Sat Sep 27th, 2008 at 08:27:29 PM EST
In the discussion about rescue plans for the financial crisis, there is quite some focus on not producing moral hazard by buying out stockholders, but there are other stakeholders, who can make dumb decisions, on which there is no focus.
The people owing the stocks have made a lousy investment, when having bought them a couple of years ago. Even when the companies are kept solvent, the bubble game hasn't worked out for them.
The real profiteers are the bankers. Many had salaries, which they couldn't get in years, if they would not have been allowed to take enormous risk. Because a one-year good performance gave them a bonus, not of a fraction, but multiple times their fixed salary. It is impossible to take that money away from them, but that's not a reason to shift prime responsibility elsewhere. CEOs and top managers are very powerful in modern companies, especially when their short term results are OK.
The other people, who did get a better deal than stock holders, are the bond holders. But why should they be bailed out, when it is wrong to bail out the stock holders? When you require a stock holder to check exactly, what he buys, then why should bond holders not be required to check exactly? Still any bail out plan (and past bail outs of F&F, BS, AIG) did not ask bond holders for an haircut.
Only the 'Industrial Bank of America' plan will produce more or less fair results with distributing losses between stock holders and bond holders.