Ok, so you're sitting there asking yourself, what do these things possibly have in common.
Why did the Titanic sink?
Most people would say, because it hit an ice berg. But why did it hit an ice berg? Because the captain of the boat wanted to arrive in New York early to surprise everyone, so he was speeding across the Atlantic. Why would the captain take such a risk? The speed at which they were traveling made virtually impossible to avoid a berg once one was spotted.
The captain took the risks he took because he was operating on a specific premise. Structurally, the Titanic was unsinkable.
Think about what that means for a moment. If they truly believed it was impossible to sink the Titanic then why should anyone consider safety features. Was it really necessary to have enough lifeboats, or any lifeboats for that matter? If they hadn't held the premise that the Titanic was unsinkable, would it have sunk?
The same principle applies to the financial industry. They knew that they couldn't sink and that the government would rescue them. Therefore, they didn't need to be responsible about their decisions and whatever policies they held in place to ensure the credibility of their lending or investment decisions went out the window. Why take such precautions when failure was really impossible?
Well, the Titanic is sinking and it's taking all of us with it.
Thanks GW, we really appreciate watching our 401K's and IRA's become smaller and smaller every day.
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The Titanic sunk because of its unique "unsinkable" design...the double hull with a honeycomb structure that allowed water to fill the hull and drag the ship down. At the time, the builders thought it was good design ...sort of like the design of the Twin Towers (a design that allowed the structure beams to melt down... who knew how catestrophic it would be!
I agree that the same principles apply to the financial industry. And when the feds bail the the financial giants out, it's the taxpayers that suffer, more than investors.
So, how DID we get into this handbasket, and where ARE we going?
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