Isn't It Time to Ban Wall Street Gambling With Our Money?
The title of this blog pretty much says it all about my perspective on this. I merely ask, how is it we have a scheme in place which not only allows excessive risk taking but actually encourages it and provides approved methods to do so. The conflict of course is the gamblers are gambling with our money. When their bets don't work out the losses aren't isolated to the gamblers. The losses are absorbed by everyone because there are few, if any, people who aren't subject to the wild economic fluctuations created by the gamblers. And just as in Vegas the house (Wall Street) takes a cut, no matter what the outcome is, with the long term probability of winning quite apparently in question. Innovative financial products is merely a euphemism for risky product offerings to attract more players to the table.
There is a central theme in all of this where everyone is an involuntary player whether they wish to gamble or not. Therein lies the fundamental flaw of the scheme. There are, in theory at least, no legal circumstances that permit such a condition to exist. Yet here we are with that precise condition.
I think it is time for our regulators to examine this and curb the excessive risk taking of short sellers and derivitaves schemes that rely on pie in the sky overtly speculative outcomes. The financial marketplace has become one big floating crap game with the losers being the general public. This is not the road to a stable economy.
Oh, you cock-eyed optimist, you! Our President recently went to Wall Street with candy and flowers and said, in essence, "C'mon you guys, ya need to behave here or we won't bail ya out the next time."
Both Sheila Baer (FDIC) and Elizabeth Warren (Consumer Protection Agency) are freaking at the pressures being brought to bear on them by credit, banking, etc. interests, and there seems to be evidence that the White House is caving. Where is our new Pecora Commission?
October 3, 2009 9:57 AM | Reply | Permalink
Short sellers and derivative schemes is not the reason we are where we are.
A better title to your blog would have been - Isn't it time that the Federal government stop bailing out institutions deemed "too big to fail"?
Nobody is gambling with "our money" unless when they get in trouble they get a taxpayer bailout. JPMorgan and Goldman Sachs are not trading with "your money".
Peter Weinberg had an interesting piece this week in the paper. If only we could have all the investment banks go back to private partnerships. Then the players would have a lot more skin in the game.
http://online.wsj.com/article/SB10001424052748704471504574443591328265858.html
October 3, 2009 10:05 AM | Reply | Permalink
The hell they ain't. Because of their fucking around the entire country has lost untold amounts of money. Pull you head out of your ass. This is our country and our economy. Sure as hell regular working folks didn't topple it. It is the people running it who did that. The only liability the government has is our regulators let the financial wizards on wall Street go nuts in the financial marketplace. And that's because our regulators and Wall Street are born and bred of the same corrupt system.
October 3, 2009 10:16 AM | Reply | Permalink
Bill (or any others), please tell me just how much the creation of a CDS or other derivatives contribute to the GDP?
I'm certainly not the economist here, but I have difficulty understanding how such things exist or generate "profit" outside of the creation of an unsustainable bubble.
Also, I hear a lot about the Boards of Directors for these financial/gambling institutions being accountable to their shareholders. Who are the shareholders? My 401k for example is invested in various mutual funds. This introduces a middle man fund manager who is interested not in the long-term viability of any of the companies in whom s/he is investing, but rather the very short-term profits to be made in what is essentially day-trading. As I see it, this greatly distorts the "owner/management" relationship that is implied with stock purchases and heightens the profile of Wall Street as a casino, not as a true wealth generator nor as a responsible overseer of business interests.
Every place I look on Wall Street I see very little beyond greed driving unsustainable practices in pursuit of extremely short-term objectives (profits). It grows increasingly difficult to distinguish between Wall Street and Vegas, except for the fact that Vegas has better regulations and is not so ubiquitous in its effect upon the country and our economy. I grow alarmed, especially, that the government overseers and regulators in Treasury and elsewhere are replete with those who come from this same culture - who in fact made their career playing the same games at great personal profit but at the expense of the rest of us in this failed economy. I have little faith in any notion they are now engaged in protecting us, but rather in getting the wheels of fortune spinning again on Wall Street.
What am I missing here?
October 3, 2009 3:18 PM | Reply | Permalink
Derivatives help companies offset or manage risk. So if you're the Treasurer of Microsoft and you have a lot of foreign currency exposure, you use derivatives to manage that exposure. If you're Kraft and you buy lots of cheese, you use derivatives to manage the cost of raw materials you purchase.
