Monday, September 15, 2008

Bail Outs

It's difficult not to draw a comparison between the thousands of residents of Galveston, Texas, who needed rescuing after Hurricane Ike hit this past weekend, and the Wall St. investment banks that needed rescuing this weekend. Both are victims of catastrophes that were seen and anticipated way in advance. Hurricane Ike was talked about for over a week as it moved its inexorable way across the Atlantic and into the Gulf. It's likely landfall in Texas was predicted days in advance.

Likewise the housing and credit crises that took down Lehman Bros. and Merrill Lynch, and threatened AIG had already offed Bear Stearns, the Federal National Mortgage Association (FNMA, or "Fannie Mae") and the
Federal Home Loan Mortgage Corporation (FHLMC, or, for some strange reason, "Freddie Mac"). No surprises here.

I think there can only be three reasons for ignoring the very marked warnings that have accompanied both of these catastrophes:
  1. You're not listening.
  2. You don't believe what you're hearing/seeing.
  3. You think you can beat the odds.
If you're just plain not listening ... well, what can I say. If you're an investment banker, your whole job is supposed to be about knowing what's going on.

If you don't believe what you're hearing and seeing, you'd better start looking for more credible sources. Stop reading this blog (just temporarily) and pick up a newspaper ... yes, an actual printed newspaper (I somehow think print still carries a credibility cachet that's missing from Web media) ... preferably one that not owned by an entertainment conglomerate. Sure, there's usually a range of opinions about the severity of the credit crisis, but with the possible exception of John McCain, I don't think anyone has been denying that there are some serious economic issues in the U.S. right now.

And if you just think you can beat the odds, thank you. You're helping keep our state lotteries afloat.

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