Monday, September 15, 2008

Quote of the Day

“It’s only when the tide goes out that you learn who’s been swimming naked.” Warren Buffett

Considering the fall of Lehman Brothers and Bear Sterns, and the hustle of other Wall Street brokers, banks and AIG to ‘clothe’ themselves with capital to hide their nakedness, the above quote proves itself insightful and timely. The lack of underwriting discipline on the part of a relative few has impacted the lives of millions of people. It is difficult to make a case for not increasing regulation of the entities that will survive the credit contraction. Their inability or unwillingness to accurately weigh the risk of the investments they made calls for increased capital requirements for investment banks and brokers. If they aren’t able to comprehend or care about risk, they should be limited in the damage they can inflict on themselves and others. Milton Friedman would be very disappointed.

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