A bit more on bank nationalisation

Here’s my article from yesterday’s Fin

Bank on change, but not here

A year ago, looking at the economic outlook for 2008, I observed that ‘the financialisation of the economy has exceeded the capacity of financial markets to manage risk’, and predicted that ‘large classes of financial assets, and the associated financial markets, may simply disappear’ (Flip side of the flop, AFR 14/2/08). This seemed a bold prediction at a time when only a handful of forecasters, like Nouriel Roubini of New York University, predicted a serious recession.

Even the most bearish of analysts would scarcely have dared to suggest that, by early 2009, the hottest issue of economic debate would be the desirability of nationalising the world’s biggest banks. Yet the debate over bank nationalisation has been subject of front-page headlines in the New York Times for weeks now. The dominant view is that, explicit or surreptitious nationalisation is inevitable.

The US government is already the biggest shareholder in Citigroup and Bank of America. And despite two rounds of rescues, it seems clear that much more public money is going to be needed. While Henry Paulson held the reins at the US Treasury, funds were ladled out with no strings attached and little expectation of any return. Now, politicians and the public are asking why they should not see some reward for the risk they have been forced to take.

Equally importantly, policymakers are starting to realise that much more than a short-term bailout is needed here. What is needed to resolve the crisis is not only to fix the problems of individual banks, problems on a much bigger scale than have been seen before, but to reconstruct a failed global financial system.

Financial restructuring is going to be a huge challenge, involving both a radical redesign of national regulations and the construction of an almost completely new global financial architecture. To attempt this task while leaving major banks under the control of discredited managers nominally responsible to shareholders whose equity has already been wiped out by bad debts, is a recipe for disaster.

The problems are illustrated by the fate of proposals to create a ‘bad bank’ which would manage the disposal of the toxic assets accumulated during the bubble. The problem is that, if such assets were acquired at market prices, large numbers of banks would be revealed as insolvent. On the other hand, if governments bought the assets at the banks’ book prices, the effect would be to reward the speculative excesses of the bubble era and set the stage for an even greater disaster in the future. Only by taking over the entire bank can this problem be addressed.

The speed with which bank nationalisation has risen to the top of the policy agenda has found the international economics profession largely unprepared. The wave of privatisation in the 1980s and 1990s, supported by economic analysis that ranged from simplistic to plain wrong, seemed to many to settle the issue once and for all. As a result, there was very little interest in analysis of the conditions under which public ownership of businesses enterprises might be socially beneficial.

As Joshua Gans of Melbourne Business School has pointed out, Australia in the 1990s was one of the few places where economists paid serious attention to these issues. The analysis that emerged from these debates supported a mixed economy, in which public ownership may be appropriate for capital-intensive enterprises requiring close regulation, but not for small and medium businesses, or for firms operating in competitive markets where light-handed regulation was appropriate.

A central factor in the Australian debate was the risk premium for equity, that is the difference between the rate of interest at which the government can borrow and the rate of return expected by investors in equity and demanded by buyers of risky corporate debt. With the blowout in spreads that has emerged as part of the financial crisis, the Australian analysis of public ownership and nationalisation is more relevant than ever.

Paradoxically, however, Australia is one of the few countries where nationalisation is not on the policy agenda. Our banks remain profitable and their balance sheets appear strong.

The introduction of unlimited deposit guarantees last year, and the recent announcement of a partnership between the Rudd government and the major banks to maintain finance for the commercial property sector have substantially increased the role of government in the banking sector. Nevertheless, it seems likely that, by the end of 2009, Australia will be one of a handful of countries where all major banks are privately owned.

35 thoughts on “A bit more on bank nationalisation

  1. “…politicians and the public are asking why they should not see some reward for the risk they have been forced to take”? [Emphasis added]

    What risk are politicians taking, apart possibly from the risk of not being re-elected for the very few who are taking the lead in this?

  2. Does anyone know the view of the main creditor nations to the US on this issue? Surely any solution must be acceptable to them, as if they stop lending the US cash, there will be no funds for any recovery/stimulus, let alone refinancing the debts.

    What happens to the US if the Chinese and others stop loaning them money?

    Finally, as a first step towards a new structure, can we see an end to the rating agencies like S&P, Moodies etc. They couldn’t assess risk any better than the average punter, and just became another layer of cost on a bloated system. Some PPPs were made viable in recent years because rating agencies allowed private SPVs to borrow cash cheaper than local governments. Absurd.

