Take more risks! That’s the advice Treasury Secretary Timothy Geithner has for bankers:
March 29 (Bloomberg) — U.S. Treasury Secretary Timothy Geithner said that in order for the U.S. economy to recover from the recession, banks need to show more willingness to take risks and restore lending to businesses.
“To get out of this we need banks to take a chance on businesses, to take risks again,†Geithner said today on the ABC News program “This Week.â€
In the interest of encouraging risk-taking the plan he announced last week, essentially, indemnified “investors” against any losses. I can only speculate that he means something different by risk than I do. Baby steps, I guess.
The essence of entrepeneurialism is risk-taking. That an appetite for risk-taking is vanishing from American business is a repeated theme here: enterprises lobby for protection or seek protection in the form of various legal remedies (including tactical litigation as an integral component of the business model).
Right now the primary risk that bankers in the largest banks seem to be taking is that they’ll strain the Congress’s willingness to bail them out of the consequences of the risks they took in the past which they elected not to see as risks at all.
I absulutely agree that risk-taking (and risk-assessment) is the beating heart of entrepeneurialism. But like all gambling, it ought to be a choice for adults to make. To some degree we all were free-riders on the risks taken by a few, because those risks allowed the economy to rise and the nation to prosper. But it still seems to me proper that the risk-game itself ought to be an opt-in proposition. As it turned out, just about all working Americans were drafted into it by being shepherded into retirement plans that involved sinking our money into a market with inadequate control or information to play the game well as individuals. Really, our money was handed to the most reckless set of gamblers, and the most profligate looters, to disgrace this country. Nobody — including We the People — put a stop to it when we might have.
“absolutely.” Duh.
In 2007 the company where I worked switched from an old-fashioned pension plan to a modern 401K. It was touted to us as the proper modern thing to do. It was reported to us with astonishment that the old plan had been in place since 1940. As if that somehow made it bad. It seems to me something that has worked well for that long ought not to be monkeyed with.
Oh, yes, we also were assured that we would see 7% annual returns on those 401Ks.