How about incompetence?
An alternative and even more alarming possible explanation for this corporate negligence is incompetence. Icahn said: "In each case, the root cause seems to be excessive risk-taking by managements, or worse, managements that weren't sufficiently aware of the risks their companies were taking and how it may impact their businesses."
Many of these dodgy sub-prime loans we repackaged so many times and given names like mortgage-backed securities (MBS) and collateralized debt obligations (CDO), that it's possible many banks did not properly understand the risk they were exposing themselves to. In this case, rather than taking excessive risks, the financial institutions were guilty of excessively conformist behaviour - all joining the sub-prime party because everyone else did.
When we get to the stage that companies deemed "Too Big To Fail" have to be bailed out by the tax-payer, that gives governments all the mandate they need to intervene. In an ideal free market these banks should be allowed to fail, as happened with Lehman Brothers and Bear Stearns. But when their failure threatens collateral damage (excuse the pun) far beyond the confines of the company itself, regulation is imperative.
So why aren't politicians stepping in when these super-companies continually fail to curb their own excessive behaviour? Perhaps Tony Blair's five million dollar a year job as Senior Advisor for US bank JP Morgan offers some clue.
