re: an S&L type stunt is in the offing
This is quite likely. We have seen a series of failed attempts at deregulating various industries. S&L, electricity, and now telecom. These failures have happened because they were structured in a way that created Moral Hazard. In the end, the government is not willing to let the market punish stupid decisions (by allowing bankrupcies), and the market knows this, so gambling (overleverage) is systematically encouraged. The truly unfair thing is, only the really Big speculators get rescued. If you are SmallAndStupid, the PowersThatBe step aside, and let market discipline take its course. If you are BigAndStupid, the government steps in, to prevent chaos and peripheral damage.
Unfortunately, we are "going the welfare route" a lot more frequently than every 20 years. And it's not just big companies. The Global Managers (IMF, World Bank, U.S. Fed and Treasury) will not let any of the 20 largest countries in the world default on their government debt. Since the Mexico bailout, we have been steadily building up immense Moral Hazard everywhere.
The idiot-savants who piloted LTCM into the ground are back in business, and I'm expecting more hedge-fund messes, this year or next. |
