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Not if the government will buy you out if you are facing insolvency. Taking more risks is actually the right thing to do in this environment.

mercer 11y ago
I suppose that depends entirely on what you consider to be 'the right thing to do'.
nickpsecurity 11y ago
Good point. You can bet that popped into my mind when I was reading it: some of my own friends who saw it coming lost everything because they pulled their clients out of the bad investments. Which got bailed out and became the good investments. (sighs)
maxerickson 11y ago
The government buyout was not a great deal for AIG shareholders: https://en.wikipedia.org/wiki/American_International_Group#Liquidity_crisis_and_government_bailout https://en.wikipedia.org/wiki/American_International_Group#L... The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company It might be good for executives and other employees to take excess risks, but it probably isn't good for shareholders, they generally lose a substantial amount of their investment in an emergency bailout, most of it in a bankruptcy.
- rodgerd 11y ago
  > The government buyout was not a great deal for AIG shareholders: Good. The legitimate use of taxpayer money in propping up for-profit organisations should be to prevent a broader social problem, not to guarantee the ROI of investors.
nostrademons 11y ago
FWIW, we actually saw this in the last financial crisis, where Berkshire Hathaway funded a $2B bailout of Goldman Sachs that he exited for a healthy profit. A bailout is basically just redirecting the assets of the healthy part of the economy towards a part of the economy that has lost confidence, oftentimes at a profit (the government profited from the TARP bailout). The government does this using its power to tax. Berkshire does it through the power of Americans' insatiable demand for candy, sugar-water, freight transport, and peace of mind. Having large cash reserves just lets it participate in these deals where you would otherwise need a state-sized actor, much like how the Rothschilds owned much of 19th-century Europe.
- nickpsecurity 11y ago
  So he's saying more of what he already did than wondering about the future. Nice trick. Makes it even more likely to be true in next situation.

mercer 11y ago

I suppose that depends entirely on what you consider to be 'the right thing to do'.

nickpsecurity 11y ago

Good point. You can bet that popped into my mind when I was reading it: some of my own friends who saw it coming lost everything because they pulled their clients out of the bad investments. Which got bailed out and became the good investments. (sighs)

maxerickson 11y ago

The government buyout was not a great deal for AIG shareholders: https://en.wikipedia.org/wiki/American_International_Group#Liquidity_crisis_and_government_bailout https://en.wikipedia.org/wiki/American_International_Group#L... The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company It might be good for executives and other employees to take excess risks, but it probably isn't good for shareholders, they generally lose a substantial amount of their investment in an emergency bailout, most of it in a bankruptcy.

rodgerd 11y ago
> The government buyout was not a great deal for AIG shareholders: Good. The legitimate use of taxpayer money in propping up for-profit organisations should be to prevent a broader social problem, not to guarantee the ROI of investors.

nostrademons 11y ago

FWIW, we actually saw this in the last financial crisis, where Berkshire Hathaway funded a $2B bailout of Goldman Sachs that he exited for a healthy profit. A bailout is basically just redirecting the assets of the healthy part of the economy towards a part of the economy that has lost confidence, oftentimes at a profit (the government profited from the TARP bailout). The government does this using its power to tax. Berkshire does it through the power of Americans' insatiable demand for candy, sugar-water, freight transport, and peace of mind. Having large cash reserves just lets it participate in these deals where you would otherwise need a state-sized actor, much like how the Rothschilds owned much of 19th-century Europe.

nickpsecurity 11y ago
So he's saying more of what he already did than wondering about the future. Nice trick. Makes it even more likely to be true in next situation.