Well Reasoned Article about Regulation and Free Markets

[paul1454]

so? How does that tend to work out for equity holders and unionized employees? Best I recall, they don't end up with much and the employees certainly don't benefit at the expense of bondholders or equity owners.

No, I don't think unionized employees benefit at the expense of bondholders. Employees are usually in no different position in a bankruptcy than they would be in a bailout situation (unless they are governed by employment or union contract or the bankruptcy degrades down to an ad-hoc asset sale liquidation). My point is that the average creditor is much better off when a company gets a bailout compared to that same company going through bankruptcy. It is in part for this reason that I am arguing that past government policies have exacerbated the too big to fail problem. Formalizing it by creating a too big to fail trust fund, as outlined in current reforms, just does more of the same.

 

[paul1454]

Here is a recent article on the potential effects the financial reform bill has on moral hazards by expressly recognizing the "too big to fail" doctrine. http://www.american.com/archive/2010/april/yes-its-a-bailout-bill

 

[Cartervol]

People should learn to live within their means.

This is the problem with our whole society. They do this because there is a loophole to get out of it. We should stop rewarding stupidity and we might start fixing some of what's wrong.