DogJ's Blog

Recently, another blogger asked me why I only blame society for our economic ills, and not the corporate big-wigs that have perpetrated fraud(s) upon the common man while raking in millions in compensation? So, allow me to respond… and invite your comments on where your blame is directed.

 

First, I blame everyone; Gov’t, Corporate big-wigs and the individual citizen. Yes, I would tend to fault the average Joe more than the others because Joe has the ability to control the others. Unfortunately, Joe has allowed the others to control him, and even more direr, Joe has allowed himself to become dependant on the others.

I’ve lived my life by three simple principles: 1) If it sounds too good to be true, it is. 2) Buyer beware. 3) If I don’t have the cash I can’t afford it. Two of these principles probably sound pretty familiar (1 & 2). I make an exception to #3 for mortgages.

 

Clearly, our Gov’t under two different administrations (Reagan & Clinton) bear great responsibility for where we are today. Reagan dismantled Anti-trust laws that have allowed companies to become “To Big to Fail”. Clinton repealed the Taft-Hartley Act that controlled what banks could and could not do. Combine these two events together and recipe for calamity is in order.

 

Corporations, with new found products and security (if we get big enough we’ll never fail), then went on a rampage of disversification and leverage that has only been seen in the Great Depression. For the last 30 years corporations have only focused on quarterly earnings, not 5, 10 or 20 year visions. As long as this massive growth and earnings were met, we (Joe) allowed the compensation levels to expodentially grow, UNQUESTIONED! Our wake-up call on executive compensation was Enron… and we slept throught the alarm.

 

Regulators (a.k.a. Gov’t) were handcuffed by all the new regulations and accounting principles which accommodated “leverage” WAY beyond what created the first Great Depression. Sarbanes and Oxley has become a joke given the new GAAP (Generally Accepted Accounting Principles). Why is Madoff afforded “house arrest”? Heck, if I had defrauded anyone for $5,000,000 (one tenth of his fraud) I’d be sitting in a 4x6 cell.

 

So now we come to Joe. Why would any Joe need a 125% mortgage? Why would Joe need an ARM when mortgage rates are at 30 year lows? Why would Joe need an interest only mortgage? Why would Joe need a Home Equity (adjustable rate) loan to pay off his credit cards and then not destroy those cards? Why does Joe need a department store credit card for 10% off today without understanding the terms? Note I said “need”, not want. Yes, I fault a lot of Joes’ for finacial stupidty. Would Joe buy week old hamburger meat for .10 a pound? Would Joe buy a “new” GM auto for $500 without looking under the hood or aksing questions? Why does Joe take out ANY mortgage because a realtor or banker told him he could afford it? Does Joe have no idea what HE can afford? Why does Joe pay a mutual fund manager manage his money? Why does the Gov’t force Joe to put his 401k contributions into managed mutual funds and not a self-directed IRA? Why does Joe vote to re-elect the people (Congress) who created this mess?

 

If our country is founded on the principles of, “Of the people, by the people and for the people” shouldn’t the “people” be primarily responsible?

 

This post is somewhat simplified, but who do you blame, and why?