bailing out robert toll

[davelj]

[quote=Rich Toscano]I don’t believe this is a level playing field situation even if it applies to all businesses.

Let’s just take Bob Toll as an example. He took huge risks, accordingly made huge money during the boom, and then lost a lot in the bust.

Now contrast that to a business run by someone who wasn’t reckless. This hypothetical owner was more careful so had more modest profits in the boom, but then didn’t lose money in the bust. So this policy doesn’t benefit this business owner at all.

The net of it is that it benefits the homebuilder by subsidizing the losses he took for being reckless, but it doesn’t have a direct impact on the non-reckless.

So it is a question of bailing out the reckless (again). It’s not a level playing field because it largely rewards those who took huge, stupid risks, while not providing any help to those who did not.

Rich[/quote]

Technically, this is true, but… I seriously doubt that the “more careful” business owner you describe above would rather be in Bob Toll’s situation – that is, losing a shitpile of money but now getting the benefit of receiving tax dollars formerly paid out in profitable years. At the margin, I’m just not sure that there are many folks who would act more recklessly simply because they knew they might get to re-claim taxes paid in a prior period (at least I’m speaking for myself and the businesses I’m involved with). The TARP program and plenty of other measures taken by the government are, in my view, clear examples of creating moral hazard and warping incentives and behavior. But this “tax recapture” – I don’t view it in the same terms. (Recall that the TARP capital was “new” capital, while “tax recapture” is simply a return of taxes that the company already paid out of previous profits. These are two very different things.) As long as everyone’s getting the same treatment – which a prior poster is suggesting is the case (I don’t know) – then it doesn’t bother me too much.

[SK in CV]

The mistake that I think you make Rich, is to attribute all losses to reckless behavior. Over the last 3 years, a lot of industries have suffered, some purely as a result of market conditions, unrelated to reckless behavior. (print media, advertising, auto industry) Many of them have sustained huge losses. It benefits both the reckless and the non-reckless. (All the allied auto industry suppliers, for instance. Some of whom were purely victims of GM’s bad management.)

On the other hand, this was a handout. Had it not been for the builders, (and probably the banks and lenders for that matter) this clause never would have gotten into the law. It was certainly not a stimulus. The builders who received the benefits are still not building or hiring. Nor will they be for the foreseeable future.

[SK in CV]

The mistake that I think you make Rich, is to attribute all losses to reckless behavior. Over the last 3 years, a lot of industries have suffered, some purely as a result of market conditions, unrelated to reckless behavior. (print media, advertising, auto industry) Many of them have sustained huge losses. It benefits both the reckless and the non-reckless. (All the allied auto industry suppliers, for instance. Some of whom were purely victims of GM’s bad management.)

On the other hand, this was a handout. Had it not been for the builders, (and probably the banks and lenders for that matter) this clause never would have gotten into the law. It was certainly not a stimulus. The builders who received the benefits are still not building or hiring. Nor will they be for the foreseeable future.

[SK in CV]

The mistake that I think you make Rich, is to attribute all losses to reckless behavior. Over the last 3 years, a lot of industries have suffered, some purely as a result of market conditions, unrelated to reckless behavior. (print media, advertising, auto industry) Many of them have sustained huge losses. It benefits both the reckless and the non-reckless. (All the allied auto industry suppliers, for instance. Some of whom were purely victims of GM’s bad management.)

On the other hand, this was a handout. Had it not been for the builders, (and probably the banks and lenders for that matter) this clause never would have gotten into the law. It was certainly not a stimulus. The builders who received the benefits are still not building or hiring. Nor will they be for the foreseeable future.

[SK in CV]

The mistake that I think you make Rich, is to attribute all losses to reckless behavior. Over the last 3 years, a lot of industries have suffered, some purely as a result of market conditions, unrelated to reckless behavior. (print media, advertising, auto industry) Many of them have sustained huge losses. It benefits both the reckless and the non-reckless. (All the allied auto industry suppliers, for instance. Some of whom were purely victims of GM’s bad management.)

On the other hand, this was a handout. Had it not been for the builders, (and probably the banks and lenders for that matter) this clause never would have gotten into the law. It was certainly not a stimulus. The builders who received the benefits are still not building or hiring. Nor will they be for the foreseeable future.

[SK in CV]

The mistake that I think you make Rich, is to attribute all losses to reckless behavior. Over the last 3 years, a lot of industries have suffered, some purely as a result of market conditions, unrelated to reckless behavior. (print media, advertising, auto industry) Many of them have sustained huge losses. It benefits both the reckless and the non-reckless. (All the allied auto industry suppliers, for instance. Some of whom were purely victims of GM’s bad management.)

On the other hand, this was a handout. Had it not been for the builders, (and probably the banks and lenders for that matter) this clause never would have gotten into the law. It was certainly not a stimulus. The builders who received the benefits are still not building or hiring. Nor will they be for the foreseeable future.

[Rich Toscano]

SK – I used the term reckless in the context of homebuilders, which are huge beneficiaries of this policy. You are correct of course that some losses were not due to “recklessness” as such, but that doesn’t change the argument.

Let’s look at those other non-bubbly industries that have suffered. Within each of them, some were more careful than others. Some did the analysis and saw the damage that could potentially be done by a housing bubble burst. Some didn’t. In any given industry, there is a spectrum of good forecasting -> bad forecasting and caution -> less caution. This policy, by its nature, disproportionately rewards those who were less cautious in the good times, and whose forecasts were less accurate, than their rivals.

