Accountibility

On Sunday, I heard a prominent Rabbi say that the reason why we keep having boom and bust cycles in our economy is because of a lack of accountibility (read: liability), which is built into our system. The entire idea of a corporation is to shield the actual owners of the company from liability for the negative consequences and monetary losses resulting from the actions of the company.

So...what would replace corporations? Instead of stockholders buying shares, would investors trade "partnership shares" that would carry liability? I don't think most prudent individuals would want to carry liability unless they were personally involved in the operation of the business. So, capital would be raised primarily from loans, or loan-like instruments which offered some variable upside like a stock, but left the liability with the borrowers.

And what about the people who have lost lots of money recently due to their investments going sour? Why wasn't the risk of losses enough incentive to not invest in companies where one doesn't really know what is going on or how profits were really being earned?

In a recent post, I complained about the $500,000 limit on executive salaries for companies who receive 'bailout' funds from the Feds. I now see an upside to this...most companies will think long and hard and look elsewhere before taking bailout money.

State Security Secrets - Bush and Obama

The NY Times, in an editorial today, critisized the Obama administration for going to court and using the same arguments that the Bush administration used in asking that certain terrorism-related cases not be tried in open court. The NY Times is very disapointed in Obama, basically calling him out for lying on the campaign trail.

Did it ever occur to the Times that now that President Obama has access to the same information that President Bush had, he realizes that the actions that President Bush undertook were in fact justified and necessary, and that the security of the United States depends on his continuing the policies of his predecessor?

Bailout Nation

Yesterday, President Obama said that companies that are bailed out by the US Government should have a $500,000 cap on top executive compensation. I completely disagree.

Earlier this week, Bank of America, which received bailout funds last fall, was criticized for hosting an event at the Super Bowl.

This is ridiculous. If the condition for receiving bailout money is that the company is going to be micromanaged by the government, they will never recover.

I don't have an answer for how this could be done better. It is a direct contradiction, capitalism and government bailouts. I didn't like the idea of bailouts when they were first done in September or October, and I like them much less right now.