If you really think your 401(k) manager doesn't have your best interests in mind, then move the money out of that fund. If you don't trust the stock market at all, then don't even invest in an index fund. But I don't agree that those asset managers don't care about the long-term. When they underperform their peers, they lose their jobs. I think they have incentives to do well over the long-term.
October 3, 2009 4:52 PM | Reply | Permalink
I believe the asset managers have an interest in performing, just as I believe the fund managers have interest in performing. But the incentives are perverse. They trade in bits of paper (or, rather, ticker symbols on a computer screen) that bear little more significance for them than cherries, bars, or stars on a slot machine.
Sure, there is a great "science" in determining which ticker symbol is supposedly undervalued or overvalued, and a great deal of effort is put into selecting the right ones AT THE MOMENT that will provide a profit when it is sold - and the best selections are the ones that are bought and sold within the same day (or even hour!) with result of an incredible profit.
The task for the CEO and its managers, then, is to feed this interest of the "owner shareholders" to produce whatever short-term profit that is available to be gotten, with near total disregard for the long term sustainability of that profit. It becomes an incredible balancing act, but even this is skewed toward the short-term with the compensation packages awarded to the CEO's and other managers. Their annual income is tied to their annual (or even quarterly) performance. Short term corporate profits present the surest way to extremely exhorbitant income. If the corporation fails after a number of years because of the lack of less lucrative sustainable practices, so be it. The Exec has received his rewards, and will undoubtedly be picked up by another company that offers the same incentives to pursue short-term profits. (Or, he can retire on his earnings, or even find work as Secretary of the Treasury or something.)
What does this mean? Well, in the macro sense for example, it means exporting jobs to manufacture domestic goods. In the short term, the savings that are realized by circumventing environmental, labor and other regulations contribute greatly to short-term profits. The savings in labor costs are alone worth millions in bonuses for the management team.
Eventually, however, what we risk is that we create a situation wherein we no longer have any domestic consumers who can buy the corporation's product because they no longer have any jobs.
In the short term, it produces enormous profit for the companies, and the management is rewarded and gets their cut, as do the asset managers. It's win-win for everybody, right?
Well, yes it is (workers truly don't count in this game), at least until the chickens come home to roost. At that point, it's "welcome to the crash" with invitations to pitch a tent in Hooverville while we await the jobless recovery. (Good luck on that!)
Geithner & Co. are doing all they can to get the Wheel of Fortune spinning again on Wall Street. Meanwhile, it's pretty difficult to feel sympathy for the Ken Lewis'es and the other Wall Street "victims" of this recent crash when they will never know what it is like to worry about their next mortgage payment or how they will feed their family. They have already taken their reward for getting us into this mess in the first place, and a handsome reward it is.
Meanwhile, Bill, it is insulting to be told that the answer here is to simply stuff my monies into a mattress if not satisfied with the present economic system. This Wall Street Casino is necessarily the only game in town, unfortunately, and it affects everyone regardless of whether they have any personal assets or not. In fact, my point here is that those among us who have the very least are often the greatest victims of this insane economy that is greatly predisposed to be managed by gamblers and thieves.
No, it's time to challenge the very fundamentals that drive this economy, and to get in place systems and regulations that encourage sustainability of all kinds and that justly serve the needs of everyone it affects.
October 3, 2009 11:03 PM | Reply | Permalink
The real bite in the ass on all this is that there was a perfectly sensible regulation in place to prevent the infection of the traditional banking system by the excesses of the speculative one. It was called Glass-Steagall, and its repeal was signed by our previous Democratic president and supported by the Chief Economic Adviser to our current president.
I know you all know this. And I really believe that the Obama administration is justified in its skittishness regarding bringing a very fragile financial system to heel too quickly. But if he is to be a successful president in historical terms, when we have returned to sustainable economic growth, he must put in place real reforms that wall speculative excess off from the credit banking system. Higher taxes on top income levels, on capital gains, and a per-transaction tax on trading wouldn't hurt either.
Otherwise, we will have permanently reverted to a nineteenth century banking system and will experience 2008-style economic crises once every few years.
October 4, 2009 1:42 AM | Reply | Permalink
I disagree and don't see how the incentives for the asset manager are perverse. If they outperform their peers they get to keep their job and if they door a poor job they get fired. It's a very competitive industry and right now there's lots of people looking for jobs. Therefore people with a job have a lot of pressure to do a good job and keep their seat.
