The financial crisis that is creating a pandemonium across the globe has its origins in something very personal… the craving for excesses, the misalignment of interests, and inability to gaze over the hillock.
It resonates in the psyche of almost every primate’s mind (at least the ones on Wall Street and the likes). The trouble becomes systemic, when this psyche percolates through the system until it is endemic in the processes, the supporting ideas and the resulting actions.
Too much cash was doled out to anybody who could not refuse it (in some cases, they converted a few of the refuters too). Excesses… spiraling demand, irrational and frothy growth, ballooning inflation, subsequent fall backs, leveraged positions that faced a free fall etc. The routine…
As a consequence companies went belly up, unemployment soared, confidence shattered, families fragmented, hopes crushed. This resulted in federal banks world over realizing that sentiments and subsequently liquidity is turning out to be a severe problem. Companies were bailed out (with a few exceptions), regulatory agencies and credit assessors were pulled up, bonuses questioned etc… primarily a few feathers were ruffled.
Having said that, they went on the time tested cure, an interest rate reducing spree, handing out benefits to banks (pitted with illiquid, penny priced bad assets). The banks on the flip side, decided to park the excess funds so released with the federal banks themselves… fearing to lend it out to suspected “sub primers”.
The same banks that got rapped on their knuckles for being too liberal in lending… and then securitizing the receivables, of suspect lenders, are being prodded to loosen their purse strings and lend more freely. The banks that sported a sheepish look earlier have a constipated look at the moment. They might want to lend, but are wary of the repercussions.
Hence, we find them caught in a quandary -
· Lend - risking bleeding and triggering a repeat of their previous error
· Hold back - risking sustenance of federal magnanimity, & squeezing the markets dry
Which way will they tilt?
It resonates in the psyche of almost every primate’s mind (at least the ones on Wall Street and the likes). The trouble becomes systemic, when this psyche percolates through the system until it is endemic in the processes, the supporting ideas and the resulting actions.
Too much cash was doled out to anybody who could not refuse it (in some cases, they converted a few of the refuters too). Excesses… spiraling demand, irrational and frothy growth, ballooning inflation, subsequent fall backs, leveraged positions that faced a free fall etc. The routine…
As a consequence companies went belly up, unemployment soared, confidence shattered, families fragmented, hopes crushed. This resulted in federal banks world over realizing that sentiments and subsequently liquidity is turning out to be a severe problem. Companies were bailed out (with a few exceptions), regulatory agencies and credit assessors were pulled up, bonuses questioned etc… primarily a few feathers were ruffled.
Having said that, they went on the time tested cure, an interest rate reducing spree, handing out benefits to banks (pitted with illiquid, penny priced bad assets). The banks on the flip side, decided to park the excess funds so released with the federal banks themselves… fearing to lend it out to suspected “sub primers”.
The same banks that got rapped on their knuckles for being too liberal in lending… and then securitizing the receivables, of suspect lenders, are being prodded to loosen their purse strings and lend more freely. The banks that sported a sheepish look earlier have a constipated look at the moment. They might want to lend, but are wary of the repercussions.
Hence, we find them caught in a quandary -
· Lend - risking bleeding and triggering a repeat of their previous error
· Hold back - risking sustenance of federal magnanimity, & squeezing the markets dry
Which way will they tilt?
