Thursday, October 16, 2008

Of Sleepless Nights, Canadian Medicine, and Horses

This whole financial crisis thing really hadn’t phased me up to this point.

I mean, obviously in my professional role, it concerned me that our business has completely sucked for going on two years. But business is cyclical, and that kind of thing is to be expected. I’m working for a very conservative organization that has always been exceptionally well run financially, so we’re in a good position to weather this storm. Good people, smart management ( J ), and a solid market and plan.

And like a lot of other people, I’d seen my 401(k) drop by more than 28% from October 1st to October 10th. A pisser for sure, but I’ve never been the kind of guy that was going to retire at 55 or 60 anyway. I like to work and be engaged. Plus as you’ve probably read elsewhere by now, if you don’t do anything stupid it’s really just a cost averaging investment strategy at this point: don’t pull your money, and your regular contribution is just buying x times more the number of shares. So when the market comes back, you’ll make it up, as they say, by volume.

As for the regular market, I had pretty much gone cash, so there wasn’t a great deal to be lost for me there.

Not a big deal. Surf the wave and look for the next good opportunity. Happens all the time in our country; at least four or five times since I’ve been out of college.

Ah, but Tuesday, they really rattled me. Tuesday, they kept me awake all night.

And I didn’t even really comprehend it at first.

I read all the headlines and thought, “Hmmm, that’s a little unusual…” But then it started to sink in. And at 2:39 a.m. on Wednesday morning I rolled over in my bed, stared and the clock, and thought, “Oh my God…we’ve nationalized the banks…”

I’m still not sure the rest of us have caught on yet.

We’ve nationalized banking in the U.S.


Now on the simplest level, think of it this way: how many people in the United States do you know that would love to be on Canada’s medical plan? You know, nationalized medicine. That gets big raspberries every time I hear it come up. Heck, I personally know a guy in Canada who had been told he needed heart bypass surgery, but he refused to have it done because of the level of care in his own country. One day he started having chest pains and suspected a heart attack. So he and the wife packed a quick bag, ran to the airport and flew to Myrtle Beach for a “vacation”…where he went to the hospital, they checked him in via the emergency room, and he had his bypass surgery—paid for by his coverage since he was on vacation. Some endorsement for a nationalized industry huh?

Or think of it this way: we’re in the middle of an election where all we hear about is how inept our government is. They can’t be responsible with their own budget. The ANNUAL deficit will approach half a trillion dollars this year and is projected to be close to a trillion in 2009. That’s annual deficit, not total. This is the same federal government that took over the infamous Nevada Chicken Ranch in the late 80’s and early 90’s due to a tax lien, and ran it out of business. A brothel. These guys couldn’t make money on hookers and booze. In Nevada. Where it’s legal.

These are the people who are running our banks now.

But even with all of that, that wasn’t what bothered me the most. It was two other points.

First: maybe I’m naïve, but it’s hard to believe that the government can just swoop in and take over businesses. I mean, I know it’s legal, and that in dire times they can do this. But from what I’ve read, several of the banks did not want the cash infusion. The government just felt like they needed it. That’s scary to me. Soviet Union, Red China, big brother kind of scary. “I know better than you little buddy, now give me your business. We’re smarter than you, bigger than you, and we can do this, so let me have your bank.”

Oh, I know it was just a partial investment, but trust me—the government is calling the shots now.

Second, and maybe even bigger than that: We now have a democrat congress, a democrat senate, and probably in two weeks will be electing a democrat president. I can very clearly see a scenario where Nancy Pelosi is now holding major sway over our banking industry. Yikes.

Does this bother anyone else? That our government—in their INFINITE wisdom—how holds this kind of control over our financial system and processes? Does it frighten you that THIS would ever be considered a viable option to letting the market sort itself out?

The same democrats who are blaming the republicans for the deficit suggested yesterday that another $400 billion of “recovery aid” may be in order. They’ve taken over the banks, and the first thing they want to do is DOUBLE THE DEFICIT????

Now don’t get me wrong. I don’t think the GOP is any better. I mean, in this environment, they’ve selected John McCain to be their Presidential candidate. Great guy. An American hero in every sense of the word. But does anyone remember the “Keating Five?” If you don’t, look it up. McCain and John Glen were basically cleared but still found guilty of poor judgment—in a scenario that played a major role in the savings and loan crisis.

Speaking of the savings and loan crisis—were those the good old days or what? When you could bail out a financial institution for a measly $3 billion? Ah, I remember when…

But I digress.