  3. Hasn’t the Govt deposit guarantee virtually guaranteed all bank loans? Once the Govt does that it is forced to bailout/support bad loans and that’s essentially what it’s doing now with the commercial construction sector. No sooner than it announces that, we have the precursor to the domestic building sector collapse with homebuider Wincrest in NSW going under with 100 homes under construction. By the feel of things Australia is only 3-6 months behind the rest of the world and a similar RE price collapse will no doubt see our banks just as insolvent.

    As fast as Govts try to prop up wages and prices in a clearly deflationary environment, real savers will not invest for the future, but simply stash it in safe havens, thereby prolonging this depression. We need the price of inflated assets to fall in line with real long term returns. Unfortunately that means freeing up labour rates/terms of employment too but Govts will resist that for the obvious. They are losing the reflation battle everywhere and the investment market knows it and furthermore that it will cause even more pain down the track. Everything stops and goes into survival mode under those circumstances. Govt actions have become totally unproductive at a macro level, yet everyone has a vested interest in lining up at the trough sectorally. That’s our rapidly emerging catastrophe now but noone wants to call it. I’m calling it! Stop this madness!

  4. Socrates said

    “What happens to the US if the Chinese and others stop loaning them money?”

    The US would stop buying their goods and start making their own again.

    JQ said;

    “it seems likely that, by the end of 2009, Australia will be one of a handful of countries where all major banks are privately owned.”

    This could be an advantage for Australia’s major banks in the longer term. Banks are very highly geared businesses with some geared at over 20 times their equity, so they have a high chance of failing during severe economic down turns, especially if they have not been regulated properly and allowed to lend recklessly, which is what has happened recently overseas.

    Banks have failed in the past, banks are failing now and banks will fail again in the future, if they are not regulated properly to ensure they do not participate in reckless lending. Being nationalised or not will not change that fact.

    Unfortunately the banks are essential to the economy, so the failing off shore banks will have to be recapitalised and subjected to a tighter regulatory regime. Not having this problem in Australia is testament to our prudent regulation of our banking system.

  5. “What happens to the US if the Chinese and others stop loaning them money?”

    Like the rest of the oxymoron developed economies they’ll just print some more and instead of inflating my 2013 delivery, Perth Mint gold warrants from under $1000/oz to $1400/oz equivalent in a matter of months, they’ll make that look like a very conservative investment, assuming the Perth Mint can deliver(if they can’t then it’s down to flush WA taxpayers by all accounts). Roll on Glenn, Wayne and Kevin.

  6. You read my mind observa. Confidence is shattered everywhere, anyone with cash has buried it in the back yard (with the gold!), governments are propping up industries in a haphazard manner, and central banks are desperately trying to re-inflate the debt bubble.

    Not having this problem in Australia is testament to our prudent regulation of our banking system.

    Yeah well, lets not pat ourselves on the back too soon. Lets see how well run our banking system is after 12-24 months of falling house prices and corporate failures.

  7. True carbonsink, I am not buying any Aussie bank shares just yet. Australia’s toxic debt is in the listed and unlisted commercial sector, which is down over 60%, there could be a lot of assets trading below loan values there. Resi will be OK as new supply will never meet demand due to bureaucracy constraints holding up construction of new housing.

  8. Resi will be OK as new supply will never meet demand…

    It won’t be ok if the banks stop lending, under supply or not.

  9. Tony #6 Resi – the home loan company that lends on mortgage backed securities. Its not the bureaucracy that will be holding them up Tony. Its the insecurity and the question marks hanging over the mortgage securatisers. Tony – I suspect you have not been reading the papers in the last year at all and have no fundamental understanding of this financial crisis and where it is likely to cull the financial markets first.

  10. [LOL-Mode = ON]
    I will boldly predict a banking “moment of truth” before the year is out. One of the biggest half dozen banks will teeter on the brink, perhaps two. Sort by order of total remuneration per employee, in decreasing order. Pick the bank with the highest remuneration/employee; it will see-saw on the edge first. Alternatively, try the ratio of (CEO Remuneration) / (Junior Teller Remuneration). Again, the largest ratio identifies the bank which wobbles first. Many other metrics may be devised. (If one measure contradicts the others, just select a measure that makes your argument of the day, and ignore the rest.)

