Thursday, May 07, 2009

Insolvent banks should feel market discipline

Roubini and Richardson argue that the stress tests are basically a farce (which I agree) and that institutions that make bad decisions should be punished. Bond holders failed to oversee the risk being taken and should be on the hook for losses before the taxpayer.

This is nothing new and what I've been saying for months (as has Hussman).

It seems that we are starting to become complacent as things have apparently improved (read: volatility has decreased at least on the downside) and this complacency will lead to further problems as our current ones are not addressed and worked out in a meaningful way.

Scott Dauenhauer CFP, MSFP, AIF