Thursday, September 25, 2008

You're on your own

Have you read newspapers lately? I'm talking about those people trying to ask compensation from the government for their investment loss due to the crippling effect from the Wall Street's recent fiasco. They are amazing. When they decided to put their money in private investment bank, they did it out of respectable greed and of course without consulting any government whatsoever (in fact it's really like: hey this is my money, you government stay away!). Now the bank they put their money with is facing serious problem and is likely to share the pain with their individual 'investors'. And they're asking the government to pay for their loss? I don't get it. I really don't.


Anymatters said...

Aco, what if the government may argue that helping them may give a room to recover and develop, thus to result a fresh start for a better future.

in my view, government still plays important role in building and strengthening the fundamentals.

some time ago i commented cafe salemba's post of how government may involve indirectly in credit derivatives. in my example, it is credit default swaps of a pool of student loans. at the end, government should provide career assistance to students so that they can pay back their loans and eventually cover the last protection buyer (depok fund).

in this example, bank A lends some money to a group of students and buys protection from salemba bank. salemba bank then buys protection from depok fund.

probability of students' default is high from bank A's view but then getting lower from the view of salemba bank. finally, depok fund considers the lowest probality because of the knowledge that government may help the students to succeed in career to pay back the loans.

i actually quite like credit derivative in terms of its multiplier effect in the economy and for development.

Aco said...

Jeff, I was referring to this. It is about an individual who happened to put his money in one of those investment thingies in Citibank. Now that Citibank is apparently affected by the Wall Street brouhaha, he is blaming Bank Indonesia. Unbelievable!

What you laid out above is great. But it is more of a plan ex ante.

Thanks, Jeff!

Anymatters said...

ha ha sorry i didn't know what you were referring to.

investors should blame one who gave them the advice or recommendation, eventhough it is still a personal responsibility. please eat and digest the loss for future luck.