Reality Chick

             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?

***This post was an Editor’s Pick on Open Salon, read the conversation

at: http://open.salon.com/content.php?cid=20088

“So how are you today?”  my neighbor Mel asks.

“To tell you the truth,” I reply. “Pretty freaked-out about this AIG thing.”

“Oh, don’t worry! It’s all covered! You’re completely protected!”

Mel then proceeded to relate a long series of misconceptions – starting with the idea that all of our retirement money was insured by the U.S. government, and that AIG was part of American Funds, where she had all her dough. ”Safe as houses, all taken care of!” 

I started to tell her that I used to work for AIG, that it had nothing to do with American Funds, that it was a whole different kettle of fish from Merrill, or Lehman, or WaMu, which were or will all be bought or allowed to fail. Then I stopped.

If world markets failed, and I knew they would if AIG went belly-up, she’d find out soon enough. And I didn’t have the heart to tell Mel that the value of her mutual funds was not guaranteed by the U.S. government or anyone else, that the whole pot of gold she’d stowed away for 30 years could liquidate overnight, thanks to one small division of the giant insurer AIG going under.

This was 911 week on Wall Street, and I haven’t felt so bad about the place since 9/11/2001. I’ve worked for most of the key parties concerned in this past week’s blood bath. AIG, the financial giant with a trillion dollars in assets, was my introduction to Wall Street in 1986. I worked there a scant 18 months, but the experience was formative. See War Zone, on my site: http://www.christinagombar.com/doc.php?doc=war-zone&p=1

I left AIG of my own accord, just after the crash of ’87, to work for brokerage firm E.F. Hutton. On on my very first day, it put itself on the auction block. For a few weeks my paycheck was stamped by the investment bank Shearson Lehman – since split off into separate entities, one of which went bankrupt this week.  At the end of that six week takeover, I landed at S&P, the ratings agency that failed for years to downgrade AIG and many other financial entities to accurately reflect their perilous balance sheets. Failed, along with two or three other agencies, to warn in a timely fashion, company management and the investing public that the companies needed to clean up their acts or they’d blow up.   

          At 9:15 last night, the Federal Reserve stepped in and basically bought AIG, to keep it from going bankrupt and bringing global markets — even those burgeoning Asian ones — down with it. It kind of had no choice, once the situation was explained to them. For a quick and clear summary of what happened, and what might happen, read Floyd Norris’s blog in the NY Times :

http://norris.blogs.nytimes.com/2008/09/16/socialism-21st-century-style/

Later this week I’ll explain how Credit Ratings are the opposite of bra sizes, how the financial markets are like a strip club, and how the relationship between the federal government and the financial world is like one of those families where everyone winds up in a 12-step program.

“Is Sarah Palin Exploiting Her Son’s Disability?”

A few nay-sayers in the bunch accused Blitch — who is quadraplegic — of exploiting her own situation. The writer deftly clarified her position in a response:

“Frankly, most Americans simply don’t understand how near-impossible it is for people with disabilities to stand on their own two feet (if you’ll pardon the expression). There is absolutely no reason for me, an educated, intelligent, capable young woman to be sitting at home taking disability (a whopping $600/month). I *want* to be working, paying taxes, contributing to society. I want my parents to be able to retire one day. And in pretty much every other developed nation, that’s completely reasonable. People need to know that the system their tax dollars are supporting is actually keeping people like myself *out* of the workforce, because there’s no middle ground, no guarantee of health insurance. In this country, either you have a disability and can’t work, or do work and are magically healed. People need to know these things, and they need to know that there is a candidate and party committed to making specific, necessary changes to fix the problem.”

 She lauds the Obama campaign for having a specific plan for people with disabilities; letter writers responded by reporting that Obama’s home-state, Illinois, has the worst policies for disabled children in the country.

Thanks to Becky for bringing this under-exploited  issue to media attention, both presidential candidates should be listening.  This young woman is a voice crying out in the wilderness, an amazing thinker and writer.  I wish Salon should pluck her from the electronic slushpile, give her a salary on their regular staff, and get her off of SSI.  She speaks for a largely voiceless population, and to a general population that would like to help the disabled become independent, but doesn’t know how.

http://open.salon.com/content.php?cid=16273

I live in a non-nuclear family. And I vote!  So when politicians campaign on a platform of family values, they don’t just leave me cold, they leave me out.

 If American politicians didn’t so strongly identify their family status with their worthiness, they wouldn’t appear so fraudulent when they are caught out.  European leaders don’t flaunt their families anywhere near to the extent American ones do; they divorce, they have mistresses, they argue that their personal lives have little to do with their leadership ability. I agree.

Maybe if Americans weren’t so suspicious of anyone living outside of the nuclear family ideal, our politicians wouldn’t have to puff up their family status only to have it deflated. John Edwards, Sarah Palin, are you listening?