“It’s a Wonderful (Corporate) Life” . . . Not
Banks have never made money in the history of banking, losing the equivalent of all their past profits periodically.
–Nassim Nicholas Taleb, “How Bank Bonuses Let Us All Down” (2/24/09)
G.M. has become a giant wealth-destruction machine ” possibly the biggest in history.
–Thomas Friedman, “Start Up the Risk Takers“; The New York Times (2/21/09)
GM is a 101 year-old company which . . . has accumulated negative retained earnings of $60 billion-and-climbing”meaning that in more than 100 years of operation, the company has not managed to keep a dime’s worth of retained earnings for its shareholders.
–Jeff Matthews, “The Most Irresponsible Thing You’ll Read This Weekend” (2/22/09)
In the movie classic, “It’s a Wonderful Life,” George Bailey’s guardian angel, Clarence, shows George all the ways the world would have been poorer had he never existed.
Thriving Bedford Falls is instead tenement-filled Potterville; its citizenry is prostrate and indebted to the town’s predatory lender, the Bailey Building and Loan Association; and George’s loved ones are either dead, ruined, or miserable.
Surveying the mounting financial carnage wrought by AIG, GM, Citigroup, Bank of America, Wachovia, Washington Mutual, Bear Stearns, Fannie Mae, Freddie Mac, and a long list of others, what would a financial Clarence say?
That society would have been better off had they never existed.
At least in a strict accounting sense, i.e., accumulated retained earnings, such a conclusion is incontrovertible.
You’d certainly get little argument from their devastated shareholders, nor from taxpayers burdened with their bad bets . . .
P.S.: the usually astute Thomas Friedman isn’t even close on which company is “history’s biggest wealth destruction machine.” That dubious honor goes to . . . AIG.