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The same people who've been saying for weeks that all was well are now the loudest in urging the Fed to reflate the bubble. These pleaders ignore two major risks.
The first is the "moral hazard" problem of rescuing Wall Street banks and hedge fund players that walked too far on the wild side during the boom. They made money then, and they need to absorb the losses now. Without enduring the discipline of losses, the offenders will go even further out on the risk curve next time.
The second problem is that a Fed reflation could lead to even more trouble if it causes a loss of confidence in the dollar.
RE: Money Ball by flynn23 at 1:22 pm EDT, Aug 20, 2007
possibly noteworthy wrote:
The entire point is to avoid surprise headlines.
...
The same people who've been saying for weeks that all was well are now the loudest in urging the Fed to reflate the bubble. These pleaders ignore two major risks.
The first is the "moral hazard" problem of rescuing Wall Street banks and hedge fund players that walked too far on the wild side during the boom. They made money then, and they need to absorb the losses now. Without enduring the discipline of losses, the offenders will go even further out on the risk curve next time.
The second problem is that a Fed reflation could lead to even more trouble if it causes a loss of confidence in the dollar.
Follow the above link for Q&A with Jim Cramer.
Plus: did you see this?
I swear to God, if they bail out Wall Street on this, I will go on a six state killing spree. Where was this when the telecom sector was going down in flames and a trillion dollars in equity was flushed down the toilet because the ILEC lobby bought the FCC???
Yes, it sucks that a lot of people will lose their homes, but that's what happens when you injest poison. You die.
