The article "Lehman’s Demise, Dissected" in The New York Times catches my interest. Cohan examines the root of the problem in financial sector in the USA. I think his explanation of the cause of the crisis is very accurate and get to the point. It can account for why many finance company made such a reckless decision about the risk. In his article, he points out that the companies in Wall street mostly reward those who generate the revenue for the company most without considering the risk that they need to bear. The article says that these companies are the few ones that pays out 50 to 60 percent of the revenue to employees. This situation occurs because now most of these companies become public companies. Unlike the past that the money came from the partners of the company, now the money comes from public. They would run business with less care in order to maximize the revenue, thus attracting more investors to buy their stocks. The article suggests that, instead of promoting such a reckless investment in order to maximize the revenue, the companies should reward the employees who make a prudent decision and make a long-term profit, not the ones that make most revenue with a great risk.
I agree with this article in that now such finance institutes take too much risk without considering that the money they invest belong to other people. Their actions are very irresponsible. However, this might be the nature of such a company in that they would generate as much revenue as possible so that they could attract large amount of investment from the public. This might take a long time to change the tradition of such a company. In the short term, strict regulations from the government might be able to prevent such financial disasters. On the other hand, the investors should keep their greed in check If the companies take too much risk, although the price keep skyrocketing, the investors should avoid them rather than jump to the bandwagon.
I agree with this article in that now such finance institutes take too much risk without considering that the money they invest belong to other people. Their actions are very irresponsible. However, this might be the nature of such a company in that they would generate as much revenue as possible so that they could attract large amount of investment from the public. This might take a long time to change the tradition of such a company. In the short term, strict regulations from the government might be able to prevent such financial disasters. On the other hand, the investors should keep their greed in check If the companies take too much risk, although the price keep skyrocketing, the investors should avoid them rather than jump to the bandwagon.
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References
Cohan, W. (2010, March 18) Lehman’s Demise, Dissected. The New York Times. Retrieved March 19, 2010 from http://opinionator.blogs.nytimes.com/2010/03/18/lehmans-demise-dissected/
I totally agree with you. The FIs should be take more responsible to the society. They should not care only their profit which put their cost to the others.
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