Risky debt abounds once again on the capital markets, according to the FT.
So, we've already figured out that there isn't going to be much in the way of regulatory reform. But one would think that the industry would at least be a little gun shy.
Is this the result of the so-called "moral hazard" of government bailouts? For once, perhaps the conservatives were right. Perhaps government really can't take the place of markets in some situations. Sometimes, people need to go broke to learn a lesson.
Michael Lewis, in an interview he gave regarding his fantastic historical account of the financial crisis, The Big Short, speculated that perhaps the mess wouldn't have been so bad had investment banks not gone public. If they had remained partnerships, perhaps the mess wouldn't have been so bad. Partners in a partnership generally don't let their employees throw billions of company dollars on a roulette table -- especially when odds are much worse than 50/50. Because what's getting thrown away is the partners' own money.
Not so with corporate executives. They haven't got any skin in the game. Their diversified public shareholders? They can pull anything over on those dupes.
With public corporations, we're left to the government as the only watchdog.
Oy vey.
