Friday, September 18, 2009

Clawbacks and Capital

The two Cs will go a long way toward preventing future catastrophes. If people (and firms) have their own money at risk, and if short term windfall compensation based on short term profits can be wiped out in the event of longer term catastrophe, risk will be priced appropriately.


Joe said...

I once heard an economist say that the tech bubble was better than the housing bubble because the tech bubble left us with a useful infrastructure. There may have been other benefits that economist didn't mention. For instance, even thought the tech bubble burst nearly a decade ago, I still live a fairly comfortable life because of it.

This makes me wonder something. Can the risky behavior that is much talked about be channeled in such a way that our economy gets some kind of benefit as a byproduct?

I don't have an answer. I'd love to hear your thoughts on the matter.

Martin W said...

great thought and hope it will get great result

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