No doubt you have read this parody of the derivates market. Bar owner encourages alcoholic clients to accumulate debt, which banks, investors, and hedge fund managers mistake for a valuable asset. (“Look at all the debt the bar owner has accumulated! Let’s get a share of that!”) The tag line is instructive, but certainly not for the reasons the story’s original author believes:
“Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from their cronies in Government.
“The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi’s bar.”
Yes, it is true, that the bank, brokerage houses and their respective executives are bailed out. But were the tax-payers really the innocent bystanders portrayed in the story? No. Surely they were not non-drinkers. They too were consuming on credit and held questionable investments. But that’s not the point.
The point is that they enthusiastically supported the political candidates and espoused the regulatory policies that forced the financial community to take the steps and offer the investment instruments referred to in the story; and, probably with this and similar stories in mind, they will probably indignantly and loudly support political candidates and espouse economic policy changes that will once again fail to adequately regulate markets.