Some thoughts:

Money is not the same as assets. I tend not to agree with “money (or assets)” usages throughout. Though we use them interchangeably in our conversation they are very very different. A stock is an asset. A gold bar isn’t – its money. An asset has counter party risk, money doesn’t. Lehman Brothers had plenty of assets. So has AIG. What they didn’t have was liquidity (money).

“Lesson 5) The bankers are lazy and would like to sleep all day without doing any work ” , this is a common feeling among everyone now.

I think banking is an essential element in any economy. So a person who works and saves 1$ puts that money in the bank. The banker keeps the money and gives him an interest. Then he turns around and lends 10$ to entrepreneurs at a higher interest. Seems like an easy and greedy job. But a banker is a person who really sticks his neck out. He’s taking the risk of his loans not being paid back. He could go out of business based on a rumor (if all the people who has deposited money in SBI comes asking for their money back now, SBI goes out of business now)

The problem comes when the leverage goes up. ie. instead of lending 10$ for very 1$ deposit that a banker has with him, if he starts lending 30$ or 100$ he’s taking a huge risk. Add to that, that the money wasn’t lent to entrepreneurs but to consumers who blew it up on “stuff”.

Then why do bankers do that? Well, there are two human emotions that make capitalism work – fear and greed. You want to make money but then you also don’t want to lose what you already have. So there is a balance. People take risks they can afford, else they go broke. Now, what happened now is that the fear factor in this was taken out – by the GOVERNMENT. When you bailout a insurance firm, or a bank or an auto maker, then you are telling them and others “go ahead and take all the risk you can. don’t worry about failing. if you take too much risk that you will bring down others also with you if you fail, we will see to it that you won’t fail”. Refer to LTCM

This created greedy bankers. Don’t blame investment bankers for this. Blame the government who took fear out of the equation. If there is no fear that we’ll lose money, you and I will make the same bets. It’s human nature. And the most beautiful part of the story is that not many people see through this. So the government can place the blame squarely on the “greedy bankers” and everyone will swallow it.

This is just another example of governments screwing up and sticking the bill on the common public. It’s not the first time and definitely not the last. This is what politicians do. And most people don’t care enough or are too stupid to realize this. They think the government stands for them. Poor souls !