Re:Warren Buffett explains the credit crisis to Charlie Rose
by fauigerzigerk on Thursday October 02, 2008 @12:04PM
(#321811)
In my opinion bankruptcy would be a good solution, if those who made wrong decisions went bankrupt. Unfortunately, it seems impossible to limit the bankruptcies to to just those companies.
An interesting question is to what extent counterparties are responsible for the bad decisions of their trading partners. I think they are responsible to some degree, because they should and could have checked the credit worthiness of their opposites.
But as the chain of counterparties gets longer, there is just no visibility as to the risks you are exposed to. And at that point it becomes a systemic question. That's the point where the government has to come in and stop things, or even better, not inflate a credit bubble to begin with.
An interesting question is to what extent counterparties are responsible for the bad decisions of their trading partners. I think they are responsible to some degree, because they should and could have checked the credit worthiness of their opposites.
But as the chain of counterparties gets longer, there is just no visibility as to the risks you are exposed to. And at that point it becomes a systemic question. That's the point where the government has to come in and stop things, or even better, not inflate a credit bubble to begin with.