That's not to say that there isn't some short-term problems with it. If Fidelity's flagship fund has one bad quarter will people all want to take their money out? Some will. But enough investors care about the long-term that it's not as much of an issue. Your point about the best picks being bought and sold within the same hour I think is misleading. Sure that's how some people trade to make small profits on high volume, but if that's not who you want to invest your money in, you don't need to give it to them.
The bottom line is that you need to pick someone to manage your money who you believe has the right incentives in place. If you think the active managers are all trigger-happy idiots, then you can put your money in an index fund instead. (I wasn't trying to insult you. But if you don't like active managers, you can invest in other ways by buying index funds or individual bonds if it's more in your risk appetite)
And yes some CEOs manage for the short-term as well as the long-term, but the short-term is not the primary focus. For most companies, top management's pay is heavily weighted towards longer-term components like stock and less in near-term cash.
Sorry for the long response. I am all for better regulation. But I just don't agree that derivatives don't serve a purpose other than "gambling" and that asset managers (ie the person managing your 401(k)) don't care in the long-term.
October 4, 2009 8:10 AM | Reply | Permalink
Investing in an index fund does not resolve the basic problem. All that does is give you a ticket to ride on a different bus that is no less headed for "a spectacular crash." (With a nod to Jackie Stewart). The Wall Street "sport" is itself unnecessarily dangerous and unsustainable. There are aspects of the sport itself that need regulating (Such as separating casino gambling from the commercial banking industry), but the fundamentals of this system present perverse and unsustainable outcomes as well.
For example, the market has greatly encouraged the exportation of our manufacturing jobs that create the products destined for domestic consumption. It doesn't take a rocket scientist to understand three aspects of this practice that are extremely alarming (as in "We should have seen this coming!"):
1.) Such a practice results in magnificent profits to be gained in the short term; and
2.) Any company that doesn't participate in the exportation of jobs suffers a debilitating (indeed, probably fatal) competitive disadvantage; and
3.) The net result of this practice in a macro-sense is the ultimate loss of the consumer base which necessarily leads to a crash and to a so-called "jobless recovery" which I fear is nothing more than the initial death throes leading to a Depression unlike anything seen since the 1930's.
The libertarian free market capitalists are not going to get us out of this one. Indeed, they have already cost us hundreds of billions in dollars in an attempt to get the Wheel of Fortune racetrack spinning again.
I think, instead, it's time to put the adults in charge and wrest control of this economy from those who like nothing more than to "go fast" regardless of the consequences for themselves and others.
October 4, 2009 9:12 AM | Reply | Permalink
So private companies that arguably don't care as much about short-term profits (because they aren't managing to Wall Street's analyst expectations) are less likely to outsource jobs?
I don't think your example of outsourcing jobs makes a difference whether the company is public or private.
Take Mars - it's a huge candy and food company. Just because they're private they won't outsource jobs?
October 4, 2009 11:16 AM | Reply | Permalink
Did you give money to Lehman which they then went and gambled?
Not really. I don't see how they gambled with "your" money.
Unfortunately the government chose to bail some of them out.
But it wasn't the short sellers and derivatives that caused the crisis
We were in a major housing and easy-credit bubble that we were all enjoying.
Now the party's over.
October 3, 2009 11:42 AM | Reply | Permalink
Everybody's missing the point. (I am too, probably. Economics suck like that.)
We weren't "enjoying" an easy credit and a housing bubble. We were borrowing throughout the Bush years to maintain the lifestyle we became accustomed to during the Clinton years. In the 90s, real wages shook off the stagnation of prior decades and went up for the middle and lower class for first time in decades. Under Bush, the middle and lower class experienced the first decline in real wages during an economic expansion since we first started measuring things.
Median household income increased by about 7K during the Clinton recovery and declinded by about 2.1K during the Bush "recovery." Meanwhile, under Bush, real wages skyrocketed for the upper 2%. Essentially, the Bush/Greenspan economic, trade, taxation and fiscal policies boiled down to the most reckless and disasterous upward redistribution of wealth in this country since the Gilded Age. Rather than cutting back, ordinary people optimistically expected that things would get back to the "new normal" they experienced in the 90s by new borrowing and, in many cases, were locked in to decisions they made in the 90s based on their assumption that their piece of the pie would start growing again at some point.
