Financial bailout? We Don’t Need the Crooks to Save Us

The people that got us into this financial mess are telling us the only way to get out of it is to bail out the same crooks who caused it.  But is that really the only alternative?  Is that really the best we can do?

What if we let the institutions that took big risk just fail?  Poof.  Supposedly it would constipate the credit markets and none of us could get car loans or credit cards and the economy would stop…Hmmm.  I wonder.  I’ve been thinking of other ways to use $700 billion.

1. What if we reward regional and community banks and credit unions who didn’t play in the high risk mortgage market with a large pool of low rate money they could loan to credit worthy businesses and customers?  And what if we published the list of those banks and credit unions so we would all know where to get the capital we need to make our economy grow and our lives work?  Maybe we really don’t need the big banks that seem to psychologically headquartered in Las Vegas.
2. What if instead of expanding unemployment benefits we spend a few $100 billion on rebuilding our public infrastructure like repair bridges, roads, and water and sewage systems and put all those people who recently lost construction jobs back to work building our future?
3. We must let the real estate market find its true floor.  Its values were outrageously inflated.  If we don’t allow for a true price correction in real estate values will remain flat for 10 years or more.  So what if we start a national Real Estate Trust that buys foreclosed homes at their real value instead of some pre-negotiated-good o’ boy-bail-out value allowing the banks that made the inflated loans to eat their losses or fail.  Then suppose we put the homes in a huge rent-to-own pool where people who can pay a market rent for 2 years or more earn the right to buy the home they’re renting.  The supply of homes for sale would reduce and prices would stabilize.  The trust would make money, Americans could live in the homes we built and people would take pride in the homes they are earning the right to buy.

The point is if we’re really interested in building our future based on principles that reward good judgment and maintain the honest value of free enterprise there are a lot of things we can do besides bail out the hand-wringing corrupt financiers of our Congress and administration.

New York Times columnist Gretchen Morgenson said taxpayers deserve better than what we are getting.  They need to earn back some trust and provide us with information about the financial bailout.

Gretchen Morgenson talks about the financial bailout stating, “Such is our lot today: They break it. We own it.Taxpayers deserve better than this, of course. But we have no lobbyists, so we get skinned. If federal regulators and political leaders want to earn back some trust, they could do two things. First, they could provide us with some transparency about whom precisely we are backing in the recent bailouts.”

With financial markets in flux and a massive government rescue package in the works, financial reporter and New York Times columnist Gretchen Morgenson looks into what’s involved in the nearly $700 billion deal. In an interview, she calls the financial bailout a conflict of interest.

What’s the best thing we can do?  Email your Congressmen and Senator today (Write Your Representative, Congress.org, or Contact Your Senator), forward this email if you want to. Tell your friends to as well.  Make some noise, America.  We went to war because we were lied to about the immediate danger of WMD’s.  Doesn’t it seem like we’re being whipped into the same kind of frenzy?  Let’s not fall for it!

To visit American Dream Project’s home page, click here.

19 comments.

It’s Time to Move Your Money

It’s time to take our money away from big faceless banks and put it where it belongs.  In our own communities.  I’m not paranoid or anti business.  To the contrary, I’m pro honest business.  But I’m also realistic.  For many years I worked with clients involved in mergers and acquisitions.  I’ve spent time in rooms with investment bankers, financial analysts and accountants who were busy changing financial assumptions, inflating valuations and reassessing risk to make a deal “work.”  These are smart guys (and gals) just making it up.  I was present when some of our biggest financial institutions were training their sales forces to sell sub prime debt while they explained it would slice and dice parts of risk-drenched loans into a variety of investment portfolios until the risk of any single loan disappeared.

Someone said mixing high-risk debt with low risk debt is like putting a little arsenic in a Jamba juice.  Blend it up and pretty soon the poison disappears.  Guess what?  It doesn’t. 

Although that may not make common sense, it made great sense to a commission driven sales force ready to descend on people who had never borrowed money.  No, not all these people are evil or even extraordinarily greedy.  What they are is extraordinarily tempted.  And one of our society’s primary restraints against great temptation is legal regulation.

But with great sadness I see once again our deeply compromised government saying one thing while intending its exact opposite.  Like the Clean Air Act, which allowed for greater air pollution, this newly proposed regulatory reform of our financial institutions is simply a word trick.  Double speak.  Hogwash.  Here’s a few tidbits:

First regulations don’t work if the regulators are corrupt. Wall Street firms have averaged paying fines of $1 million a day or $400 million a year for the past 6 years for violating current regulations.  This, you see, is just a cost of doing business.  It’s cheaper to break the law, pay the fine, and make a fortune.

Now Henry Paulson and the old Wall St. boys want to merge high-risk investment banks like Merrill Lynch and Goldman Sachs into a huge consumer bank like Bank of America and Wells Fargo.  It’s the arsenic in the blender again.  This works because tens of millions of us put our deposits into commercial banks that give the risky, greed soaked investment banks a platform for more casino games.  The reason it’s so tempting is that big bank deposits are insured by you and me, the taxpayer, through the FDIC.  Our insured deposits give them a new capital base.

