Wednesday, January 21, 2009


Show of Confidence, or Desperation?

Apparently Bank of America and JPMorgan CEOs, along with some BofA directors, have bought their own banks’ stock to show that they have confidence in their institutions. But considering the dire straits in which banks find themselves, it’s more likely that they’re desperate to do something which will encourage investors to follow suit.

It reminds me of a story in the local media here a few years ago. A car salesman who was having trouble selling enough vehicles for his dealer started boosting his sales by purchasing cars himself. As you might imagine, he quickly got into financial trouble and ended up turning to crime to make the ever-mounting payments.

Which is not to say that these CEOs and directors will turn to crime, but when you have to buy your own products or stock to keep the business afloat, it’s a sign of distress.

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