So yeah, reckless certainly doesn’t apply to everyone here, but it does reward risk taking at a time when people shouldn’t have taken risk, as well as rewarding lack of forecasting of and preparation for the downturn. That said, the reckless are the ones who are helped the most by it.

Whether you use the word reckless or not, this is most definitely not a “level playing field” situation (which was my argument to begin with).

Rich

[Rich Toscano]

SK – I used the term reckless in the context of homebuilders, which are huge beneficiaries of this policy. You are correct of course that some losses were not due to “recklessness” as such, but that doesn’t change the argument.

Let’s look at those other non-bubbly industries that have suffered. Within each of them, some were more careful than others. Some did the analysis and saw the damage that could potentially be done by a housing bubble burst. Some didn’t. In any given industry, there is a spectrum of good forecasting -> bad forecasting and caution -> less caution. This policy, by its nature, disproportionately rewards those who were less cautious in the good times, and whose forecasts were less accurate, than their rivals.

So yeah, reckless certainly doesn’t apply to everyone here, but it does reward risk taking at a time when people shouldn’t have taken risk, as well as rewarding lack of forecasting of and preparation for the downturn. That said, the reckless are the ones who are helped the most by it.

Whether you use the word reckless or not, this is most definitely not a “level playing field” situation (which was my argument to begin with).

Rich

[Rich Toscano]

SK – I used the term reckless in the context of homebuilders, which are huge beneficiaries of this policy. You are correct of course that some losses were not due to “recklessness” as such, but that doesn’t change the argument.

Let’s look at those other non-bubbly industries that have suffered. Within each of them, some were more careful than others. Some did the analysis and saw the damage that could potentially be done by a housing bubble burst. Some didn’t. In any given industry, there is a spectrum of good forecasting -> bad forecasting and caution -> less caution. This policy, by its nature, disproportionately rewards those who were less cautious in the good times, and whose forecasts were less accurate, than their rivals.

So yeah, reckless certainly doesn’t apply to everyone here, but it does reward risk taking at a time when people shouldn’t have taken risk, as well as rewarding lack of forecasting of and preparation for the downturn. That said, the reckless are the ones who are helped the most by it.

Whether you use the word reckless or not, this is most definitely not a “level playing field” situation (which was my argument to begin with).

Rich

[Rich Toscano]

SK – I used the term reckless in the context of homebuilders, which are huge beneficiaries of this policy. You are correct of course that some losses were not due to “recklessness” as such, but that doesn’t change the argument.

Let’s look at those other non-bubbly industries that have suffered. Within each of them, some were more careful than others. Some did the analysis and saw the damage that could potentially be done by a housing bubble burst. Some didn’t. In any given industry, there is a spectrum of good forecasting -> bad forecasting and caution -> less caution. This policy, by its nature, disproportionately rewards those who were less cautious in the good times, and whose forecasts were less accurate, than their rivals.

So yeah, reckless certainly doesn’t apply to everyone here, but it does reward risk taking at a time when people shouldn’t have taken risk, as well as rewarding lack of forecasting of and preparation for the downturn. That said, the reckless are the ones who are helped the most by it.

Whether you use the word reckless or not, this is most definitely not a “level playing field” situation (which was my argument to begin with).

Rich

[Rich Toscano]

SK – I used the term reckless in the context of homebuilders, which are huge beneficiaries of this policy. You are correct of course that some losses were not due to “recklessness” as such, but that doesn’t change the argument.

Let’s look at those other non-bubbly industries that have suffered. Within each of them, some were more careful than others. Some did the analysis and saw the damage that could potentially be done by a housing bubble burst. Some didn’t. In any given industry, there is a spectrum of good forecasting -> bad forecasting and caution -> less caution. This policy, by its nature, disproportionately rewards those who were less cautious in the good times, and whose forecasts were less accurate, than their rivals.

So yeah, reckless certainly doesn’t apply to everyone here, but it does reward risk taking at a time when people shouldn’t have taken risk, as well as rewarding lack of forecasting of and preparation for the downturn. That said, the reckless are the ones who are helped the most by it.

Whether you use the word reckless or not, this is most definitely not a “level playing field” situation (which was my argument to begin with).

Rich

[Rich Toscano]

davelj, I’m not suggesting that anyone would want to switch places with Robert Toll.

My point is that this is another example where when the times were good, the less cautious benefitted… and now that times are bad, their losses are subsidized.

Agreed, nowhere near as egregious as the TARP but this is clearly (to me anyway) another example of rewarding failure and encouraging risky behavior (whether it works or not).

rich

[Rich Toscano]

davelj, I’m not suggesting that anyone would want to switch places with Robert Toll.

My point is that this is another example where when the times were good, the less cautious benefitted… and now that times are bad, their losses are subsidized.

Agreed, nowhere near as egregious as the TARP but this is clearly (to me anyway) another example of rewarding failure and encouraging risky behavior (whether it works or not).

rich

[Rich Toscano]

davelj, I’m not suggesting that anyone would want to switch places with Robert Toll.

My point is that this is another example where when the times were good, the less cautious benefitted… and now that times are bad, their losses are subsidized.

Agreed, nowhere near as egregious as the TARP but this is clearly (to me anyway) another example of rewarding failure and encouraging risky behavior (whether it works or not).

rich

[Rich Toscano]

davelj, I’m not suggesting that anyone would want to switch places with Robert Toll.

My point is that this is another example where when the times were good, the less cautious benefitted… and now that times are bad, their losses are subsidized.

Agreed, nowhere near as egregious as the TARP but this is clearly (to me anyway) another example of rewarding failure and encouraging risky behavior (whether it works or not).

rich

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