Confessions of Economic Karma.

2 minute read.

With Lehman Brothers filing for bankruptcy and AIG looking less solvent than it should, you would have thought that banks would have stopped been greedy and start looking to solve there only problem. 

What caused the problem – greed – on a scale that should have never been allowed, bundling ever big bad investments and selling them as good ones, the net result being that the banks can no longer stay solvent, and are dropping like flies. Look at Fannie Mae and Freddie Mac, between the two companies they secured over $6 trillion of mortgages in the US, and they couldn’t stay solvent.

And yet companies keep getting bigger, Bank of America is buying Merrill Lynch and Barclays is interested in buying some divisions of Lehman Brothers. You would have thought they would have seen sense already and kept they size they are, with the economic climate such as this you shouldn’t be looking to grow the business but keep it stable and if the business grows well done you.

Growth is not the be all and end all, being able to say we weathered the storm is much better than we grew 10% in 2008 but went bankrupt in 2009. There are lots of sad looking people at the moment and its only going to get worse, unless the banking industry wake up and smell the heap that has been mounting at the side of them. Halifax says it has enough capital to avoid liquidity problems, yet its stocks tanked 40% the stock market seems to think otherwise, and here lies the problem. The banks have had such an easy time they haven’t had to worry about a thing, confidence in them has been assured and now what little confidence there was after the collapse of yet another bank, has evapourated to leave us the common man in a very precarious position. 

We haven’t seen the last bank to fall yet, and I haven’t got that much confidence that system will change quick enough to ensure the damage is limited. The global economic down turn is here to stay and will be with us for a while yet.

Update: So the banks are still being there usual selves, Lloyds TSB is in talks with HBOS the owner of Halifax to take it over, but rather than pay its perceived value they are paying last weeks share price of 300p.

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