Wednesday, September 17, 2008
Thousand Pound Gorillas
Everybody treads very carefully when there is a thousand pound Gorilla in the room. Then there is the other old saying: When you owe the bank one thousand dollars, you lose sleep over it. When you owe the bank one million dollars, the banker loses sleep over it! Both of these sayings are pertinent to the current financial mess with the government bailing out one huge failing financial firm after another. The Feds are afraid of the large number of investors [Read "voters"] who will have their savings or investments wiped out if the huge financial firms are allowed to fail. Don't forget that we all will have to pay the bill in taxes and/or inflation for these bailouts. When Enron went under because of manipulation and unethical practices, the government didn't step in. I personally lost a bunch on that one because my stock in Portland General Electric had become Enron stock when "Big E" took over that utility. It hurt, but life went on, and investors in Enron learned a hard lesson. If huge financial firms are so greedy that they follow unsound business practices to make a quick profit, they deserve to fail, and the government shouldn't prop them up so that they can do more stupid things in the future. Financial firms like all of the rest of us have to learn that if the potential profits of an undertaking or investment sound too good to be true, they usually are. Too many people were willing to loan money to people and firms that could not realistically be expected to pay it back. Then they acted surprised when those people had to default on their loans. What ever happened to financial analysis?