Sure, they claim the Federal Reserve will keep a tight lid on over-the-line risk, but what regulators do you trust today?  So…now all of us, the taxpayers, are going to guarantee the continuing risks of investment banks.  And what do we get?  Zilch.

Not only that, all these new arrangements will do is strengthen the unrestrained power of big banks at the expense of local banks and credit unions.  The result could be higher consumer costs, less competition, and more shenanigans.

Our real problem began decades ago when our economy switched from a manufacturing, real value producing economy to a financial one.  Real wealth is the result of serious invention and innovation, science and engineering meeting genuine human needs.

We lost our mojo of invention and high quality production into converting all our assets (like our homes) into debt instruments to be leveraged and traded.  Today financial services are two times bigger than our entire manufacturing sector.  In the late ‘90’s we removed nearly all regulation of banks, insurance companies and real estate debt.  That’s why we have 27% interest rates on our credit cards and million dollar home loans to unemployed people.  But when finance exceeds its legitimate role to just moving numbers on a spreadsheet and inventing global casino games simply to place bets with borrowed money hoping to make a financial killing, the decline of our economy is inevitable.

So, what’s the greatest thing you can do?  First, deposit money in a credit union.  A credit union is the bank you can own.  Credit unions are owned by their own depositors. 

Credit unions operate on a human scale by people like you and me.  They began 150 years ago to help farmers be free from big city banks who didn’t understand real life.  They have all the same services of a huge consumer bank and they loan money at low rates to their own depositors.  They have an international ATM network and have more sophisticated on-line banking that lots of big banks saddled with legacy IT systems.  All their accounts are FDIC insured.  There is simply no reason why every American should not be a member of a local credit union.

Second, if you’ve ever considered writing or emailing your congressperson, now is the time.  We don’t want investment banks and consumer banks united.  It’s time to stop this nonsense, create a real economy and re-enthrone ethics.  And yes to create financial institutions we can trust.  We need fair, effective and enforced regulation.  All of us are better off when we have to answer for our choices.  It’s common sense for the common good.

To visit American Dream Project’s homepage, click here.

18 comments.

What’s the Greatest Thing You Could Ever Do?

Printer-Friendly:  Greatest Thing You Can Do - Will Marre

“So what’s up with you?”  That’s the little vocal bullet Aaron shot at me over breakfast at the 101 Diner.  I was meeting with him and John about the message of my new corporate responsibility website.  Aaron is a marital arts expert with like a 150-degree black belt in some form of Asian violent-tranquility loosely translated as “Green Willow.”  Well Green Willow man started pelting me with jabs about the tone of my recent political blogs.  “Dude, your anger is showing.”  Aaron continued, “Are you sure this is what you want to be known for?  Being Mr. Angry Man?”

“Well,” I shot back, “I am not thinking of what my brand is. I am frustrated about what’s going on with our political debate, so I am just being authentic.”

Then John, the other Green Willow warrior and an expert in consumer opinion research said, “If you had a one sentence message, what would it be?”

Without hesitation I pulled out a stack of notes from a file I had.  I just finished reading a book called Inside Steve’s Mind about Steve Jobs’ amazing turnaround of Apple.  I turned to my last note that captured Jobs’ mantra.  It read, “Imagine the greatest thing you could ever do and do it!”  I said, “That’s it for me.  That’s what I want to encourage everyone to do.”

So John responded, “So make that your signature.  No matter how frustrated or inspired you might be at what’s happening, end your blog or speech or whatever with a suggestion from that greatest thing viewpoint.”  I’ve thought a lot about the advice from the Green Willow brothers in the past 24 hours, and I say I must agree.

A few days ago I was in Phoenix facilitating a strategy meeting for 75 leaders and board members of a non-profit called Fresh Start (wehelpwomen.com).  For nearly a decade they’ve been helping women who find themselves desperate, often battered, and stuck.  Through education, mentoring and some focused social service they literally help women who have the gumption to try to climb up to self-reliance and growth.  Now they are ready to take what they’ve learned to a new level by expanding in several directions.  The people in that room were fiercely dedicated, very bright ordinary citizens doing the best thing they can imagine doing.  And it’s working.  Big time.  That’s what’s best about America.  About all of us.

Well I am all jacked up about the goodness of my fellow citizens when I get clobbered with reality.

One of the ladies I met at lunch is a psychologist in her late 50’s, a grandmother who until a year ago made her living lecturing all over the country.  She told us her job had to change, however, because somehow her name got on the terrorist watch list.  It used to take her an additional four hours at the airport to be invasively screened.  Now she said the airlines tell her to not even bother trying to fly!   This woman is as close to being a terrorist as the Easter Bunny.  But one million Americans are on the list.  She told me she has tried every way possible to be thoroughly investigated so she could get off the list.  Being from Arizona, she tried Senator McCain, her congressman, and even directly appealed to President Bush.  Nothing.  There was no trial, no review, no recourse.  Her basic civil liberties to travel were ripped away from her and she has no recourse.  So here I am in this very inspiring setting with these very inspiring people and I am angry, again.  Damn.  So let me just say my peace and then mention something positive.

