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Politics : Ask Michael Burke
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To: Sam Citron who wrote (89570)2/17/2001 9:37:54 AM
From: Thomas M.  Read Replies (1) of 132070
 
Moral hazard is a risk in any intervention.

You missed Michael's point. The risk of moral hazard is greatly amplified when the perpetrators go unpunished. When the FDIC bails out a bank, the offending management is booted and stockholders are given the shaft. When Warren Buffett offered to buy out LTCM at a good price, part of the deal was not allowing the clowns who were running it to stay on. Since those clowns had many friends at the Fed, the Fed rejected that offer. And those clowns are still managing money. That's crony capitalism at its worst. Similiarly, nobody at Goldman Sachs was forced to suffer when Rubin engineered the Mexican bailout. Perhaps it was because of Rubin's ties to that firm.

Tom
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