Archive for March, 2009
March 28th, 2009
There seems to be a financial Bad Cop/Bad Cop scenario playing out these days.
And I’m not sure which is worse.
On the one hand, the federal government is telling me not to worry because it’s keeping an eye on my money — and not just my taxpayer dollars. It’s also keeping a close watch on banks these days.
This, of course, is the same federal government that has racked up a multitrillion dollar deficit and spent most of the last two quarters sprinkling free money — our money! — over Wall Street like so much pixie dust.
It’s not exactly confidence-inspiring.
In the meantime, the country’s tottering financial institutions are telling me not to worry because they’re keeping my money safe — in between shouts of “nationalization!” at the top of their lungs to keep Bad Cop No. 1 from spending any more time than absolutely necessary in their midst.
(“Any more time than absolutely necessary,” by the way, is code for “just long enough to hand out more pixie dust.”)
As I suspected, the financiers of Wall Street — Bad Cop No. 2 — opened themselves up to a hell of their own making last year when they begged the government for a little monetary intervention … undoing nearly two decades of fierce lobbying for looser regulations in the process.
They’re getting their intervention. With a vengeance.
Last week, Treasury Secretary Tim Geithner rolled out his plan to impose stricter standards on financial institutions, the derivatives market, and hedge and private equity funds.
In other words, the federal government — and by extension, taxpayers, many of whom can’t balance their own checkbooks — are now firmly entrenched in the banking business.
So who should be watching your money?
Like I said, I’m not sure which is worse.
The financial sector is contritely pointing out its expertise in money management — forget that little subprime mortgage issue that collapsed the global economy. It has learned its lesson, its titans claim.
And the federal government, which isn’t quite sure where all its pixie dust is, just wrapped up a banner week in which it first bowed to popular rage by excoriating the Obama administration, Geithner and American International Group executives — then meekly backing off at the realization that it needs the financial sector to help solve the financial crisis.
That leaves us taxpayers — presumably those who have balanced their checkbooks at least once.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
March 21st, 2009
If there is one thing a decade of easy lending creates, in addition to financial markets that are either paralyzed or collapsing, it’s a sense of entitlement.
It began with the carefully cultivated notion that money no longer needed to be earned — indeed, it was free. It no longer belonged only to an elite class of people we could only envy.
Suddenly, we were, all of us, rich. We needed only to ask and piles of money appeared before us.
So we asked, delighted to find ourselves in lifestyles to which we were completely unaccustomed, to learn that our parents were wrong when they told us money didn’t grow on trees.
At some point, such abundance became less a novelty, more a perquisite. It was nothing more than what we deserved, after all.
Today, with the economy derailed and any sort of recovery months or years away, we find ourselves dancing around a grim reality we don’t really want to see.
To forestall facing it, we have resorted to asking two questions over and over. The problem, of course, is that they’re the wrong questions.
We are first demanding — after all, we have every right to demand answers when our right to free money has been violated — the identities of the culprits responsible. These days, we seem comfortable pointing to various executives at failed insurer American International Group because of the billions of dollars in bonuses they were given.
And when they become old news, as they inevitably will, we’ll find someone else — someone even more responsible. Probably the federal government, always a good scapegoat because we are so accustomed to letting Uncle Sam take over when the going gets tough.
The second question — I get this one a lot — is when this is going to be over. It took me a few frustrating attempts at an answer before I realized what the real question is: When am I going to be rich again?
These are the wrong questions because we are determined to not hear the answers, which are, in a nutshell: 1) We are. 2) Not for a while.
We felt rich because we saddled ourselves with so much debt, which lenders are loath to approve these days. We forgot it wasn’t real money — that real money, sadly, must be earned. But we are desperate to clutch our illusion of wealth close. Why wouldn’t we? We liked being rich.
But the longer we put off accepting the answers, the more it will prolong the inevitable realization: There’s no such thing as free money.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
March 14th, 2009
In the general scheme of things, a little Monday-morning quarterbacking can be a useful, even necessary, tool.
Granted, few of us look forward to the boss (or worse, the spouse) saying something along the lines of “So, Ed, I’ve made a list of everything you did wrong yesterday, and …”
But when it comes to learning from our mistakes, few things teach us so well as history.
Take, for example, the nation’s 31st president.
For the past 70 years, Herbert Hoover’s response to the market meltdowns of the 1930s — higher taxes and interest rates, a Corporate America that was left to rise or fall (mostly fall) on its own — has been studied and debated and researched and probed, and in the end proclaimed an almost perfect example of what not to do.
So I found it amusing that Congress called everyone except my mom to Capitol Hill last week — most notably Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner — to give them a firm drubbing about the various bailout plans, particularly the Troubled Asset Relief Program and the way it is being administered.
Where’s the money? they blustered. No oversight! they thundered, threatening to withhold any more until someone gives a solid accounting of where the money went — and more importantly, it seems, who exactly is at fault for the recession that has gripped the economy.
They’re fairly certain, for example, that American International Group, which has received $180 billion from the TARP, bears some of the blame. Apparently, they now also want to know which AIG worker brought down the global economy.
Not that they don’t have a point. But it’s ultimately a fruitless, not to mention incredibly ill-timed, pursuit.
No doubt, Faithful Reader, you want to find whoever is to blame as much as the lawmakers. After all, there is something grimly satisfying in holding someone accountable. Besides, once we’ve identified the villain, we can all move on, safe in the knowledge that the Bad Guy has been caught.
I know I wouldn’t mind. But I also know it’s a primal reaction, a need for vengeance born in the reptilian part of my brain.
By giving in to that, I’d be no better than the financial geniuses who did the same thing, except their first reaction was greed. And we all know where that got us.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
