"Moral hazard is the fact that a party insulated from risk may behave differently from the way it would behave if it would be fully exposed to the risk. In insurance, moral hazard that occurs without conscious or malicious action is called morale hazard...Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings, and therefore has a tendency to act less carefully than it alternately would, leaving another party to hold some responsibility for the consequences of those actions. " (Wikipedia)
Wall Street banks and insurance companies (think Goldman Sachs, Bank of America, City Bank, and AIG) have become moral hazards. The question is what are we going to do about it?
Showing posts with label Responsibility. Show all posts
Showing posts with label Responsibility. Show all posts
Tuesday, October 13, 2009
Wednesday, February 4, 2009
Being a Capitalist Fundamentally
The American capitalist system grew out of democracy based on the fundamental principles of freedom. There is within it a profound belief in the free market which corrects itself by choice, that is the customer's right to choose what is desired, balancing the system through a kind of basic freedom. The core beauty of the system reminds me of Scripture which refers to the "perfect law of liberty."
But with freedom comes responsibility that of the corporation and the customer. The "perfect law of liberty" is the law of love which encompasses "do unto to others as you would have them do unto you." This is the fulfillment of the law, "for the law is fulfilled in one word, even this:'You shall love your neighbor as yourself.'" Love is discipline, creative, tough, responsible, persistent, long-suffering, strong, accountable, passionate, innovative, thoughtful, compelling, and decent.
"If you bite and devour one another, beware lest you be consumed by one another."
Capitalism was born of freedom. But we have a responsibility to act justly. If not, we will find ourselves yet again in a financial crisis with even greater consequences. The whole world now groans and tithers on the brink of financial disaster. We must do better or things will get increasingly worse.
Fundamentally we, capitalists and all others, in fact, must begin with the "perfect law of liberty" summed up in one word: love.
But with freedom comes responsibility that of the corporation and the customer. The "perfect law of liberty" is the law of love which encompasses "do unto to others as you would have them do unto you." This is the fulfillment of the law, "for the law is fulfilled in one word, even this:'You shall love your neighbor as yourself.'" Love is discipline, creative, tough, responsible, persistent, long-suffering, strong, accountable, passionate, innovative, thoughtful, compelling, and decent.
"If you bite and devour one another, beware lest you be consumed by one another."
Capitalism was born of freedom. But we have a responsibility to act justly. If not, we will find ourselves yet again in a financial crisis with even greater consequences. The whole world now groans and tithers on the brink of financial disaster. We must do better or things will get increasingly worse.
Fundamentally we, capitalists and all others, in fact, must begin with the "perfect law of liberty" summed up in one word: love.
Friday, January 30, 2009
Being Nassim Nicholas Taleb VI
"Scandalous! Why do they keep their bonuses," Taleb asks? He makes the significant point that executives like Stanley O'Neal, after tanking Merrill Lynch, has kept his bonus--not to mention those who got bonuses of $18 BILLION just last year while their hands were out and small businesses were closing all over America. With the Bank of America bailout, we have essentially bailed out Merrill Lynch and not held O'Neal accountable. This is Taleb's point.
Stanley O'Neal is now on the board of Alcoa, Inc, "one of the world's largest producer of primary aluminum, fabricated aluminum, and alumina," according to its website, after having served on the board of General Motors from 2001 - 2006. Did General Motors not just receive a massive bailout? Are these board members rewarded for inefficiency?
What's the matter with these large companies? Tank a company, run away with billions, and reward these with board positions where they are likely to allow more of the same. No wonder nothing changes. But we can change. Let's hold the board members responsible and give no more money to companies who seat the likes of these on their boards.
Stanley O'Neal is now on the board of Alcoa, Inc, "one of the world's largest producer of primary aluminum, fabricated aluminum, and alumina," according to its website, after having served on the board of General Motors from 2001 - 2006. Did General Motors not just receive a massive bailout? Are these board members rewarded for inefficiency?
What's the matter with these large companies? Tank a company, run away with billions, and reward these with board positions where they are likely to allow more of the same. No wonder nothing changes. But we can change. Let's hold the board members responsible and give no more money to companies who seat the likes of these on their boards.
Thursday, January 29, 2009
Being President Barack Obama II
Visit msnbc.com for Breaking News, World News, and News about the Economy
When have you heard a president candidly speak with such clarity about the "restraint, discipline, and responsibility" needed in such crises?"
Now, let's demand policies that will hold CEOs and executives responsible when our money is used to bail them out.
Being Arianna Huffington
Here is Arianna's ever bright and brilliant response to what's really going on in Davos with regards to banker to government transactions as opposed to banker to banker transactions. There appears to be a lot of contrition going on in Davos too. But my question is how long will it last and what is the outcome?
Who will be held accountable for this massive mess? My advice? Follow the money. In this interview Arianna also speaks about the emergence of social media; she's pretty funny too. Her book, Pigs at the Trough: How Corporate Greed and Political Corruption Are Undermining America, was also mentioned. Perhaps it should be required reading for all those in attendance.
Who will be held accountable for this massive mess? My advice? Follow the money. In this interview Arianna also speaks about the emergence of social media; she's pretty funny too. Her book, Pigs at the Trough: How Corporate Greed and Political Corruption Are Undermining America, was also mentioned. Perhaps it should be required reading for all those in attendance.
Tuesday, January 27, 2009
Being John Thain III
Reuters has just reported that John Thain has been subpoenaed by the New York Attorney General over Merrill Lynch bonuses before the takeover by Bank of America last year. Let's see how this story ends. Do you think it will end justly?
