Wednesday, October 28, 2009

New Frontier of Moral Hazard

I sent the letter below to the Wall Street Journal. Is there any sanity left in Washington? The funniest part (in a black humor sort of way) is that the White House reached this agreement wait for it...Barney Frank! I am reminded of de Gaulle's response to Nikita Khrushchev when the Soviet premier told him that the Russians would sign an agreement with Erich Honecker of East Germany to come to the East Germans' aid in attempting to kick the NATO allies out of West Berlin. De Gaulle told Khrushchev that he was not impressed with agreements among communists and that everyone knew that Honecker was his puppet.


----- Original Message -----
From: Patrick Barron
To: Wall Street Journal
Sent: Tuesday, October 27, 2009 4:24 PM
Subject: A New Frontier for Moral Hazard

Re: Big Financial Firms Would Bear Cost of Failed Rivals Under Proposal

"Under a deal hashed out between the Treasury Department and a key House Democrat, financial firms with more than $10 billion of assets would have to pay for the rescue or unwinding of a collapsed competitor..." This is a new frontier for moral hazard. At least there always was some hope that government might not want to answer to the public over bailing out big firms with taxpayer money, but now the government will force the failed firm's competitors to bail them out. So, where is there any discipline to conduct one's business in a fiduciarily sound manner, when one reaps all the rewards of success and...Oh, this is deliciously evil! gets to make one's competitors pay the cost of failure?

Patrick Barron
West Chester, PA

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