R u planning to write something on the Lehmann’s and Merrill lynchs and the like…..the end of investment banking…..in general….and is it anyway going to affect john deere di daal and roti….
The last part, I shall ignore, since it is official Deere matter. There's a reason I am in (Virtual) Manufacturing and not in Finance. It is not right to talk of my current company being exposed to the financial crisis, since I am not the best person to talk about it.. Nowhere near..
But, about Lehman Bros, and Merrill, and AIG, and all others, it's surprising that all the MBA Finance hot shots didn't know enough finance to know that if you give a loan to someone, you better make sure that if the guy defaults, you have some way by which you get your money back.. They call it surety, and you don't need MBA finance to know that.. If my bhaji wala needs a loan, he leaves something with me as surety (girvi in Hindi).. Even uneducated people know that.. if the surety is a loan by the bhaji wala to someone else, and on and on, it's kind of difficult to keep track of all of this..
About the bailout from Uncle Hank, I don't know the details. I believe the deal is that the US government is going to buy into AIG / Bear Stearns / Fannie Mae / Freddie Mac and then sell it off, once things start to turn around. But, if that is the case, wouldn't it be better for some private firm to do it? Unlike Uncle Hank, they would have a direct stake in turning around their investment.. If you are guaranteeing that the sick firm will improve, why would someone buy it (later) at a higher price, that what they are getting for now? If they don't have the money today, how would they have the money tomorrow, when the same thing is going to cost more?? That's basic logic, isn't it??
On a personal note.. My wife is the only person I know who has an offer letter signed by Hank Paulson. In retrospect, it seems like a mighty fine decision that she didn't accept.
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