    It wouldn’t surprise me in the least if the ASX rises quite a bit early this year before collapsing once more, probably by late March. Of course, it will be Rudd’s fault. If it doesn’t collapse, then buy shares now, especially in the banking sector (but wait, wouldn’t that be risky in light of the previous forecast? No, I’ve forgotten it already.).
    [LOL-Mode = OFF]

    More seriously, it is worth remembering that the US Savings and Loans crisis of the early 1990s affected Aussie banks too. Westpac managed to get into the home market over in the USA, and by 1992 its share price had declined from $4.00 to $2.40AUD, IIRC. Westpac only managed a dividend by taking a loan, I think. That’s what I mean by a moment of truth.

    The current circumstances are different to the 1990s of course, but the point is that Aussie banks are not pillars of stone: they can be brought undone in any of several ways.

    BTW, why is there no news here about the smaller lenders in USA? At least a few must be getting desperate by now.



  11. The current Australian Federal Govt is in a rarified position internationally at present with zero debt, although that’s rapidly under threat. The bailouts need to cease immediately and it needs to face a quick back of the envelope calculation for a crash in average asset prices. A good round figure would be 40% judging by RE prices and like the US subprime that’s the greatest threat now, particularly with the flight of investors and defensive options like gold. Consequently it should immediately announce the withdrawal of the current 100% deposit guarantee and set it at 60% with an amnesty for the depositary institutions from mark to market for 12 months. Basically they trade as is unless there is a solvency run and they close the doors with the Govt guaranteeing 60c in the dollar for all, to be transferred to another institution of choice, unless there is an immediate takeover offer and capital injection to continue. No ifs, buts or maybes. That way depositors can still shop around the banks and chase higher investment returns if they can. Also they will be wary of holding large cash balances and want to spend or invest it directly as policymakers would wish. Carry on socking it away but remember 40% is no longer guaranteed folks. That will get things moving again without threat to the future taxpaying GenXYZ.

  12. To John Quiggen

    It seems to me that if the change in ownership is to be more than a mere name change, then a serious skills (education) gap in public economics may have to be addressed. Have you considered giving up your research position and taking up teaching at University?

  13. Paradoxically, however, Australia is one of the few countries where nationalisation is not on the policy agenda.

    Perhaps the reason for this paradox is that the Productivity Commission, Treasury, etc. pay more attention to American economists, due to the comparatively low intellectual standards here? After all, the arguments being put forth by most Australian economists are a crude version of what American left-wing economists (who tend to be slightly more free-market) are saying – so why not simply take the advice of the cream of the crop?

    Anyway it’s neat how Keynesian economists these days are using the same tactics that were used to shore up support for the Iraq war:

    In 2003, “serious” people were willing to debate the evidence that Saddam Hussein had weapons of mass destruction, but they considered it settled that such weapons were reason enough to invade his country. In 2009, “serious” people will debate the best ways to stimulate a slumping economy, but the arguments against a so-called stimulus itself are beyond the pale.

    The boundaries for the global warming debate are defined in the same way. There are the “serious commentators” and then there are the “partisan hacks” who dare question the consensus.

  14. #13- interesting point. Universities may be crying poor but pushing academics into research only positions and away from teaching for the sake of increasing the research standing of a university is a dangerous trend. Presumably this is to increase our share of fee-paying foreign students from increasingly crisis-hit Asian countries (currently our 3rd biggest export). Is this the next part of the domino game? Not to pick on Fed.Fellows who have every right to apply for the best job, but at over 5 times the average post-doc salary and double the average Prof. salary the productivity/wage ratio is becoming skewed. These were Howard’s tactic to divide and rule academia and bring it into the bubble epoch. There must be a return to having our best and brightest academics teaching our best and brightest student (not other countries’ students) if we are to efficiently invest in our future. This is selling the family farm stuff.

  15. P.S. Ernestine Gross- He’ll probably take you more seriously if you spell his name correctly.

  16. Sukrit#14
    Australian economists do seem to pay more attention to overseas economists (mainly US or UK) but I think they are always around five years behind. The UK has been scaling back the privatisations initiated by Thatcher in the past five years.

  17. Thank you, plaasmatron @16, for pointing out my embarrassing spelling error. I am glad you did not interpret my comment as disrespectful to our host or other Fed. Fellows, but closer to what I had intended

  18. To John Quiggin,

    Apologies, John, for spelling your name wrong @13.