Tuesday, January 20, 2009
Being Personally Responsible
If anyone knows me or have read anything that I have ever written, I am all for personal responsibility. I remember getting into big trouble as a consultant with a large city government for insisting that communities be personally responsible for their own neighborhoods. Change begins with each of us on the smallest of levels. Trash in our neighborhoods is not a small thing. As does love, respect begins at home. But when I heard Joe Scarborough and Peggy Noonan this morning on "Morning Joe" talking about personal responsibility it had a particular divisive and partisan ring.
"Barack Obama is going to be talking about Republican themes of personal responsibility and cleaning up the vacant lot next door," said Joe. Are democrats not personally responsible? Who lives among vacant lots? Peggy Noonan chimed in some time later with the same pejorative buzz word, as if either of them actually knows what President-elect Obama will say, "Yes, he's going to talk about personal responsibility, like cleaning up those vacant lots in your own neighborhood."
By then I was livid. There is no doubt that this disparaging "vacant lot" had not only a derogative anti-Democratic tone, but was used pejoratively to indicate African Americans. Such words are incredibly disheartening especially considering the past eight years where vacant lots in and of themselves did not add to the financial crisis currently rocking America. What about President Reagan's notion of laissez-faire economics that many believe has brought us to our current financial crisis? What about those who bankrupted banks and mortgage companies escaping in golden parachutes that landed in pristine gated communities? The financial crisis had more to do with these and less to do with vacant lots. Who will be held personally responsible for these things?
Financial institutions received welfare the likes that vacant lots will never see in thousands of lifetimes. Vacant lots had nothing to do with water boarding. Many Americans are asking that the current Republican president take personal responsibility for torture. Many are insisting that the incoming president charge him with war crimes. (I am not.) Yes, we all need to take personal responsibility but divisive partisan buzz words and tones will not unify us and will not get to the heart of what's needed to turn this country around. We need bi-partisanship and personal responsibility from everyone with respect for differences. Derogative buzz words strike the absolute wrong chord in this difficult time America now faces.
"Barack Obama is going to be talking about Republican themes of personal responsibility and cleaning up the vacant lot next door," said Joe. Are democrats not personally responsible? Who lives among vacant lots? Peggy Noonan chimed in some time later with the same pejorative buzz word, as if either of them actually knows what President-elect Obama will say, "Yes, he's going to talk about personal responsibility, like cleaning up those vacant lots in your own neighborhood."
By then I was livid. There is no doubt that this disparaging "vacant lot" had not only a derogative anti-Democratic tone, but was used pejoratively to indicate African Americans. Such words are incredibly disheartening especially considering the past eight years where vacant lots in and of themselves did not add to the financial crisis currently rocking America. What about President Reagan's notion of laissez-faire economics that many believe has brought us to our current financial crisis? What about those who bankrupted banks and mortgage companies escaping in golden parachutes that landed in pristine gated communities? The financial crisis had more to do with these and less to do with vacant lots. Who will be held personally responsible for these things?
Financial institutions received welfare the likes that vacant lots will never see in thousands of lifetimes. Vacant lots had nothing to do with water boarding. Many Americans are asking that the current Republican president take personal responsibility for torture. Many are insisting that the incoming president charge him with war crimes. (I am not.) Yes, we all need to take personal responsibility but divisive partisan buzz words and tones will not unify us and will not get to the heart of what's needed to turn this country around. We need bi-partisanship and personal responsibility from everyone with respect for differences. Derogative buzz words strike the absolute wrong chord in this difficult time America now faces.
Monday, January 12, 2009
Being in the Old Guard II
On Good Morning America Democratic Senator Chris Dodd did exactly what I've been speaking about here. Being in the Old Guard, he simply did what many in his position often do, shift the blame on the other Party instead of taking responsibility and offering innovative solutions to problems. Senator Dodd blamed the Bush administration for the failure of the financial bailout disbursements, as if he bore no responsibility as the Senate Banking Committee Chairman. Ugh!
Are you getting really sick and tired of this kind of do nothing rhetoric? I am. What makes Senator Dodd think that anything will be different when the President-elect assumes office if the Congress continues to act in this way? Senator Dodd speaks as if he himself has no responsibility with how the financial bailout was handled. He appeared to be pandering to us. We'll, we don't need it. We want responsiblility and accountability now!
Yes, "further aide must include pay limits" but what about the limits that the good senator did not see to in the hundreds of millions that have already been dispersed without line by line accountability? Spending other people's money has always been no problem. The mess with the disbursements have not been the fault of the Bush administration alone. Congress bears responsibility and so does the American people for not speaking out loudly RIGHT NOW, declaring ENOUGH and signaling to the new administration and the new Congress that we insist on real change and not rhetoric!
Are you getting really sick and tired of this kind of do nothing rhetoric? I am. What makes Senator Dodd think that anything will be different when the President-elect assumes office if the Congress continues to act in this way? Senator Dodd speaks as if he himself has no responsibility with how the financial bailout was handled. He appeared to be pandering to us. We'll, we don't need it. We want responsiblility and accountability now!
Yes, "further aide must include pay limits" but what about the limits that the good senator did not see to in the hundreds of millions that have already been dispersed without line by line accountability? Spending other people's money has always been no problem. The mess with the disbursements have not been the fault of the Bush administration alone. Congress bears responsibility and so does the American people for not speaking out loudly RIGHT NOW, declaring ENOUGH and signaling to the new administration and the new Congress that we insist on real change and not rhetoric!
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