Jag Venugopal's Blog

December 8, 2011

Truer words were never said

Filed under: Business — Jag @ 7:00 am
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Obviously I’m using hyperbole, but the paragraph below from T. J. Rodgers, the outspoken CEO of Cypress Semiconductor, tell us how we landed in the mortgage mess. The real culprit was not Wall Street. It was government:

“Wall Street did nothing other than facilitate home-financing access to the next tier of less-qualified home buyers, as demanded by every president since Bill Clinton. After that, the bankers did exactly what their shareholders wanted: bundle those risky loans into securities, sell them to lock in the profits, and dump the risk right back onto the federal government—where it belonged.”

This paragraph is part of a larger op-ed in the Wall Street Journal about how government policies are subsidizing Wall Street and Chinese manufacturers of solar panels, in the name of building a competitive solar industry in the United States. An interesting read on how companies act based on the incentives available to them, and how government activity in a free market distorts its proper functioning.

T. J. was required reading in my MBA program. His argument with a nun about corporate political correctness is a classic. Even if you don’t agree with him (which I did), I am sure you will find his views give food for thought.

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