September 17, 2008

life in financial markets: hypocrites' anthem: "privatise gains, socialise risks"

It does not come as a surprise to me -- the hypocrisies of soon-to-be-nuclear-superpower India's so-called capitalists. The last week-end's death of Lehman Brothers and the takeover of a in-great-distress Merrill Lynch, and the the bullying cry for help to the government by AIG (that the Fed has now succumbed to) has once again exposed the hypocrisies of the top-level executives in the financial and corporate sector.
The Indian media has been seeking views from Indian Inc and Indian banking & financial sector about the implications of the global financial crisis on India and generally. As usual, a majority of those who give their views want the US government to bail out the distressed AIG like it did with Fannie Mae and Freddie Mac recently.
I can give two examples from what I remember watching on business news channels the last 3 days. Goverment bailouts of private organisations when they go into financial distrees was rigorously defended by Anil Ambani-owned Reliance Money's CEO Sudip Bandyopadhyay and similarly, though not rigorously, by State Bank of India's chairman, O.P. Bhatt.
Companies like AIG will never price their products and services cheap to their customers (for instance, when I took out my pure-term life insurance policy 3-4 years i was checking out the pure-term policies of all insurance companies and found that Tata-AIG's one was the most expensive... i finally went for HDFC Standard Life's offering). It is ludicrous, therefore, for them to expect themselves to be treated by kid gloves (= bail out) by public taxpayers' money.
Some good reading material can be found at recent blog posts at globaleconomicanalysis.blogspot.com.
Meanwhile, the hypocritical Indian-&-international capitalists can continue to loudly sing their anthem "Privatise gains, socialise risks."
this below part of the post was added on 21 Sep:
The one good thing about the US markets that is misearbly lacking in Indian and all other markets is the level of transparency. It is high even though it is not great in the US but in the rest of the markets it ranges from low to very low. Another thing is that many American analysts are refreshingly bold in criticising their governments and regulators for doing regressive things. I have got most of my understanding of why the government bailouts in the US or anywhere is regressive from American analysts and commentators themselves. Here, in India, barring an occasional voice or two, most of the analysts and commentators are cowards and support almost every regressive step that finance minister, Chidambaram, or the commerce minister, Kamal Nath (notorious for his devious obsession in pusing for more and more sops for SEZs) RBI or the Sebi takes with regard to the economy or the financial markets.
Here are some examples of some American analysts/commentatos' telling it like it is:
1) After the nationalisation of Fannie Mae and Freddie Mac, CNBC, on 8 September, quotes an investor and former partner to George Soros in Quantum, Jim Rogers, as saying "... America is more communist thatn China is right now. You can see that this welfare of the rich, it is socialism for the rich... its just bailing out financial institutions... This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this..."
2) Mike Shedlock, an investment advisor, says openly in his 21 September post that the Bush administration is seeking unreviewable dictatorial power by pressurising Congress to hand over power to him to buy $700 billion worth of in-deep-loss mortgage investments that financial companies are stuck with.
3) The ludicrous ban on short selling by SEC has be ripped apart by many in the US -- Peak Insanity, Peak Insanity--Comments, Short Sellers Targetted, Short Sellers Targetted--Comments, Paulson's Shorting Ban Needs Revisions Already,
Paulson's Shorting Ban Needs Revisions Already--Comments. From the comments sections, here are some interesting ones: (a) "... These are supposedly the bureaucrats that champion the wisdom of the free market and the market's ability to correct itself over time. Now they seem drunk with the taxpayers dime rushing from one billions of dollars fix to the next. All this plus two (and possibly more) land wars in Asia financed with borrowed money. It is nuts." (b) "UNBELIEVABLE! I didn't buy a house when I could have because I believed it to be prudent to wait til the market dropped. I didn't get into debt because I knew we were on our way to the greatest credit crisis the world has ever seen. Because I have been prudent and saved my money and waited to short the Sh*t out of this market, I lose and those that were spending like there was no tomorrow, that took out loans bigger than what they could pay, that levered themselves to the skies....they win! This is not a free market and I am fed up with those running the system and this country!" (c) "... Now Paulson and Bush and Bernancke stand before the country and declare they are taking steps to save the country... including unlimited powers for Paulson, and Congress can't wait to say yes...exactly the way the Iraq war was sold. Just freaking say no...is there anyone with an integrity in Congress...we are of course being sold down the river. No pain, no gain. Let the freaking markets work."

2 comments:

slash said...

It takes a fund manager to stand up and show courage and protest against injustice. Only an official from the world's most transparent industry (mutual funds) can get up and do that. BRAVO!

Rajesh Gajra said...

awww! come on, kayezad! :-) that guy is a popular fund manager but not from mainstream mutual fund industry that still continues to be run by crooks! :-)