C’mon America. Get your collective heads out of your you-know-what! We’ve spent ourselves into this crisis, and now the GOVERNMENT is in charge! Wake up!!!!

I’ve always had great confidence in our country and our system of government, but this one cuts deep. My government, THIS government, the government that possesses a list a mile long of poor judgment and mismanagement and over-spending and lousy decisions by committee is now running the banking industry in the last great bastion of capitalism in the world.

Does anyone have a copy of Revelation handy? What color horse is that standing over there? I know the red horse is war and the black horse is famine, but I always get the white horse and the pale horse mixed up…a little help? “Program, get ya programs! You can’t tell Death from Conquest without ya program!”

Dude. Do you think I can fake a heart attack and go to another country to bank?


The Atom said...

Great commentary. This guy should post more often.

John Ettinger said...


You are much more relaxed about the financial crisis in general than I am. I understand your arguments about not needing cash soon, leaving your 401k alone, etc. But the problem is, there are many people who already need to tap into their 401k because they have already retired. Or there are people with kids in college who have been investing to pay for college. the thing is, there are many millions of people the stock market directly impacts today.

There are also many millions of people who will be indirectly affected. I'm not sure if there are any trickle down benefits of cutting taxes for the wealthy (I seriously doubt it) but I'm very sure that the bad stuff will trickle down when the economy goes south.

I truly believe this country is on the verge of a much bigger meltdown than we have already seen. If all of the big banks are allowed to collapse, we will see a result the likes of which we haven't seen in nearly 80 years.

I share your concerns about the government taking over the banking industry but unfortunately, it may be a necessary evil. Perilous times call for a strong action, and I believe we are facing the most perilous time this country has faced since WW II and the Great Depression before that.

Having the government take over the banks now is like having a less than stellar surgeon remove your ready to rupture appendix. You certainly would like to have the greatest doctor in the world perform the procedure, but you only have one doctor available. So your real choice is to let him attempt the surgery and probably live, even with some impairments, or not let him operate and probably die when your appendix bursts inside of you.

I also understand that it would have been so much better if you would have listened to your body and gone to a good doctor before things got so bad. But the fact of the matter is that you waited too long and now are facing a very difficult decision.

The Democrats and the Republicans can sit around and argue about whose to blame and how the solution is so terrible but that complaining will get us no closer to resolution. To me, the real hero that can emerge here is the guy who can get the problem fixed with the least amount of pain. There is definitely going to be pain. But pain now is better than death in a little while.

Ron Newlin said...

Great. Just what I need, another thing I'm going to need to check daily and no doubt respond to every time. Good post and profile, Greg. I haven't fully processed the ramifications of the federal government "buying" into the banks. I have thought throughout this "crisis" that it would have been helpful for SOMEONE to have got control of the message, to have not defaulted to allowing newsmedia headline writers define the intervention as "bailout." That's added to the hysteria. Nancy Pelosi -- in the only thing I can remember her ever saying that helped, rather than hurt, the national discourse -- said "It's a buy-in, not a bail-out." Sounds better to me. At least it seems more palatable to have the federal government (i.e. the taxpayers) be getting some collateral for this enormous expenditure and expansion of the deficit. Can't we turn this from an "expense" and a dead loss, to an "investment" with a corresponding (however uncertain) asset on the imaginary national balance sheet? Could we limit the revolutionary implications of this act with some kind of agreement that the federal government was compelled to sell its (our) stake back when the banks got their balance sheets in order? It's beyond the grasp of this struggling little entrepreneur...

Hoov said...

Thanks for your responses guys...Atom--thanks for stopping by.

John--I agree with you wholeheartedly. I guess my only variance would be on your doctor's analogy. When it comes to an apendix, you're right--any doc to get it done. But would you feel the same way if it were a meningioma brain tumor right on your pituitary that required sixteen hours of surgery? I feel like the problem we have now is a lot worse than an apendectomy, and maybe we need to FIND the best surgeon (solution) and fly him here in a private jet. Point being--the government taking over and charging all of us another $2000 or $3000 per family probably isn't the answer.

I appreciate you guys stopping by and writing.


Scott Kline said...

Scary is right, Hoov. Dogs (Paulson) and cats (Pelosi) living together. Real end of the word stuff. I think it the end though it all points to the priorities in this country. $700B to the banks and Wall streeters, $85B to AIG, $10B per month to the war. While we have an appalling graduation rate in those country, millions without health insurance and we buy all our oil from guys who then ship our money to the very terrorists we are fighting. What to do.