Bail outs

A fairly interesting Q&A on current events. The commentors are banking/finance professors at the University of Chicago GSB.

http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-...

and oh so much more. I just need to vent.

In capitalistic markets, the consequence of poor business decisions are losses, and for catastrophic decisions, bankruptcy. At which point does the government get to redefine the lower range of free markets after allowing its upper excesses? The implication is that markets and business are only supposed to go up in value. And the proper intervention would be to reclaim a portion of pre-disaster profits. I mean the moral hazard here is suffocating.

First it was Bear Sterns, then Fannie and Freddie...

So now, Lehman took on more risk than it should have. If the Fed bails out yet another bank that has taken on too much risk, where does the moral hazard end? I hate to say it but it is not the job of the Fed to bail out every bank which makes bad investments. It’s time to let some sink and others swim. Only then will we have a true correction and get on with it. Or maybe I should call up the Fed to let them know I blew too much on strippers and martini’s last week and cannot pay my credit card bill!