Survival of the fittest should be the ideal way to work in a competitive market. Loss bearing units should be allowed to die their natural death if that is for the greater good of the market and the economy. This should especially be the case if businesses refuse to be cautious and responsible with the investors' money and don't learn from their mistakes.The question is that is the FED's responsibility to ensure monetary and economic stability or to baby sit greedy investment bankers and provide them bail-out plans. I admire the SEC's step to temporarily ban short selling as a measure of damage control, but should the FED be providing bail out packages to banks who are so far down sunk in their own shit that even an robotic armadillo would fail to dig them out. Washington Mutual is another rotten lemon waiting to be recycled. If it goes down, it will cause the FED another $20 billion.
I agree that it breaks my heart to see some of these legendary names hit the dirt, but I rather see them die a natural death than give them another chance to ride people's money. An investor who would have invested in Lehman Brothers 6 months back, would today have lost 99.61% of his investment. Whether its right or wrong for the FED to babysit disasters is for you to decide. I have my fingers crossed and am hoping for the best.
1 comment:
These are the same companies/ banks that have substantially contributed to the economy as well. It takes decades to build a stature of this sort. Moreover, this can be linked with ur previous blog which mentions abt the way Fed functions...there is little to question as the country does not disclose much abt the way they function. There should be stringent rules with regard to the functioning of the FIs/IBs… Moreover, this is learning for developing countries like India and China.
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