Anxiety, Anxiety, Anxiety

Like a fool I checked my retirement plan on-line yesterday. I had avoided doing it since back in October when everything started collapsing. I needed to waste some time before leaving for work, because I had to stop at the bank to make a deposit. I don't even know the user name and password. I have to fumble through piles of papers to find it. That should have been a deterrent. It should have been a sign to just read through another blog, change my sweater, or email a friend on the West Coast who might still be sleeping.

Since October, I've lost 38% of my retirement fund, which is conservatively invested in diversified stocks along with bonds and fixed income investments.

This is the reason why we should never privatize Social Security.

When I did get to work, my daughter sent me the long email the president of her college sent to students. It was about how the significant operating deficit because of the loss of an undisclosed portion of the college's endowment would impact the daily life at school.

As I read through the email, I realized that ordinarily, institutions offer early retirement as an incentive to older employees whose salaries once freed could be used to bring in younger and less expensive workers. But the problem now with buying out older employees is the problem I faced yesterday morning: profound losses of retirement investments. The college president mentioned that a different kind of incentive was being developed to help people make a "voluntary" decision to retire.

I didn't like the way that sounded.

And then there was the NPR story about "zombie banks." "A zombie bank keeps draining bailout capital from the government but doesn't respond with any meaningful lending that helps the economy recover."

My bank takes bailout money. Is it making loans? Last week I closed another bank account because suddenly the bank started charging me $10 a month. I didn't notice at first, but when I did, I went into the branch and asked what was happening. No one knew, so I withdrew all of the money and closed the account. That bank took bailout money. Was that bank a "zombie," too?

Years ago I read all three books of Isaac Asimov's Foundation in three days when I was trying to quit smoking cigarettes. I needed some perspective because I had just finished taking the New York Bar Exam. I recall only one aspect of Asimov's premise: a society collapses when a worker accidentally drops a wrench into a nuclear reactor. No one knows how to stop the chain reaction, no one knows how anything works, it has all become so complicated.

It's all become so complicated.

Mortgage Meltdown

Watching Treasury Secretary Henry Paulson on Face the Nation, and then switching to Meet the Press to listen to New York City Mayor Michael Bloomberg, I was struck by a literary allusion to “The Foundation Trilogy” by Isaac Asimov.

I did read the then three volumes, one a day for the three days, following my completion of the grueling New York Bar Exam in July 1975. I was trying to quit smoking cigarettes and didn’t leave my apartment for three days. I did succeed in passing the Bar and completing the trilogy, however, within three weeks, I was smoking again.

If my memory serves me properly, the cycle of “foundation” civilizations went into inevitable decline when everything became so complicated that no one knew how to manage or fix anything.

That sounds like the economy of the United States.

Paulson, the former CEO of Goldman Sachs, the last of two remaining large, independent investment banking houses, was cagey in his responses to Bob Schieffer on Face the Nation. He appeared inarticulate, because frankly, he doesn’t know just how many of these bad mortgages the American taxpayers are about to buy, how much they are worth now, and what they might be worth later. No one does.

That’s the problem with deregulation. There is no oversight internally within the financial institutions. Why bother when the banks were making so much money. And there is no regulation from government, because the Republicans who controlled the White House and the Congress until 2006 have a dedicated belief in self-regulation until it is too late.

My problem with the bail-out is simple and two fold: first, it gives far too much unfettered discretion to this Treasury Secretary and the next, and second, it has no regulatory musts attached to it.

Mayor Mike was a bit more forthright in responding to Tom Brokaw’s questions on Meet the Press. He has taken a bipartisan stance, still talking to both candidates. His insights were deeper, because Mayor Mike made his money by understanding the markets, not just lending money. Mayor Mike spoke about a NYC mortgage program for first time home buyers that has loaned money to thousands of residents with only five foreclosures. He used this as an example of properly educating prospective home buyers and then responsibly lending them money.

Certainly, not everyone can benefit from the Bush enabled “ownership” society. Two big problems arise for people with too little income trying to buy homes, especially in high rent districts in and around cities. First, unless one itemizes, there are no tax benefits to paying interest instead of rent. And second, and perhaps more importantly, home ownership makes people less flexible and less able to just pick up and follow jobs. The glut of houses in the rust belt where 250,000 people have lost jobs in the automobile industry alone is evidence of this phenomenon: these workers can’t move to where the jobs are without selling the house first, because people's entire savings are often caught up in the house.

It isn’t just deregulation and greed, it’s incompetence once again. Remember John McCain was the senior member of the Senate Commerce Committee for how many years? And he admitted that he doesn't know much about the economy. Well, what was he doing for all of those years? Just listening to lobbyists, I suspect.

Here is the link to the transcript of Meet the Press, where Paulson also appeared later in the broadcast.