The bottom line is that when the percentage of national wealth controlled by the top two percent hits a certain, the supply of good investments--defined in terms of low risk to high return and potential to increase the real wealth of the national economy as a whole--is exhausted. At that point, capital inevitably moves into speculative bubbles and into parasitic investments, i.e. investments that simply drive further upward redistribution of wealth without increasing--and frequently decreasing--GDP as a whole. Outsourcing of domestic manufacturing and the mortgage backed derivatives market, under Bush II.
If you let rich people control too much of the national wealth, they inevitably run out of smart things to do with it and move it into stupid shit that eventally brings down the whole economy. But if you don't let them have enough of it, they stop tending to business, convert the money they do have into political power, use that power to increase their share of the national wealth. Inevitably, once they get used using political power to redistribute wealth upward, they can't stop until they have too much of it, at which point they do stupid shit with it that brings down the whole economy.
The quest for the illusory "sweet spot" between the "too little" that drives the rich out of business and into politics and the "too much" that wrecks the whole economy is pretty much the whole history of the antebellum Democratic Party.
October 3, 2009 12:42 PM | Reply | Permalink
Thorough.
Not much more to add than pointing out that the money used by gamblers does not have to come from individuals to be "ours." Insurance companies, banks and pretty much every other entity feeds the machine indirectly.
Well, the part that is not imaginary. The worst aspect about the "financial sector" is how it keeps losing imaginary money that has to be paid with real money, which usually comes from the bottom up since that is where the only things worth something are created.
October 3, 2009 12:51 PM | Reply | Permalink
Hey Karl! Good to see you again!
October 3, 2009 2:51 PM | Reply | Permalink
When people were buying houses they couldn't afford and running up bigger and bigger balances on credit cards and home equity lines, I consider that "enjoying the credit bubble".
October 3, 2009 1:16 PM | Reply | Permalink
"If you let rich people control too much of the national wealth, they inevitably run out of smart things to do with it and move it into stupid shit that eventally brings down the whole economy."
Inevitable? I don't know - I've been a bit ambivalent on this idea since reading it in Marx. I don't quite see why it should be inevitable. After all, they want to make money on their investments, and there is no reason to think they'd necessarily run out of profitable investment. I'd attribute more of the 'stupid' to the way the system has been set up so that no one actually making the 'investment' decisions faces the consequences of a stupid move. From mortgage originators, to credit agencies, to regulators, to prop-traders, to Ibank managers.
eg. What does Ken Lewis' severance package look like? And what should it look like?
That said, there are more indirect problems coming from a narrow population controlling a disproportionate slice of the national wealth - they end up with the power to game the system to their own benefit. This doesn't necessarily lead to the destruction of the economy, but their incentives can get skewed: would they rather have a proportionately smaller (though larger in absolute terms) slice of a bigger economic pie or a proportionately larger (though smaller in absolute terms) slice of a smaller economic pie? It depends on whether they're operating with a cardinal (eg. absolute material well-being) or ordinal (eg. social rank) conception of utility. Judging by present events, it looks like the latter.
October 3, 2009 2:11 PM | Reply | Permalink
You are confusing "profitable" with "smart."
There is a finite amount of what could generously be termed "real" profit, as in having something to do with reality (since actually there can never be any profit at all; nothing is created from nothing)...anyway, the "real" profit margins are quickly used up, which means that in order to support the perpetual "growth" of the "economy" - and further enrichment of the already rich - derivative schemes must be invented.
You could think of it sort of as metagaming...the money is not in the economy, the money is imagined to exist on top of (and to the side of, inbetween and behind) the economy.
October 4, 2009 7:09 AM | Reply | Permalink
If you let rich people control too much of the national wealth, they inevitably run out of smart things to do with it and move it into stupid shit that eventally brings down the whole economy.
Not only that but if you let the rich control too much of the national wealth they starve the economy, 70% of which is based on consumer spending, by driving out middle class purchasing. Even if they had a mind to the super rich couldn't possibly buy and eat, use up, or wear out as many consumer goods as the middle class. They don't buy Fords or Chevys, eat at Applebees, or wear Chinese made clothes and there aren't enough of them to make a difference even if they did.
October 3, 2009 3:42 PM | Reply | Permalink
Hey Bill, what about all our 'passive money' they use to gamble with.
You know stocks, bonds, 401ks, pension funds, insurance funds, even our savings in the bank. Isn't that what they use to gamble with? Isn't that our money?
October 3, 2009 2:55 PM | Reply | Permalink
How do the banks use the stocks in my brokerage account to gamble with? I'm not trying to be argumentative, I really don't understand your point. The shares of Microsoft I have in my E-Trade account, for example, - how is Wall Street "using" these shares to gamble?
