Tuesday, September 23, 2008

Wall Street Mess

People in Wall street create a mess, the government will clean it with our ( taxpayers) hard earned money and then Wall street will make more money out of it. A classic theme repeating again and again.

Why is treasury secretary asking for a bailout for these banks, why create an entity which will buy toxic assets from bank, why not just lend money to the banks at a higher interest and make the interest payment top-most priority of the banks which borrow money which means no dividends to shareholders, no bonus to executives.

This outright buying of toxic assets is going to make the failed institution not really feel the heat and try to look for alternatives.
Example look at what happened with AIG, it tried to sell itself to many people, but waited thinking govt will bail it out, well govt did bail it out but it is a very costly deal from AIG perspective , so now what is happening the majority shareholders are trying to finance the same and avoid taking the loan from the govt.

I feel that we need to teach private institution a lesson on corporate management and allow them to fail rather than the govt trying to save the same.

This action of creating a fund to buy the assets if done without careful thinking will just bold en the risk taking actions of Wall street. Even if it is done, the institution should feel the pain and understand that every action has an equal reaction.


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