Category Archives: Business

Is it a good time to start a company?

People ask me this. I ask myself this. You wonder about it over coffee. I know you do. Yet it is the wrong question to ask.

There’s never a good time to start a company if you predicate your personal decision on solely external conditions.

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Imagine we bailed out homeowners

There would be huge uproar if the United States bought out the distressed mortgages in the country and just let the people who had trouble with their loans remain in the house, just wiped the slate clean. Yet that is what the bank bail-out will do, if the U.S. buys up all the bad debt banks hold while leaving the healthy banks “unclogged” (to use President Bush’s plaque-in-the-veins metaphor of this evening) and ready to operate profitably, again.

Make no mistake, helping taxpayers recover the value lost on that “toxic paper” would be the lowest priority on Wall Street.

On the other hand, if the U.S. government bought up all the bad mortgages, foreclosed on them and, then, let the people who defaulted live in those homes on rental terms, eventually providing programs to buy homes back from the government, that would be considered a fair treatment by many voters. The assets seized would offset the cost of the mortgage losses and provide the basis for recovering the losses later by selling the property. We’d be tangibly helpful to distressed families, giving them a roof over their heads while opening the door to their repaying the cost of the home in rent and, ultimately, new mortgages.

Why is the U.S. not taking the same approach as it did to AIG when it failed last week? The U.S. government now owns about 80 percent of the company in exchange for the cash it needed to stay afloat. There are already investors interested in buying that equity at a profit to the government.

Wall Street should be sold off to the government, just as mortgage-holders in default would find their homes repossessed, and the companies receiving money from the public held responsible to the taxpayers as shareholders, because without that public money, they will be out of business. Surely, if the crisis is resolved, the assets will be worth more, but so too would there be viable economic reasons to buy those assets back from the government at a profit.

If the bail-out goes ahead based on the U.S. buying “toxic paper” the banks, for all intents and purposes of analogy between these scenarios, will end up owning their homes and mortgage-free. The U.S. government will be left holding the paper that representeds inflated values of assets held by others — no collateral and, therefore, unlikely to be treated as a pressing debt to be paid by responsible people who want to own their property.

I don’t doubt we need to do something about the credit crisis–I just think we should treat the recipients of the largesse of the U.S. taxpayers like any business would treat someone asking it for value: Ask for security that the debt will be repaid. Then, the bankers can keep their banking houses and learn to run their businesses responsibly before buying out their saviours, the American people.  We could even cap the premium the government demands to make sure that, once the industry is able to profit honestly, it could become a truly private concern.

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WSJ.com – Flu Pandemic Could Cost U.S. Economy $675 Billion

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How I got a key to my house after five years

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NPR : There is No God (a headline so provocative on so many levels that it can’t be intentional)

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We have nothing to fear, because we might medicate fear itself

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If Einstein was wrong, we get sucked into a space-time vortex….

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