Most probably the Fed along with many advisers and bankers are currently sat down working on trying to find a solution to the credit crunch, similar to the times when one of the most famous investment groups Long-term capital management went bust.
One was surprised about the actions and operations of Enron, but how is it possible that so many banks seem to have done exactly the same mistake to misjudge the mortgage market at the same time?
A bail out will help us in the short run, in terms of keeping jobs, stabilizing the economy and protecting other companies from hitting financial trouble but the question is how helpful is it going to be in the long run. Taking $700 billion of the tax payer's to pay for the wrong doing of banks and its managers sounds the wrong solution. Although, the Fed is planning on re-selling the property slowly over the years to recuperate the investment, it appears to let off the ones responsible.
Will a bail-out send the wrong message to banks?
We can only hope for tighter banking regulations and transparency after the credit crunch but regulations will never be able to cater for every possible event. Shareholders and CEO's are looking for the highest possible returns to maximise income and bonuse as we are experiencing without thinking ahead of how the company will carry on later. CEO's know that by achieving "short term" profits, they will receive bonuses, what happens after is not their problem. Even worse a signal from the Fed that if something does go wrong, that they will be here to solve it, could give the image that we can operate even riskier to maximize profits and worry about the long term results.
HSBC and Woolwich are considering of further increasing the cost of mortgages. Interbank rater are at a record high, which the banks will most probably be happily passing on to is flexible mortgage holders as well as increase the cost of fixed mortgages, to try to make their P&L look as good as somehow possible.
The low and medium income citizens will be the ones with the least responsibility for this crisis and as always will be the ones getting hurt most.
Understandably a solution is required but should and can it be done so quick to think about the long term...
One was surprised about the actions and operations of Enron, but how is it possible that so many banks seem to have done exactly the same mistake to misjudge the mortgage market at the same time?
A bail out will help us in the short run, in terms of keeping jobs, stabilizing the economy and protecting other companies from hitting financial trouble but the question is how helpful is it going to be in the long run. Taking $700 billion of the tax payer's to pay for the wrong doing of banks and its managers sounds the wrong solution. Although, the Fed is planning on re-selling the property slowly over the years to recuperate the investment, it appears to let off the ones responsible.
Will a bail-out send the wrong message to banks?
We can only hope for tighter banking regulations and transparency after the credit crunch but regulations will never be able to cater for every possible event. Shareholders and CEO's are looking for the highest possible returns to maximise income and bonuse as we are experiencing without thinking ahead of how the company will carry on later. CEO's know that by achieving "short term" profits, they will receive bonuses, what happens after is not their problem. Even worse a signal from the Fed that if something does go wrong, that they will be here to solve it, could give the image that we can operate even riskier to maximize profits and worry about the long term results.
HSBC and Woolwich are considering of further increasing the cost of mortgages. Interbank rater are at a record high, which the banks will most probably be happily passing on to is flexible mortgage holders as well as increase the cost of fixed mortgages, to try to make their P&L look as good as somehow possible.
The low and medium income citizens will be the ones with the least responsibility for this crisis and as always will be the ones getting hurt most.
Understandably a solution is required but should and can it be done so quick to think about the long term...
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