Thu 25 Sep 2008
So how are we feeling today? Mad – not just at the obvious – a free market economy and political majority that professes to hate Big Government, except when, like a drug-addict prodigal son, it needs cash for its next fix. Then he riffles through Dad’s wallet to fund another Middle East plunder, another Wall Street run up. And the well behaved siblings, those of us who did our homework, tried to play by the rules – we have to do without, can only hope to benefit through some vague future trickle-down, once this crisis is over.
But I’m also mad at us – the investing public, for aiding and abetting this mess. Because we all own a part of it. We don’t complain in those quarters or years when our portfolios are going up 20%. We don’t ask where those gains are coming from. We are willing accomplices, when we know every minutae of the Chicago Cubs or the Red Sox, but not the difference between a savings account and a mutual fund. When we don’t ask our broker or employer’s retirement plan manager – So tell me about this Hedge Fund thing, does this mutual fund invest in them? Does it own any securities tied to those lousy sub-prime mortgages?
We can only vote for a president once every four years, but as investing consumers, we can ask questions every day, we can fill out those proxy forms we get in the mail, we can make a toll-free call and we can show up at shareholders meetings.
The willful ignorance of the average American investor frustrates me, because when I worked in the financial sector, I toiled so, so hard to follow the rules and make it clear to potential investors the risks they were in for. I wore my eyes out reading the financial press, then boiling it down and making it easy for people to understand, and wherever I worked, we had to follow very stringent compliance rules, so we were never promising anyone anything.
After my first Dummies piece last week I got more than a few letters from readers asking me how investments work. What? You mean my 401K isn’t insured by the government? Not even my money market account? “I don’t have any money in the market, so I don’t really care.” Oh yes you do, or should. Everyone has a stake in this crisis. If you have a dime in a savings bank, a car loan, a job in the consumer products sector, an elder or disabled person in your family involved in the Social Security system. We’re all one big intertwined dysfunctional family – that’s one thing Treasury Secretary Hank Paulson got right, and it’s too late to do nothing.
Big business has always looked to government as bailer-out, Big Daddy of last resort. And if Big Daddy bails out Wall Street, you can bet someone else is going to get the short-end of the Government stick – the well-behaved siblings who paid their bills and mortgages, the most vulnerable and helpless. Here in Rhode Island, the state government is already balancing its budget by sending seniors home from Medicaid-funded nursing homes and cutting medical coverage for poor kids.
I applaud Congress and the American people for waking up and smelling the coffee, saying Not So Fast this time. We were scared into a costly Big Government-funded war with threats of Weapons of Mass Destruction. President Bush looks like the Boy Who Cried Wolf now. Problem is, there really is a wolf at the door this time. At the beginning of last week, when Big Daddy Government refused to bail out Lehman Brothers, it froze up money flows in European Markets, and that froze up money flows here. So Big Daddy reversed course.
Whoever voted for President Bush and free market evangelism owns the greater responsibility for this melt-down. Mr. McCain — who, let us not foget, owns hundreds of millions of dollars in Wall Street securities — hates regulation but denounced Wall Street greed.
Congress is trying to enforce a policy of Tough Love on its prodigal son. But the rest of us siblings, whose needs are being brushed aside are going to have to start speaking up for ourselves. Are we going to start asking questions, not just of our politicians, but of the financial industry we pay to handle our money? Or are we just going to turn our attention to the Red Sox after the worst of this crisis is over?