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Editor's ViewpointMeditations Of A Minnesota Mossback |
Stock Market Charts, Cardiograms … And A High-Stakes Poker Game
This past month, a line from a movie has been popping into my head, almost on a daily basis.
It’s from “Apocolypse Now,” when Robert Duvall—as Lieutenant Colonel Bill Kilgore-emerges from his military tent, inhales deeply, and announces to nobody in particular: “I love the smell of napalm in the morning!”
Well, it occurs to me that Wall Street has been a veritable war zone of late, with stock market charts looking more like cardiograms at a Mobile Army Surgical Hospital than anything else.
The prognosis of the patient, however, is still unclear.
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Einstein said, “An empty stomach is not a good political adviser.”
I’m not sure that a full stomach is much better.
Consider the following quote:
“A democracy cannot exist as a permanent form of government.
It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits … with the result that every democracy will finally collapse due to loose fiscal policy.
The average age of the world’s greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.”
At the Hugo Business Association meeting in September, Senator Ray Vandeveer introduced me to that quote. (Although it is sometimes attributed to Alexander Fraser Tyler, who lived in the 1700s, there is, apparently, no conclusive proof that Tyler penned those words.)
Basically, this quote says that it’s basic human nature to be greedy, especially when we lose perspective on how we got to where we are today. But in my mind, the American way hasn’t traditionally been about “getting”— it has been about having an opportunity to achieve.
Ancestors on both sides of my family rode covered wagons across the prairies, and believe me, we kids were raised with the idea that nobody “owed” us anything except an opportunity to become educated. Certainly, we understood that whether or not we succeeded in school was our responsibility.
Consequently, I am perplexed when I hear it argued that we need more government intervention in the credit market.
I think we’ve had more than enough government intervention in the name of “getting,” thank you.
Being older than dirt, I can remember the days in the mid- 1970s when “Redlining” by banks, mortgage companies and insurance companies was making newspaper headlines. “Redlining” is the restriction of bank credit based on either the perceived high risk of the borrower or the location of the property.
Some felt that home ownership was the answer to poverty.
But that’s a pretty high-stakes game. Lending money to people who may not be able to make their payments involves risk.
One could argue that, in a booming economy, lending money to higher-risk borrowers on a caseby- case could be profitable—but that choice should originate in a strategized business plan.
The push for expanded home ownership has come, instead, from government bureaucrats and well-meaning social activists, and the consequence of a “damn the torpedoes” lending atmosphere promoted by those unwise fiscal policies now lies exposed.
Lending decisions should be based on what is sometimes snidely referred to as “the profit motive,” not by elected officials who see themselves reinvented as social engineers.
In an economy built on a poker game of subprime loans, you can only draw so many aces before players begin to suspect that somebody has been messing with the deck.
Congresswoman Michele Bachmann recently penned an interesting column that The Citizen was unable to print this issue due to space limitations.
As a member of the House Financial Services Committee, I think Rep. Bachmann is in a unique position to weigh in on this topic.
She said, “For years, members of Congress and the executive branch bullied creditors into making risky subprime loans as part of an effort to expand home ownership. A worthy goal, to say the least … [but] banks can only take on so much risky debt. They needed somewhere to unload their high-risk mortgage assets and turn a quick profit. Enter Fannie Mae and Freddie Mac— the two government-sponsored enterprises at the center of the storm.”
Bachmann goes on to write, “While many economists, including Alan Greenspan, and members of Congress were warning that Fannie and Freddie were overexpanded and undercapitalized— a surefire recipe for disaster—Chairmen Frank and Dodd continued to press for increased loan limits and increased portfolios for these mortgage giants.
They also fought vigorously against all efforts to increase oversight of these governmentsponsored enterprises.”
Now is the time to ask questions and, yes, point fingers.
Last time I checked, members of Congress work for us. Why should we be left holding the bag, when as voters we still hold all the cards?
Recent actions by Congress to correct the system have merely privatized profits and socialized loss.
We don’t need more government intervention. Been there, done that: in fact, Einstein had a quip for that, too.
He said, “Insanity is defined as doing the same thing over and over again and expecting different results.”
We need reform: we certainly don’t want to do this again.
Are we teetering somewhere between apathy and dependence?
Perhaps, but it doesn’t have to be that way.
I think it’s high time we write to our representatives in Congress, demand an accounting, and insist that Washington and its lobbyists quit stacking the deck against those of us who have to work for a living.
(“It’s a great time to be a lobbyist,” one radio commentator said last weekend. “Everybody’s hiring.”)
It’s time to reexamine that lobbyist, “get-a-piece-of-the-pie” mentality we all harbor upon occasion.
Demand that our elected representatives in Congress recognize that smart business decisions—not Congressional sleight-of-hand and governmentsponsored enterprises—should fuel our economy.
Then, and only then, can we afford to stand back … and hope that Wall Street isn’t left holding the Dead Man’s Hand.