Posted on 2010-05-20 14:19:00
Tags: reviews essay books
I just finished The Big Short: Inside the Doomsday Machine. (I'm turning into somewhat of a Michael Lewis fanboy - really enjoyed this book, Moneyball, and The Blind Side) It tells the story of the subprime mortgage meltdown and in the epilogue talks about the fact that not only were (most) of the companies involved bailed out by the government, but most of the traders who bet on subprime mortgages and lost billions of dollars for their company were let go with generous severance packages. (i.e. millions of dollars)
His implicit argument is that they should have known better (most of the book is about the people who did see the crisis coming ahead of time, bet against subprime mortgages, and made plenty of money) and thus don't deserve to have their job or be rewarded. I'm not defending the giant severance packages, but this is a dangerous road to walk down. If they honestly believed they were making money for their companies, then firing people who failed (and obviously there were a lot of them) could make other traders very wary about doing anything.
And yes, I feel kind of ridiculous defending the traders, but I know I screw up a lot at work and I'd be very paranoid (and cautious to the point of getting very little done) if I thought one mistake could lead to being fired.
On a similar note, some people seem to think that contacting politicians at home or following them around Washington is "fair game" if they don't vote a certain way, or even outing them as gay if they vote against anything gay-related. I believe in a thick line between one's professional life and one's personal life, and such things make me very uneasy.
Comment from yerfdogyrag:
Ya, I like Michael Lewis also. I really liked his articles when he worked for The New Republic and followed some of the alternates to the Clinton / Bush campaigns. BTW, I do have his book on the '94 campaign if you're interested. I suspect it's out of print right now.
Personally, I think (but not with Great Conviction) we could fix a lot of the financial system with two fairly simple changes:
1) Add in a sales tax of about .1% to .5% to stock trades. Day trading does absolutely nothing for the economy as a whole and I think this would end up making investors a bit more thoughtful.
2) Have the interest rate set quarterly by the Fed, but add a random factor (+- 30%) to it. The idea here is to periodically 'shock' the system which should pop any bubbles before they get really bad.
Comment from djedi:
Item 1 is referred to as Tobin's Tax right now, I think, and was very popular but did not make it into neither the house nor the senate versions of the current bill. =(
Having the Fed handle bubbles has been one of their jobs for a couple of decades now, and they really suck at it. Of course, a lot of that is Greenspan's fault, but still.
This backup was done by LJBackup.