Moral Hazard - Heelllloooooo!

So I am mega-bank and investing in all sorts of toxic assets. All of a sudden the rug is pulled out from under me and everything I have invested in (bet upon) turns out to be pretty much worthless. Fortunately, my good friend from GS has a nice high level government job and he and his friend, let's call him Uncle Ben, are willing to save my arse from all the extreme troubles I have caused for myself and my shareholders. They provide billions - oh I mean trillions - in support for me and my compadres. This is fantastic. I make tons of money and everything is fantastic; I lose tons of money and the government makes everything fantastic. Sure there is a bit of bad press about executive comp and bonuses, but we are a smart lot and can work our way around that. Thank you Uncles - as in Ben, Hank and Sam. You guys are great!! By the way, where did you get all the money we sucked away from you to support our bonuses?

Folks, this is making me sick. The companies that brought us here are making a mockery of our government support efforts. There is no company too big to fail - period!! Yes, the failure needs to be controlled with government support but companies abusing the process should fail and have to fail. At a minimum they have to be acquired by the taxpayers, taken apart and sold off in pieces. None - ABSOLUTELY NONE - of the companies should be allowed to profit off taxpayer dollars, be it from their own taxpayer support or the support for their counterparts. For example, Goldman Sachs was repaid billions in obligations from AIG which was paid by taxpayers at a time when GS was paying some major salaries and bonuses. We, my friends, need a (merrily) lynch mob. Government officials giving multi-billion dollar gifts to their former companies is not going to serve them or the taxpayers.

I am really upset (and I would say this differently but this is a family oriented blog). The bigger issue to me is not the trillions we have wasted on the AHOs (I saw this sign today on an AHO construction company) that got us here, but the moral hazard this has created.

Let's face the facts, the current bounce or recovery is just a government spending, government debt, induced bounce. That aside, the last bubble was due to certain financial companies not playing by the rules, not following basic economics and not caring about any of this. Their God was the almighty dollar and they pursued it with reckless, and I mean reckless, abandon. Now that we (as in taxpayers) have saved their collective arses, we are all in a world of hurt in the country to come. The abuses will continue and be magnified to a magnificant level. Wait and see. Meanwhile, read this:

http://www.nakedcapitalism.com/2009/08/jp-morgan-chase-caught-speculating-with.html

Why would we do this to ourselves? Seriously, folks, the proper response is absolute outrage. Extreme outrage!!! Our taxpayer money, and trillions of it, is now gone with a familiar flushing sound behind it.

And where does this leave us? A lot of AHO financial institutions that got us here are surviving while thousands of worthwhile U.S.companies are folding. U.S. debt, total private and public, is still setting new records (so much for deleveraging). Unemployment is still rising - though at a slowing rate. There is no clear economic recovery in sight, though all the financial instutions are there (with our dollars) to lend if any company actually becomes worth lending to. Commercial backed realty is still on the decline, with no help from the financial institutions that got us here. And I see green shoots everywhere I look. Okay, on this last line I fibbed just a smig. I did a lot of weeding this weekend and maybe those are the shoots in my memory.



Disclosures: None.