Saturday, April 11

Bankers victim of predatory lending by Govt.

[via Beat the Press]

Interesting headline raises the point about sanctity of contracts.

After the AIG fiasco, just when you thought things had reached the rock bottom, bankers start digging faster.

From the original NYT article

Both large and small banks have pressed the Obama administration to make it less costly for them to exit the bailout program by waiving the right to exercise stock warrants the banks had to grant the government in exchange for the loans. At a meeting last month, the chiefs of three of the largest banks separately asked Mr. Obama to direct the Treasury not to exercise the warrants, Mr. Fine said.

Bankers want to return the bailout money, to avoid excessive compensation caps and get this, government should make it cheaper for bankers to pay themselves more. Imagine Goldman trying to renegotiate its contract with Warren Buffet, claiming the conditions were "too tough" post signing the contract. I guess no harm in trying!! Dig away!!!

While it is easy to beat up on Bankers now, one cannot and should not expect anything other than self interested behaviour that responds to incentives. Just as "War is too important to be left to Generals", "Banking is too important to be left to bankers" hence strong regulation & oversight etc. etc. as much as one may cringe at the prospect, the only hope is politicians along with academic economists step up to the plate.

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