Wednesday, September 24, 2008

FBI Investigation

The Times reports that the FBI is investigating a number of executives from Fannie Mae, Freddie Mac, Lehman Brothers and AIG.

The Times states that are investigating as to whether the executives lied to shareholders, and whether fraud helped caused some of the troubles at these organisation.

The investigation includes whether executives deliberately misled the stock market about the state of their businesses.

Needless to say the politicians who oppose the $700BN Paulson bailout have latched onto this as another reason not to give money to greedy Wall Street bankers.

All well and good.

However, moral hazard and regulation can be addressed after the crisis has been dealt with.

When your neighbour's house catches fire (even if he started it deliberately) you do not stand idly by watching it burn (remonstrating with him about his stupidity), you help him put it out.

Another point that those who hate greedy bankers should remember is this, people were happy enough to borrow the money when it was cheap and to saddle themselves with debt; no one put a gun to their heads.

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