Profits are Privatized and Losses are Socialized follow this blog post

posted by Martin Snyder on March 16, 2008

Yes I am aware that ERE is not an economics or political website, but events are now so serious in the macroeconomic area that there is little doubt that recruiting will be impacted in the coming months and years by what is happening today.

The bailout of Bear Stearns lasted about 48 hours before taking another turn; the essential wipeout of the firm, sold to JPMorgan for maybe the value of its office furnishings. 

Nouriel Roubini has been an astute observer of the crisis- his Twelve Steps to Financial Disaster have been widely linked and discussed, and we now appear to be at Step 9.

He closes his latest post with the line:

Breaking decades-old rules and practices is a radical action that seriously requires a clear public explanation and justification.   

To which I can only ask:

Where the heck has he been for the last six years? 

    

        

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•  Martin Snyder

  1 point 20 months ago

  Hi Colin,

  While the massive loss of equity for the employees of Bear is regrettable (to say the least) who will speak for the 300 million of us who are picking up the tab for the vast misjudgments of their leaders?

  When the cash was rolling upon their shores in giant waves, how many of them were seeking employment with firms that were somewhat more conservative in their betting? (Led by no doubt inferior, lower paid personnel)

  If only I had invented the phrase; it?s been around for many years and has been applied to this situation by far brighter folks than myself.

  Read Gretchen Morgenson?s brilliant piece in the Times and see if you feel the same way about Bear Stearns:

  http://www.nytimes.com/2008/03/16/business/16gret.html?_r=1&oref=slogin

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•  Colin Kingsbury

  1 point 20 months ago

  Martin,

  "Profits are privatized while losses are socialized" has the making of a perfect political campaign slogan. It is simple, euphonius, and leaves out anything that complicates the narrative.

  If you would like to hang around BSC's headquarters in Manhattan and tell all the folks whose options evaporated and whose jobs are now all marked with an asterisk that their losses have been socialized, I suggest you keep the engine running and have a clear route of escape planned. A lot of folks who had planned retirements will probably be forced to continue to work another 5-10 years or be forced to take a lower-paying job as they will be damaged goods once the "synergies" are taken care of.

  As for the multi-million dollar bonuses, that is very much on-topic for us human capitalists to borrow Jason's phrasing. We can say now with some reason that these brain surgeons were rather overpaid, but that's what the market was. Companies that didn't offer those sorts of packages probably didn't make too many good hires. By the same token perhaps we should discuss whether Microsoft's engineers are overpaid because of the mess that is Vista?

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