As if, somehow, the world was coming to an end because holders of debt of these two antiquated, flawed companies were paying up for default protection. And that maybe this suggested an overall continuing credit crisis.
It doesn't.
These prices ought to be higher now. Both firms are clearly in danger of bankruptcy, not to mention it's unclear that either is any longer needed in the US economy.
Other than the usual Congressional suspects, and the local economies around their production facilities, would anyone really miss GM if it just died? The market share will be filled in by some other auto maker, meaning replacement jobs and facilities. Only, this time, they might be ones with prospects for growth, rather than fear of how much they'll be shrinking due to CEO Wagoner's continuing inept management of the firm.
As for MBIA, it probably has a very small footprint, economically. As Doug Dachille noted on CNBC some months ago, the model for bond insurance is no longer viable. Between better information access and fully-priced risks in the underlying instruments, the kind of 'guarantee' that MBIA and its ilk offer is simply worth less today, if its even credible.
Plus, the industry didn't help itself by plunging into a risky area, mortgages, to try to stoke growth, as I noted in this post.
Sometimes it seems like the sky is falling, when, in reality, it's just a small piece of it.
Why don't people just let go and acknowledge that companies die. They sometimes lose their reason for being. Their approach to the market is wrong and out of date. They have become irrelevant.
Currently, it looks as if the bond insurers and America's poorly-run, largest automaker, GM, are either already there, or very close.
But that doesn't mean the entire financial market, nor the economy, is in crisis.
No comments:
Post a Comment