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Q: The losses were huge in number, running into billions and trillions of dollars. So huge that they can expressed as a percentage of US GDP?
A: To keep the numbers in perspective. First, The US GDP stood at $17 trillions in 2015. Second, during and after the crises $600 bn of net worth was written down by the financial firms. Finally, the budget for Troubled Assets Recovery Program (TARP) proposed by Fed and U.S. treasury stood at $700 bn.
Q: The net worth of executives running these banks also ran into billions of dollars. How much hit they took when the market crashed?
A: A major chunk of the compensation given to the bankers was in the form of stock options. When the markets crashed, with them the the value of stock options also took the plunge. Overall, major bankers saw their valuations falling about 60-100% of their net worth. Jimmy Cayne's (Bear Sterns) worth was reduced to $61 mn from $1.6 bn. Similarly, Richard Fuld's (Lehman Brothers) billion dollar valuation was not even worth half a million dollars after the crash.
Q: Should we be sympathetic to these bankers for like the retail investors they too felt the pain of the crash?
A: How can you expect the "retail investor" to be sympathetic to someone with a net worth of millions even after the crash. Moreover, the havoc they unleashed over the financial universe was of their own making.
Q: The fact that they received compensation in the form of stock option speaks of the belief they had in the financial system?
A: It is difficult to say whether it was their "belief" or was it simply their "arrogance" in the financial architecture they created and ran.
Q: The net worth of executives running these banks also ran into billions of dollars. How much hit they took when the market crashed?
A: A major chunk of the compensation given to the bankers was in the form of stock options. When the markets crashed, with them the the value of stock options also took the plunge. Overall, major bankers saw their valuations falling about 60-100% of their net worth. Jimmy Cayne's (Bear Sterns) worth was reduced to $61 mn from $1.6 bn. Similarly, Richard Fuld's (Lehman Brothers) billion dollar valuation was not even worth half a million dollars after the crash.
Q: Should we be sympathetic to these bankers for like the retail investors they too felt the pain of the crash?
A: How can you expect the "retail investor" to be sympathetic to someone with a net worth of millions even after the crash. Moreover, the havoc they unleashed over the financial universe was of their own making.
Q: The fact that they received compensation in the form of stock option speaks of the belief they had in the financial system?
A: It is difficult to say whether it was their "belief" or was it simply their "arrogance" in the financial architecture they created and ran.
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