17 September 2008
The decreased diversity of the economy - to blame?
The feds just bailed out AIG, the largest insurer of financial services businesses, after their stock plummeted this month. Part of the reason their stock plummeted, according to the Wikipedia article is because investors evaluated their holdings in light of Lehman brothers' (another recently-failed financial services corporation) holdings, and found them similarly over-valued.
It seems that these huge financial services corporations bet on the high-risk, high-gain low interest mortgage market from the last 10 years, not thinking about what would happen when people couldn't pay once the rates on their adjustable rate mortgages rose after the initial 3, 5, or 7 year term.
The fact that so many of the huge corporate banks and financial services (insurance, savings and loans, brokerage firms, etc) are all tied into these companies is chilling. They are all interconnected and involved in the same shady dealings with the same apparent lack of foresight.
In the past 10 years (maybe longer, but that's as long as I"ve been noticing it), the US Banks, Citibanks, and Chases have been gobbling up their smaller competitors. No one's got a monopoly, but the market is certainly less diverse than it was 10 years ago. The government has antitrust and anti-monopoly laws to protect the public from their evils, but what about the now apparent evils of a simply less-diverse market.
Or would all of these problems still have come crashing down even if the top 5 banking institutions were a more diverse 10 or 15 different ones?
A second point is I wonder if there's an analysis of the salaries of the CEOs of these failing companies, including any severance or retirement packages dealt out in the last 5 to 10 years. It seems these fools who ultimately are responsible for the current instability of their companies (and the economy as a result) deserve a pay cut, if not a forfeiture of their nest eggs in order to pay for the burden the taxpayers are now shouldering.
It seems that these huge financial services corporations bet on the high-risk, high-gain low interest mortgage market from the last 10 years, not thinking about what would happen when people couldn't pay once the rates on their adjustable rate mortgages rose after the initial 3, 5, or 7 year term.
The fact that so many of the huge corporate banks and financial services (insurance, savings and loans, brokerage firms, etc) are all tied into these companies is chilling. They are all interconnected and involved in the same shady dealings with the same apparent lack of foresight.
In the past 10 years (maybe longer, but that's as long as I"ve been noticing it), the US Banks, Citibanks, and Chases have been gobbling up their smaller competitors. No one's got a monopoly, but the market is certainly less diverse than it was 10 years ago. The government has antitrust and anti-monopoly laws to protect the public from their evils, but what about the now apparent evils of a simply less-diverse market.
Or would all of these problems still have come crashing down even if the top 5 banking institutions were a more diverse 10 or 15 different ones?
A second point is I wonder if there's an analysis of the salaries of the CEOs of these failing companies, including any severance or retirement packages dealt out in the last 5 to 10 years. It seems these fools who ultimately are responsible for the current instability of their companies (and the economy as a result) deserve a pay cut, if not a forfeiture of their nest eggs in order to pay for the burden the taxpayers are now shouldering.