    My point is not concerned about the incomes of Fed. Fellows versus Professors.

  19. @13,15 do you have any evidence for a shift away from teaching load and toward research load. This is completely at odds with my experience as an academic – I found the pressure from upper management was for greatly increased teaching loads compared to say 10 or 20 years ago.

  20. Keynesian economics has to face new facts that fiscal stimulus and more debt cannot solve a massive demographic problem now. Firstly the economics discipline was non-plussed at the emergence of stagflation (the coexistence of unemployment and inflation) in the 70s(if this youth demographic surprised with stagflation, it would no doubt surprise in its dotage).
    In hindsight what caused that was a post war demographic bulge, a youth generation entering the workforce in massive numbers and print fiat money and give it to them and it would be spent instantly, driving up prices. As well developed economies struggled to accommodate an explosion of females wanting to enter and largely stay in the workforce, apart from a brief absence for 1.8 children. Developed economies eventually managed to swallow that unprecedented trend and by the early 80s a generation reaching its 30s was ready to take on debt, leverage and the capital reins of power.

    This was the Reagan and Thatcher generation in their prime and a swollen generation which could not get enough of free markets, new financial intermediation and the means by which to takeover the economic reins. What started out as sensible capital transfer and the financial leverage to transfer savings and allocate returns from one generation to the next would be called the Great Moderation, before it morphed into a nominal savinds glut and excessive leverage, fuelled by Asian savers. The curtain call was baby bonuses for their offspring and an extra child for the Treasurer, as a demographic tectonic shift was about to occur again. The youngest of the baby boomer generation is now 47, with it’s peak borrowing, earning and spending largely behind it. That’s the reality for young Asian savers looking for a home for their monumental savings ratios now.

    There’s a simple truth about investment. It’s largely the old lending to the young to finance homes, cars and businesses in order to provide for their retirement and the rate of return governs the allocation of that share between generations. We have now entered that predicted period demographically where there are not enough young to support the aged in the manner to which they came to believe they were entitled. That’s the simple truth with their leveraged assets now and no Keynesian stimulus can alter that brutal fact for them. To attempt to do so now by reflation and public deficit financing, is to refuse to face demographic reality, and to attempt to shift the burden onto the young. To do that would be a bigger scandal than a generation turning a blind eye, both publicly and privately, to the excesses of the greatest Madoff scheme ever.

    That’s the ugly truth for Keynesian economics now. This is no mild downturn in a typically homogenous population where some short term stimulus could even out business cycle shocks. It’s about a generation facing up to its real savings and investment record and not trying some sleight of hand generationl shift of its nominal record. Guaranteeing bank deposits 100% and by implication all loans, was just such a generational sleight of hand, bearing in mind it is that aged cohort that are doing most of the lending. They deserve no guarantee whatsoever from young taxpayers in future and it must cease forthwith, as must all sly interventions to prop up their poor real savings and investment record and any baby boomer Keynesian who says otherwise can go to hell. No syrup or sugar coating. It’s grown-ups medicine time.

  21. ABC News Radio had the Swiss Minister of Finance saying that nationalisation of banks is the most cost effective way forward. What does he know?

  22. nanks @20. With the qualification that the point is tangential to the intent of my 13 and 15, my answer is Yes. The management fad of ‘devolution’ (and enterprise bargaining) opened up opportunities for middle managers to introduce overt or covert ‘strategies’ to this end. I know of at least one University which now has an explicit policy. In my experience the pressure for increased teaching loads (number of hours and student numbers) started with John Dawkins and was enhanced when salary supplementation became popular (it had to be financed).

  23. Ernestine, I can’t see how my point is tangential to 15 but, as you say, the pressure for increasing teaching loads has been there a while, and this comes at the expense of quality research hours. In addition Universites may have policies claiming ‘research-focus’ but, in practice, between the policy and its implementation lies the shadow.

  24. I strongly agree with Ernestine 22. I am not an academic but Xanthippe is and if her experience is anything to go by I can fully understand why academics prefer research. Teaching in universities has been turned into an overworked often underpaid profession, with students churned through like a sausage machine. Meanwhile there is a mindless stream of time consuming admin tasks that are imposed from above by careerist bureaucrats that make the public service look like a model of efficiency. Here at Adelaide the admin staff actually outnumber the lecturers, yet if there are budget shortfalls the cuts always fall on those who generate the income (!) = the lecturers.