Your response to my recent posts have inspired me.  If most Americans are being as thoughtful as you are in choosing who to vote for we have a lot to be encouraged about.  Thank you for your comments and ideas and the reasonableness of your arguments.  It seems to me that whom we elect does matter.

It matters because of the things that happened to my new psychologist friend.  Our leaders do create an agenda of our society that either makes it more fair and opportunity driven or more unfair and fear driven.

At the same time what matters most is how we live our individual lives.  These volunteer leaders will continue to help elevate the lives of women no matter who’s elected.  Likewise, our lives matter when we make them matter.  So I agree with the Green Willow men.

No matter what, in all and every circumstance, imagine the greatest thing you could ever do and do it.  That’s how the world will change.

So that’s what I am going to try to do.  I’ll tell you more about it next week.  In the meantime, what do you think about all this?  Am I too angry?  Is doing our best thing all we can really do?  What are the best things you’re doing or want to do?

11 comments.

“RepubIcants” and “DemoCraps”

First off I want to thank everyone who commented on my most recent post, “Who Will You Vote For?”  Your comments were extremely thoughtful.  I am amazed that so many of us seem to feel so similarly.  It would be very encouraging if we were all going to run things for a while.  But I must admit after sitting through two weeks of political conventions I am thrilled that football season is starting.  I need a diversion to regain my sanity.  As a perennial optimist I find myself struggling to keep emotionally afloat amidst the raging seas of political hijinx.  Here are some thoughts.

1.  I really try to keep an open mind.  I come from a ranching, take-responsibility-for-yourself Republican family.  However, when I was 18 my very independent father vowed to take me to Canada rather than have me fight in a “politicians’ war waged for the military-industrial complex.”  Dad was more of an Eisenhower Republican.  George Bush would have caused my dad’s head to explode.
2. Two years ago I talked to a former senior staffer for Joe Lieberman.  She resigned because she said that lobbyists run Washington.  Literally.  Lobbyists write a law then they find a congressman to “buy” to sponsor it.  They push their bills and agenda relentlessly.  Day after day.  Year after year.  They’ve taken over running the FDA, the EPA and every other regulating body of our government.  By the way, she resigned to teach yoga and open a day spa.  She said the corruption was so rampant and revolting it made her physically sick.
3. The Democrats are just as corrupt as the Republicans.  They are just as delighted to accept lobbyist money.  In two years running the Congress they have done nothing to improve our national train wreck or even slow down the conductor.
4. I don’t understand why the religious right thinks the Republican leaders care anything about their hot-bottom issues.  The Republicans controlled both houses, and Bush acted like an emperor making any law he wanted for his first six years.  They didn’t do anything at all to create prohibitions on abortions.  And their half-hearted attempts to limit partial-birth abortions were political stunts rather than sincere attempts to pursue their fiery pro-life rhetoric.  Books have now been written about how Karl Rove and his cronies look at Christian conservatives as mental hillbillies they can manipulate.  Isn’t it time to wake up?
5. Democrats have no viable plan to end wasteful programs or pay for their ideas.  For instance, if we don’t stop the escalation of health care costs we can never individually or collectively pay for it all.  Hello.
6. Republicans constantly talk about helping businesses by cutting regulations and lowering taxes.  But they equate businesses not with the 95% of businesses that employ less than 500 people but the tiny few that control Wall Street.  The financial establishment in New York racks up over $1 million a day in fines for breaking laws ($400 million per year), but it’s just the cost of doing business and big business complains the U.S. has the highest tax rates on business in the world.  But guess what?  Nearly no large business pays on the published rate because their lobbyists over years have come up with so many loopholes and accounting rules that on average 1/3 of the profitable companies of the Fortune 500 pay no taxes at all.  Nearly everyone pays a small fraction of their rate.  Yet small businesses that operate without lobbyists pay the full freight.  Neither Wall Street nor the Republican leadership is a friend of real American Business; they just manipulate the hell out of us.
7. I just do not understand how John McCain can act like he and his lobbyist advisors and his establishment friends are going to change anything except for the worst.  Our country is broken and the same guys want to loot it.
8. I enjoy Obama’s passion and inspiration, but seriously, where is a record of accomplishment that coincides with his years in state and national office?  He seems extraordinarily competent at raising money and getting elected, but aren’t his seemingly meager actual achievements a little thin?
9. No one, and I mean no one, can make the case that Sarah Palin is the most qualified Republican to stand behind a 72 year-old McCain.  Nominating her was a political stunt to turn this campaign into a personality and beauty contest.  It is an insult to all of us that McCain would gamble our country’s future to try to get elected.  If Palin turns out to be any kind of heavyweight leader it was sheer luck.  We deserve more than luck.  (And yes, the difference of Obama’s candidacy is that he’s campaigned for 2 years and 18 million Democrats chose him.  One man chose Palin.)

So, after the last two weeks I am still unresolved on whom to vote for.  The blatant and excessive corruption of the past 8 years and watching 15,000 Rush Limbaugh clones lust after Sarah Palin makes supporting the McCain ticket unthinkable.  But what evidence is there that Obama is what he claims to be?  I don’t know…maybe my Washington friend was right.  I should try yoga.

Your thoughts?

35 comments.