Journal Stargoat's Journal: First resort 1
As Fannie Mae and Freddie Mac together with its purchasing of mortgage backed securities, the Federal Government is the first resort for mortgages. This final bit of the American dream, the new home, has become more expensive over the recent decade. At present, it requires two incomes to afford a condo in most major US cities, let alone a home. Farm prices are prohibitively expensive for anyone who has not inherited wealth. Gold is at a very high price, in addition to providing a bad return on capital.
How can a person afford to live? In the United States, horribly convoluted laws regarding 401Ks, IRAs, education, housing, and taxes seems to hint at some way of saving some money for retirement, but the FSM alone knows if you will ever see a dollar of any of it - let alone social security.
This current mortgage crisis was brought about by a complete disregard at major corporations. They faced no moral hazard. The people there knew that they could make hay while the sun shone. And make hay they did. There was no regard for new property owners or for the people they would sell the mortgages to. And lo, the people did announce that the time of the cyclical economy was at an end.
So let's talk about moral hazard. A corporation is, in and of itself, a moral hazard. Individuals pool their money in together, creating a company. This is fine. But then the individuals are protected from prosecution or any responsibility outside of the potential loss of money.
Of course, this creates a situation where individuals can invest in enterprises that they would never touch if they knew they were liable for the damages being caused. Asbestos, tobacco, oil tankers, and many other potentially irresponsible activities would be entered into much more cautiously if the investor knew that they were potentially legally liable for the actions of their corporation. Fools rush in where angels fear to tread, but investors in corporations needn't worry about consequences.
Of course, this lack of responsibility leads to greater investment speed and an overall increase in GDP. This is because there is not a need for much knowledge for the products produced by the corporation. This causes an increase in velocity.
An example. There is a corporation with 100 investors. If the corporation, through some convoluted maleficence, murders someone, the corporation will be sued. Perhaps for a lot of money, perhaps for all of it. The corporation may go out of business and the 100 investors will lose all their money. But if the murder would cause an individual to go to jail for 50 years, the 100 individuals will not each spend half a year in jail.
Is this appropriate? The individual investors did not commit the crime, but the entity they created did. How does one create responsibility beyond financial for a corporate entity?
How can a person afford to live? In the United States, horribly convoluted laws regarding 401Ks, IRAs, education, housing, and taxes seems to hint at some way of saving some money for retirement, but the FSM alone knows if you will ever see a dollar of any of it - let alone social security.
This current mortgage crisis was brought about by a complete disregard at major corporations. They faced no moral hazard. The people there knew that they could make hay while the sun shone. And make hay they did. There was no regard for new property owners or for the people they would sell the mortgages to. And lo, the people did announce that the time of the cyclical economy was at an end.
So let's talk about moral hazard. A corporation is, in and of itself, a moral hazard. Individuals pool their money in together, creating a company. This is fine. But then the individuals are protected from prosecution or any responsibility outside of the potential loss of money.
Of course, this creates a situation where individuals can invest in enterprises that they would never touch if they knew they were liable for the damages being caused. Asbestos, tobacco, oil tankers, and many other potentially irresponsible activities would be entered into much more cautiously if the investor knew that they were potentially legally liable for the actions of their corporation. Fools rush in where angels fear to tread, but investors in corporations needn't worry about consequences.
Of course, this lack of responsibility leads to greater investment speed and an overall increase in GDP. This is because there is not a need for much knowledge for the products produced by the corporation. This causes an increase in velocity.
An example. There is a corporation with 100 investors. If the corporation, through some convoluted maleficence, murders someone, the corporation will be sued. Perhaps for a lot of money, perhaps for all of it. The corporation may go out of business and the 100 investors will lose all their money. But if the murder would cause an individual to go to jail for 50 years, the 100 individuals will not each spend half a year in jail.
Is this appropriate? The individual investors did not commit the crime, but the entity they created did. How does one create responsibility beyond financial for a corporate entity?
blah (Score:2)
I hate corporate law. A corporation is not an individual and should not be granted individual rights. Start with that. Those who share the company assets should share in the company liability.
I think tort reform would help the situation as well. Stop frivolous law suits and limit ridiculous awards and there would be less of an argument for liability limitation.
Stop awarding absolute judgments. Instead of granting the plaintiff of a liability suit $20,000,000, grant them (or their heirs/charity of choic