    The workloads are such that you can only keep up research if you buy yourself out of teaching with grant money anyway. The ratio of teaching staff to students in some faculties is worse than in most private high schools.

    Sorry for the rant, but those who criticise academics doing research don’t know the reality.

  25. Nanks at 20

    I have stats on the decline of teaching only positions employed as fractionals or full time since 1990. In 1990 if I recall these were about 60% declining to 10% by 2004 ie teaching only positions are accounted for 90% by casual academics. There is some decline in teaching and research positions for the securely employed and the percentage of reserach only positions is overwhelmingly securely employed.
    Unfortunately I dont have the stats with me but over the same period student staff ratios have increased across the board in public unis ie bigger noisier classrooms staffed mainly by casuals. Its pretty ugly really because there are real disincentives to entry for would be academics. Pay for casuals two semesters a year isnt enough to pay rent and fund your own postgrad studies until you are deemed acceptable – in many unis this means through the first review of a phd before you can get secure employment (and what is secure when its likely to be on contract for a few years anyway) on a salary at fractional level A associate lecturer at 65K (may be slightly more now but not much). Its rather sad.

  26. Well bank stocks have gone up here in the US on talk of creating a “bad bank” to house these toxic assets….in return for govt equity.

  27. The Dawkins green paper in 1987(?) had the impress of the economic rationalist, without thinking through the secondary consequences. The idea of deferring the HECS fee and repaying via the taxation system, well that was inspired. Deferral to a future date meant only the really poor were deterred in any numbers. Another push was to reduce the university sector’s dependence upon government funding. A strong desire to make research have a more commercial bent was also a factor in the Dawkins revolution.

    The secondary consequences are manifold, but here are a few.

    People start paying back HECS around the time they are purchasing a house, getting married, having kids: it adds to the financial pressures.

    Casual employment of teaching-only staff soared; some cash-strapped departments removed full-time tutor positions and replaced them with hour by hour casual only. The old deal, of working on a PhD halftime while doing a tutor job, was thrown out, leaving the PhD candidate with no financial support during the university breaks.

    Pharmaceutical companies and many others used university research to their own advantage. Commercial-in-confidence agreements lock down research shared with the companies. Rather than look for a paper the question is “How many patents?”

    Departments that could not match the salaries available in free enterprise lost young staff with good potential.

    Meanwhile, departments that either had nothing of interest to free enterprise, or that had research whose nature involved long lead times, languished if they didn’t shrink away to insignificance.

    A shift to overseas students as a large scale revenue stream increased the pressure on departments to use casual positions for lecturers instead of full-time or permanent positions. This made it much easier to match annual demand and staffing levels. At a price.

    It was not all bad but I still wonder if it was really worth it.

  28. Donald#29
    Over the past ten years I have watched bright young things leave for better paying (more secure) employment elsewhere than academia because they cant fund the long breaks between casual teaching stints. It has gotten worse – some unis shrank their semesters from 14 to 12 to 8 weeks (twice a year) so while the bright young things stick it out a few semesters and chuck in the towel – lecturing contracts go to the “should be retired” and that can get to be a nice cosy regular reirement income on top of the generous super from earlier days and of course it repeats semester after semester…..but what about when the older finally age….who is coming in apart from foreigners phd trained overseas who are less likely to stay?

    Its a considerable barrier to entry for young entrants into the profession and in my more cynical moments I could even consider, under the unenlightened “anti investment in tertiary education” policies and antipathy of the prior coalition government towards the “elites” that inhabited universities, whether it wasnt designed that way deliberately?

  29. We need banks who work for the benefit of the nations and not for making profit. Consequently, all banks must be sponsored by the government.

  30. How about cooperativising the banks instead? Issue all deposit holders shares to the equivalent value of their deposits. They’re the ones with the most incentive to ensure that the institutions are well and conservatively run.

  31. While Henry Paulson held the reins at the US Treasury, funds were ladled out with no strings attached and little expectation of any return.

    As Krugman points out, when banks raise capital they normally give shares to the people who supply the capital and there should be no difference if that capital comes from taxpayers. It’s pretty simple really, if someone puts up capital they should be entitled to shares regardless of who they are or what special name is used with share acquisition by that shareholder.

    Of course, banks in Australia are not asking the government for capital (yet).

  32. James Haughton “How about cooperativising the banks instead? Issue all deposit holders shares to the equivalent value of their deposits.”