October 3, 2009 5:00 PM | Reply | Permalink
The banks use our cash deposits to borrow against. That money for that stock was deposited somewhere and that is leveraged to gamble with (up to 30 to 1, now maybe 17 to 1).
Sure a few institutions might park their cash outside the system but most are in it. But wall street uses our passive pools of money to play with.
October 3, 2009 6:32 PM | Reply | Permalink
Huh?? Yes banks take our deposits and lend them out if they have excess reserves. What do you want E-Trade to do with that money? Just sit on it? That wouldn't make much sense.
If you're arguing for higher reserve requirements/lower leverage ratios, that's one thing. But Wall Street isn't playing with our money. A brokerage firm like E-Trade isn't going out there and using our money to make proprietary trades. Same way if you send in a check to Vanguard, they aren't using that money to bet with.
Where did you get that idea?
Someone like Goldman Sachs doesn't even have much of a consumer business. For them to leverage up, they are borrowing from other institutions, not from individuals. Money is very fungible but I wouldn't look at it the way you're trying to.
October 3, 2009 7:13 PM | Reply | Permalink
Plus - if that money deposited to buy the stock was "leveraged" and "used to bet on", then how does E-Trade have the cash to pay me back when I sell that stock next week and ask to get my money back? There's just as many people selling shares as there are people buying shares.
I think you need to separate what banks do with our deposits and what a brokerage firm would do with our assets. They are two very different things.
October 3, 2009 8:10 PM | Reply | Permalink
Bill, you understand the point. You are just bored.
Wall street borrows from various institutions that hold our money. But sure, maybe not E-trade.
October 3, 2009 9:09 PM | Reply | Permalink
I think you understand it too and therefore I guess your comment that Wall Street is gambling with our 401k's, pensions, stocks, etc. was just hyperbole.
Goldman, for example, funds themselves from a variety of sources. They are not gambling with our "passive" money. If there was a large amount of withdrawals in the asset management universe and we all went to cash, that would not affect Goldman's ability to fund themselves.
Does Goldman borrow from Chase? Yes. Do I have my 401(k) at Chase? Yes. But is Goldman somehow directly benefitting from my 401(k) assets? No.
I'm not bored, but rather annoyed when people make comments like "Wall Street is gambling with our money".
October 3, 2009 10:23 PM | Reply | Permalink
Does Goldman borrow from Chase? Yes. Do I have my 401(k) at Chase? Yes. But is Goldman somehow directly benefitting from my 401(k) assets? No
Okay fine. They are 'indirectly' benefiting then. Is that better?
I think that one can say that they are gambling with our money. Regardless, this year in fact it was our money- Remember TARP. Goldman wouldn't have survived without our $$$.
Anyway, I got run. Have a nice saturday night.
October 3, 2009 10:38 PM | Reply | Permalink
How are they even indirectly benefitting from my 401(k) assets?
Yes, I remember TARP. They actually could have survived without it and they've since paid it back. Some backs like Goldman and JPMorgan had no choice but to take TARP funds. That is a whole different subject and the issue there is how to limit risk activities for banks that were bailed out and are still effectively part of the government (like Citi).
But I digress. I don't think you were talking about TARP when you said that banks use our 401(k)'s to gamble with.
October 4, 2009 7:44 AM | Reply | Permalink
Does Goldman borrow from Chase? Yes. Do I have my 401(k) at Chase?
You know the answer bill, you wrote it.
No Goldman wouldn't have survived, that's partly why they had to become a commercial bank. Allegedly Wells Fargo was ok, but I don't buy it. And more then TARP was the FED's commercial lending. But you know all this you just like to mess with liberals.
Regardless they would all be under if 'mark to market' wasn't suspended. I can count 25 empty condo bunkers in my small town of Portland. EMPTY. We ain't new york- we don't have a lot of condo towers here. Those toxic assets are still there, but now we do 'mark to whatever we want' so everything is solvent.
Have a good Sunday, I have to catch some sleep.
October 4, 2009 8:12 AM | Reply | Permalink
We'll have to agree to disagree. Or just use a different example if you have something against Goldman. (JPMorgan would have survived without TARP). But again, I think we're going off on a tangent with the TARP discussion.
