Know history or be doomed to repeat it

October 27th, 2008 at 06:34pm Annette LaCross

Published Oct. 6:

When my grandmother decided to sell her house a few years ago, the family got together to help her clean the place out.

When we were finished, we had assembled the usual collection of furniture, clothing, bric-a-brac and mementos collected over more than 80 years.

Then we ventured into the attic, where a surprise awaited: Distributed carefully among the old paintings, dusty steamer trunks and broken appliances and furniture from decades past — they no longer work but, you never know, might come in handy someday — were dozens of coffee cans stuffed with money.

Thousands of dollars, as it turned out.

After about 10 seconds of puzzled glances, we realized what we were looking at.

Insurance.

A child of the Great Depression, my grandmother remembered the terrifying days of the 1930s, when thousands of banks failed, taking the life savings of my great-grandparents with them. When the unemployment rate reached nearly 25 percent nationwide and many remained out of work for years. When lenders foreclosed on untold numbers of homes and farms. When expendable income became a distant dream and shoes were only bought in winter — if they were bought at all.

She had been squirreling money away for years, ever since she had landed one of the thousands of good-paying manufacturing jobs that sprang up in the wake of World War II.

She had no education beyond high school, and was gentle and generous to a fault. But she clearly understood one of the fundamental rules of finance: Make the most of the good years, because lean times are ahead.

I’ve been thinking about her a lot lately, as Wall Street banks and investment houses fall from grace and various federal officials — notably Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke — try to effectively convey the urgency of the Fed’s ever-growing intervention on behalf of thousands of U.S. companies teetering on the brink of collapse.

Grandma, you see, had one significant advantage over the financial wizards who helped engineer this crisis: She was there. She might not have understood all the complexities that led to the collapse, but she remembered. And she had a healthy respect for the harsh lessons taught in that terrible, grim decade.

She allowed banks to hold most of her money. But she never trusted them.

I think the problem is that we humans just don’t live long enough.

We keep forgetting, from one decade to the next, that too much corporate and individual debt will eventually overwhelm us. It helped bring about the Great Depression and has played a significant part in every economic downturn since … well, since the first vestiges of the modern economic model appeared in the waning years of the 1800s.

The guys trying to make a fast buck by coming up with more and more outlandish mortgage payment schemes had no respect, ultimately, for the people to whom they were offering the mortgages.

The guys who snapped up the mountains of new mortgages and dreamed up the exotic financial instruments that eventually led to the collapse had no experience with the consequences.

The average Wall Street genius was just graduating from college — some of them from high school — during the last major recession. They might have been card-carrying members of the Young Republicans, but they weren’t there.

They didn’t feel the chill or taste the bitterness.

Not until recently, anyway.

What, I wonder, will they do now that they have? Will they do as my grandmother did, teach that fundamental rule to future generations?

More to the point, will future generations listen?

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