Moral Hazard for the Masses!

The current situation is rather like a cross between the two movies Trading Places and Ocean’s Eleven. And now that I’ve finally got (most of) my AIG money back (see this NY Times article for that story!) I can sit back and enjoy the tragedy/comedy as it unfolds.

The old gang is brought together for one last caper (ok, this only makes sense to UK readers who will have seen the Devil himself, Peter Mandelson, returning to slimy power, so forget this bit!), bring down Wall Street fat cats, destroy the financial system, and then heroically restore order while pocketing loads of money.

The timing will have to be perfect, but it can be done.

Step 1: Encourage greed to grow unfettered by regulation, to such an extent that the markets themselves are in danger.

Step 2: Make sure accounting rules, mark to market, encourage feedback and instability.

Step 3: When the inevitable crash occurs just buy up (if you are private sector) or nationalize (if you are public sector) those banks with the right class of assets, those that are most affected by the accounting rules.

Step 4: With the public clamouring for a change of rules and regulation, abandon mark to market in favour of something more ‘responsible.’ But make sure that the new rules are such that you make an instantaneous killing as they are implemented across all those banks that you rescued.

Result: A big fat profit for all those ‘in the know,’ and everyone else feels relief that they mostly still have jobs. A win-win situation!

Roll credits.