Coach Unlimited

When I look at our current financial crisis I am reminded of a quote from Oliver and Hardy: “Now that’s another fine mess you’ve gotten me into.”  Sadly the way we got into this “fine mess” and the proposals to get us out of it also smack of slapstick comedy. We got into this mess because we “deregulated” our banks and financial institutions and the people who were supposed to be enforcing the remaining regulations were not doing their jobs.  We got into it because of the out and out greed of some lenders who used legitimate mortgage products to take advantage of borrowers, some of whom were also acting out of personal greed. The mortgage lenders greed was fed by the greed of the investment market that was willing to pay them a premium price for risky mortgages. And (shades of Laural and Hardy) everybody justified what they were doing by the fact that everybody else was doing it and of course that makes it OK. Now our Secretary of the Treasury and the Chairman of the Federal Reserve are going before the Congress of the United States proposing that the government (which is really you and I) take on billions of dollars in debt so that the banks and other institutions which behaved in a greedy and irresponsible manner can be saved from the consequences of their own foolish actions. It is interesting to see both the conservative and liberal members of congress reacting negatively to the current proposals, albeit for different reasons.  I remember going through a similar financial crisis in the late 1980’s and being assured that we now had regulations in place that would never let that happen again. Apparently that was not true. So are we going to go through the same thing again? Will we allow a few businesses to fail as an example and perhaps punish a couple of individuals to make the point that we are “serious” and basically push the expense over the the taxpayers and our grandchildren? Or is this the wake up call we need to really understand that the system is fundamentally broken and it needs to be fixed?  The Chairman of the Federal Reserve tells us, “I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way.” He wants us to believe that the proposed bail out is necessary and should be approved as is, but who is really getting bailed out?  It looks to me like the people who caused the problem are getting bailed out while the ones who were really hurt by it are left to fend for themselves. In my opinion any bailout plan should at a minimum address the following.

• Any company receiving federal support should be required to pay back every penny of it at a solid rate of interest over a short period of time.
• Companies that are not able to pay back the federal support should be allowed to sink and their stock holders as well.
• No company executives should be allowed to profit from the crisis or use so-called “golden parachutes.”
• Those who knowingly engaged in fraud or misrepresentation should be prosecuted to the fullest extent of the law including mortgage originators and real estate agents.
• Every effort should be made to protect those who were victims of this crisis even though some of them acted out of personal greed.
• New meaningful laws should be passed that restrict the financial and banking industries so that this will not happen again.

I am a great believer that everything that happens to us, no matter how bad it is, is an opportunity to learn and grow and eventually prosper.  Having said that, I believe that if we don’t at least do the things I mentioned above, then we will be doomed to keep on repeating this cycle until we come to our senses.