But Wall Street doesn't gamble with our 401(k)'s. 401(k)'s are not part of bank deposits that they can lend out. If we all started saving a lot more money in our 401(k)'s tomorrow, that's NOT going to all of a sudden show up in Goldman's coffers so they can start gambling with it. Silly hyperbole like that sells lots of Rolling Stone magazines but just isn't supported by facts or logic.
Enjoy your Sunday.
October 4, 2009 8:25 AM | Reply | Permalink
Do you actually understand how banks work, HedgeFundBill?
October 4, 2009 7:10 AM | Reply | Permalink
Obviously not perfectly, but have a good understanding. What's your point?
October 4, 2009 7:39 AM | Reply | Permalink
I think Bill is on the right track here. All proprietary trading should be banned at banks supported by a government guarantee, and permitted only in unlimited-liability partnerships with a strict leverage limit relative to net exposure.
But given this administration's behavior, it's just wishful thinking.
October 3, 2009 1:19 PM | Reply | Permalink
All I know is the financial institutions which control the larger financial marketplace are the very ones who properly have liability when things go wrong. Their liability is coupled with that of government regulators who are also owners of that liability. When things go wrong those are the persons / entities that bear the responsibility and liability to keep things on an even keel. Everyone else is a passive participant in terms of any real control.
I have heard arguments consumers have liability in this regard but that is pure BULLSHIT. Issuers of credit know very well that issuing credit ultimately works to their advantage and that they will never actually lose or risk any real losses in the aggregate. They make a bet knowing that even if they have to write off 20% of the credit they issue they'll make a ton on the remiaining 70% or 80% who make payments at 20% or 30% interest. I read recently that 12% of cardholders are in default. Here is a recent article describing default and late payent rates.
http://www.cardratings.com/drops-in-credit-card-default-rates.html
The key thing here is:
•Delinquencies indicate the number of credit card customers who have fallen behind on their minimum monthly payments by thirty days or longer.
•Charge-offs indicate the number of customers who have abandoned their accounts entirely, missing five or more consecutive payments.
In a statement to investors, American Express touted the first quarterly net decline in charged-off credit card accounts in nearly a year. Once final figures from June have been compiled, analysts believe that American Express cardmembers will once again fall below the ten percent charge-off rate that many other card issuers have witnessed. Company officials also remarked that the latest figures suggest stronger results for the next two quarters than previously forecasted. Financial stock watchers called attention to the performance of private label credit card issuer Alliance Data, which also posted a quarterly drop in charge-offs.
Big Banks Beat Street Estimates on Credit Card Delinquency Rates
Bank of America and Capital One both reported a rise in net charge-offs during June. However, the leading banks' exposure to high risk accounts was mitigated by lower-than expected delinquency rates, suggesting to some analysts that Americans are emerging from the worst of the economic downturn. Discover Financial Services also boasted a lower overall charge-off rate to offset a slight rise in delinquencies. Not every Wall Street analyst touted this week's positive results, however. Some pundits noted that credit card delinquency and charge-off rates often decline in the spring when Americans use tax rebate checks to pay down their account balances.
What this actually indicates is the credit situation from the consumer side is starting to show signs of being paid down and the rates being charged handily cover any losses and in fact still assure a handsome profit.
You'll not see me crying for banks or issuers of credit. They have this figured out and know exactly within a very narrow range what their quarterly revenues and adjusted profits will be. I have little doubt that they have their computers crunch the important numbers for executive staff to review every day. In fact, I wouldn't be surprised to know they have real time evaluations of these numbers availbale 24/7. They need to know this and can't truly make decisions without this information.
October 3, 2009 6:25 PM | Reply | Permalink
Really? It's a "no-risk" business where you know you'll make money even with high defaults? Try asking some of the credit card companies and commercial banks that have gone under recently. I think they would tell you a different story
October 3, 2009 9:05 PM | Reply | Permalink
Nice ass hat you're wearing today. Consumer credit card debt isn't the cause of the current bank failures.
October 4, 2009 2:48 AM | Reply | Permalink
Did I say that consumer credit debt was the the cause of the credit crisis? No. I was trying to point out that it's not the no-risk business that you describe it to be. You said "They make a bet knowing that even if they have to write off 20% of the credit they issue they'll make a ton on the remiaining 70% or 80% who make payments at 20% or 30% interest."
I disagree with that statement because of all the banks and credit institutions that have gone under recently. If it was so easy and such a guaranteed success, you wouldn't be seeing such a large amount of company's fail.
October 4, 2009 7:52 AM | Reply | Permalink