American taxpayers to help Bank of America finance its $4 billion buyout of Countrywide.

It would have been better for the automotive industry if the Big Three (formerly Four) did not grant all of the union benefits during the past three decades.

Had economic conditions not changed so quickly and placed Countrywide's portfolio at risk, they would have been praised for allowing many more people to afford homes than would have.

And this is hardly a bailout. It's simply a statement of how the existing tax system works.

What happened with LTCM was an active bailout. Before patting yourself on the back for a morally superior job well done, take the time to now what you're talking about.

As I stated in my previous post, it's a situation that was completely avoidable to start with. I understand how the existing tax system works, that wasn't my point. My point was that the people who can least afford to pay for others mistakes, are the ones that do so, regardless of the method of payment. Deregulation was a bad decision that I certainly didn't make, did you? Were you one of the people that instigated this economic bloodbath?

I'm willing to bet that a large percentage of the people in the country who will suffer, are not the ones who made the decisions to start with.

You're saying that countrywide are just unlucky? Aww, poor them. To think, business relies upon luck rather than good foresight and good management.. Who knew?

You're saying that countrywide are just unlucky? Aww, poor them. To think, business relies upon luck rather than good foresight and good management.. Who knew?

Where did I mention luck? The loan business requires economic forecasting. Forecasting is dealing with the uncertain. Obviously, their economic models were flawed.

Forecasting economic conditions is no more certain than forecasting the weather. And, we all know how accurate the meteorologists are and the are only looking at conditions 24 hours forward. All forecasters get it wrong to some degree. Those that are less wrong are the winners.

If you watch the news Countrywide was not the only company that forecast poorly, Cititgroup, Merrill-Lynch, and Morgan-Stanley among others have all reported horrible numbers for the last quarter. Most of that pain was inflicted by positions in the subprime mortgage market.

Who is paying for those mistakes? A lot more people than those that borrowed. The stockholders of all those companies have suffered greatly. Many of the stocks are trading at half what they did a year ago.

Deregulation was a bad decision that I certainly didn't make, did you? Were you one of the people that instigated this economic bloodbath?

And we know how well central regulation works to spur economic growth. East Germany vs. West Germany was a classic case study in market-driven vs. centrally planned economies. The centrally planning of East Germany led to a productivity level one-TENTH that of market-driven West Germany.

My point was that the people who can least afford to pay for others mistakes, are the ones that do so, regardless of the method of payment.

And who are these people? I'm not entirely against playing the victim card, but I have no time for couching complex issues in terms of vague self-pitying platitudes.

I'm willing to bet that a large percentage of the people in the country who will suffer, are not the ones who made the decisions to start with.

Of course not. The subprime debacle caused a ripple effect across virtually all financial markets, worldwide. Simply pointing out a lack of 100% forecasting certainty is hardly any biting criticism of deregulation, nor is it any sort of halfway decent argument for regulation.

To think, business relies upon luck rather than good foresight and good management.. Who knew?

To think, there's nonzero uncertainty in the financial markets.. Who knew? Heck, I always thought all investments were either 100% sure bets or controlled by monkeys rolling dice.

To think, there's nonzero uncertainty in the financial markets.. Who knew? Heck, I always thought all investments were either 100% sure bets or controlled by monkeys rolling dice

Don't you know that past performance is a guarantee of future results?

This is not a bailout at all. This is tax law that is and has been on the books for years.

Scale this principle down a bit. Say I own a small manufacturing plant that employs 50 people. One of my principle customers moves its operations and shuts down its local plant. Now, I have a decrease in revenue and will likely be facing losses for the next fiscal year and maybe more. It is going to take some time to replace the customer with enough volume to make up for that loss.

What do I do here? I could just close the shop, fire all the workers and sell the businesses assets. But, I can ease the financial hardship by using the projected losses to partially offset the prior and future years' profits. In that case, I might decide that the best course is to weather the storm and keep the workers employed. Who wins there? Everybody does. The business owner gets to keep operating. The workers get to keep their jobs, keep their benefits and continue to add to the local and national tax base.

I apologize for trying to discuss the article's content. I did not realize that this thread was just meant for bashing business and capitalism. I'll leave now unless you would rather discuss the article.

Jay:

Howdy, Pu-Pu pal.

The reason we have SOX is that the social costs of not having it are greater than the corporate costs of having it. Leaving aside that the idea of $1.4 trillion annually is so idiotically ridiculous that it doesn't dignify a response, if it costs that much, it's the price we decided we're willing to pay.

Second. The economic inefficiency and moral hazard does not reside in the tax abatements allowed to BoA. That's actually a fairly routine transaction.

The economic inefficiency and moral hazard exists in the half-billion-dollar premium on the BAILOUT price that will accrue to the benefit of COUNTRYWIDE STOCKHOLDERS. They did nothing to earn that premium--they've shifted risk from themselves to the taxpayers for no public purpose.

In a year or two they'll all be screaming bloody murder about socialism again.

Oh well. Life goes on.

if it costs that much, it's the price we decided we're willing to pay.

You can question the Economist's numbers. But, the point is that it costs far more than it saves or could save.

Unfortunately, the Sarbanes-Oxley Act was rushed through in response to the Enron and MCI scandals. It is a poorly written law that is far too vague (Section 404 especially). The main beneficiaries of the Act are not the shareholders, creditors or customers, but the accounting firms that are doing the auditing and providing services to help companies comply.

Jay:

But, the point is that it costs far more than it saves or could save.

No, that's WRONG. To put it another way, the exact same argument was put forth against FDR's creation of the SEC in the first place. The first part of your statement is at least debatable, since the costs are measured in compliance expenseses wheras the "savings" are measured psychologically, hence, much more difficult to put a dollar value on. But the second part is FALSE. You cannot tell me factually what SOX could do in the long run. In fact, there's an excellent argument to be made that it will enhance growth once the initial costs are absorbed on the theory of perfect information, i.e., the more information a market has, the more efficient and accurate the pricing mechanism.

Having said that, you're right, but that wasn't the point. For those of us who do not worship at the altar of economic efficiency, it was important to get an architecture on the legislative books while the corporations were wrong-footed by Enron and WorldCom. As long as your agenda is "Amend SOX so that it better protects shareholders, creditors and consumers" and not "Repeal this onerous SOX to unleash the power of the free market," I'm okay with criticism of SOX. It was a little rushed and heavy-handed, but shhhhhhhhh, don't tell the lefties I told you that. They'll stick me in a re-education camp or something.