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Perhaps what’s needed for “too big to fail” businesses is to require them to either have a certain amount of cash reserves on hand, or split up in such a way th

by spease 7y ago

Perhaps what’s needed for “too big to fail” businesses is to require them to either have a certain amount of cash reserves on hand, or split up in such a way that the risk is mitigated. This would help prevent an aggressively spending company from out-competing savers through excess spending, buying them out, then going out of business itself when hard times come around.

marvin 7y ago
Just wipe out the shareholders when the time for bailout comes. Owners can choose whether to take bankruptcy or a 90% haircut. (Or, say, X - 10%, where X is the number that state negotiators determines the company will get in a fire sale). This should properly incentivize everyone for the next round. I don't understand why more people don't propose something along these lines.
- EpicEng 7y ago
  >Just wipe out the shareholders when the time for bailout comes... I don't understand why more people don't propose something along these lines. The answer seems pretty obvious. If you don't believe that any company should be "too big to fail", that's valid, but it's not exactly the situation we have today. Secondly, those shareholders you speak of aren't just a small group of billionaires. Many of these companies make up substantial portions of people's returement savings, not to mention the knock on effects of huge businesses going under.
  - fredthomsen 7y ago
    but moral hazard makes the management of these companies worse and worse everytime one gets bailed out
    - EpicEng 7y ago
      Not for the banks after 2008. I think far more people should have been arrested, but the reason our banks have enough liquidity to ride this out is due to regulations out in place after the last bailout.
      - fapjacks 7y ago
        Sure, but you're talking about regulation of the companies, not the management within the companies themselves. I think the parent comment's point stands.
      - lowdose 7y ago
        Wasn't really needed with QE and being the first to profit of this free lunch.
  - vkou 7y ago
    > Many of these companies make up substantial portions of people's returement savings If those people did the prudent thing, and invested into an index fund, as opposed to picking stocks of companies that are being ran irresponsibly, their retirement savings would, on aggregate, be fine. I'd rather not have everyone else's retirement-savings-to-be bail out those bad investments.
    - EpicEng 7y ago
      >If those people did the prudent thing, and invested into an index fund, as opposed to picking stocks of companies that are being ran irresponsibly, their retirement savings would, on aggregate, be fine. Index funds go down with the market... but perhaps more importantly, there _has_ been a massive shift to index/ETF trading. You know what that did? Pumped up the market as a whole. Now individual business assessment is less valuable because businesses with crap fundamentals go up and up and up due to index buying. Just another bubble.
- einpoklum 7y ago
  1. Influence of large capitalists (stock-holders) 2. Haven't they put a lot of people's retirement benefit savings into this kind of stock? I guess that could be an excuse.
sgroppino 7y ago
I believe they did that for banks after the 2008 crisis, maybe it should apply more widely. But still I'm not sure it'd make a huge difference given the scale of disruption caused by a global shutdown like we're seeing as a result of covid-19.

by spease 7y ago

marvin 7y ago

Just wipe out the shareholders when the time for bailout comes. Owners can choose whether to take bankruptcy or a 90% haircut. (Or, say, X - 10%, where X is the number that state negotiators determines the company will get in a fire sale). This should properly incentivize everyone for the next round. I don't understand why more people don't propose something along these lines.

EpicEng 7y ago
>Just wipe out the shareholders when the time for bailout comes... I don't understand why more people don't propose something along these lines. The answer seems pretty obvious. If you don't believe that any company should be "too big to fail", that's valid, but it's not exactly the situation we have today. Secondly, those shareholders you speak of aren't just a small group of billionaires. Many of these companies make up substantial portions of people's returement savings, not to mention the knock on effects of huge businesses going under.
- fredthomsen 7y ago
  but moral hazard makes the management of these companies worse and worse everytime one gets bailed out
  - EpicEng 7y ago
    Not for the banks after 2008. I think far more people should have been arrested, but the reason our banks have enough liquidity to ride this out is due to regulations out in place after the last bailout.
    - fapjacks 7y ago
      Sure, but you're talking about regulation of the companies, not the management within the companies themselves. I think the parent comment's point stands.
    - lowdose 7y ago
      Wasn't really needed with QE and being the first to profit of this free lunch.
- vkou 7y ago
  > Many of these companies make up substantial portions of people's returement savings If those people did the prudent thing, and invested into an index fund, as opposed to picking stocks of companies that are being ran irresponsibly, their retirement savings would, on aggregate, be fine. I'd rather not have everyone else's retirement-savings-to-be bail out those bad investments.
  - EpicEng 7y ago
    >If those people did the prudent thing, and invested into an index fund, as opposed to picking stocks of companies that are being ran irresponsibly, their retirement savings would, on aggregate, be fine. Index funds go down with the market... but perhaps more importantly, there _has_ been a massive shift to index/ETF trading. You know what that did? Pumped up the market as a whole. Now individual business assessment is less valuable because businesses with crap fundamentals go up and up and up due to index buying. Just another bubble.
einpoklum 7y ago
1. Influence of large capitalists (stock-holders) 2. Haven't they put a lot of people's retirement benefit savings into this kind of stock? I guess that could be an excuse.

sgroppino 7y ago

I believe they did that for banks after the 2008 crisis, maybe it should apply more widely. But still I'm not sure it'd make a huge difference given the scale of disruption caused by a global shutdown like we're seeing as a result of covid-19.