    James – understand where you’re coming from but the banks need new capital. I.e. unless the depositors are going to hand over their deposits to the banks (and not get it back) this is just giving away shares in the bank for free.

    It seems a lot of people don’t understand the situations with bank solvency.
    At the moment in many countries (US
    UK, Iceland etc) the banks assets are worth less than their liabilities and they don’t have enough reserve capital to make up the difference. Because the numbers are so large and people are so fearful that these assets values will continue to decrease governments (or multinational bodies like the IMF) are the only ones who are large enough to put in enough capital to save these banks from growing broke.

    In other countries (especially the Baltic States) the main banks are subsidiaries of large foreign banks. The added fear there is that as these large banks come under pressure to support their home market they will pull the plug on these subsidiaries and cause the collapse of these economies where the government is not financially strong enough to fill the gap.

    The alternative to the government putting in capital to the banks is to force those who have lent to the banks (other large institutions, deposit holders etc) to convert their loans into capital. This is generally what happens during a bankruptcy proceeding. The alternative in bankruptcy is selling off the assets of the bank and they generally aren’t worth a huge amount as it’s the ongoing trust in the bank which is most valuable and this has been lost. Governments have generally guaranteed deposits to take the fear of those lending to banks loosing out (and therefore greatly reducing the possibility of a bank run – which will send the bank broke).

    Basically what governments and reserve banks are doing now is avoiding the mistakes that exacerbated the great depression. No doubt they are making different mistakes. I agree with John Quiggan is that one huge mistake is failing to penalise/replace the top management of the banks who stuffed up. But really the main msitakes have been made in the boom.

    So far Australian banks have stood up OK but there have been losses and there will be more to come. To this stage the banks have been able to raise private capital through the stock market to offset those losses as the losses aren’t too big. As a number of people have pointed out here if property values collapse – commercial or residential then banks losses will be greater and if more people loose their jobs consumer bad debt will rise and this will also hurt banks.

    I would charactertise the Australian government’s efforts to this point as being good in the short term but doing a fair bit of damage in the longer term.
    E.g.1. Stimulus stops us falling as deeply into recession as other counties but means a need to savagely cut government spending or raise taxes in the future.
    E.g.2. Incentives for first home buyers helps reduce falls in prices and falls in building activity but means we face the pain of more falls in prices and building activity later.
    E.g.3. Supporting the banks now – decreases disruption in the financial system now but increases likelihood for risky banking practices continuing later.

    This short term focus makes sense if the global downturn is going to be relatively short and we can deal with the pain in a time of solid economic growth. However if it’s going to be long (i.e. a global L shaped recession) Australia does face some considerable risks due to the huge level of consumer debt and low private savings rate (and the associated high level of foreign debt and current account deficit). This mean we as a whole country are in real trouble if we become viewed as a risky country to lend to. If we continue with this “spend and borrow ourselves out of trouble mentality” in a global environment where growth is low for years to come and where our commodity price exports will continue to decrease in value then lending to us may dry up. Then we are back to Paul Keating’s “banana republic” comment and sharp cut backs in government spending and reduced credit flows to households (and therefore decreased private spending) and back in another recession in say 4-5 years time but in a much worse situation as fiscal and monetary policy won’t be in a state to do anything productive about it.

    So ease up Kev07, recklessly spending, borrowing and lending without worrying about the risk in the medium term got the world into this mess let’s not mistake the same mistake again.

    Sorry I got off the bank nationalisation topic there – was on roll.

    Steve van Emmerik

  33. I find the large number of firms now going to the markets to raise equity somewhat disturbing. For existing shareholders this spells further dilution and loss of value on top of the GFC price falls. The whole mess really looks to me like there have been too many firms in the financial sector chasing too few shares on a global scale, and as it all corrects companies who may not now be able to get finance or liquidate assets to correct their shaky balance sheets and debt / equity or debt /asset ratios are now calling on shareholders to take up the mantle. Shareholders dont really have any choice if they want to retain their interest in the firm, but many may be induced to sell further exacerbating the downside. I really wonder if the enforced super streams on a global basis didnt contribute to the overvalued shareprices, result in massively inefficient gains for the few and now losses for many. Something has to be done about financial sector management and regulation (perhaps looking at regulation or lack of that may have contributed to this unsustainable boom).
    Obama is taking some initiatives on executive remunerations. What are we doing here?

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