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February 24, 2009 - Ray Hall (Archive)
The United States is in an economic mess. The world is in an economic mess.  The world blames financial mavens in the United States.   Financial mavens in the United States fault our Government. Our elected politicians are getting ruptures trying to straddle what has become a razor wire fence of campaign contributions from the very people they are charged with overseeing. We have had a bailout of banks. We have had a stimulus. We had had a mortgage bailout.
 Yet, layoffs continue at a record pace and the stock market is in a free fall. Some market watchers predict the Dow could drop to 4000 before it hits bottom.   If that happens, according to some financial soothsayers, it will take a generation for the economic markets to recover. There is credit, there is no credit. Credit is determined by wildly fluctuating FICO scores determined by three companies who hold more information on citizens than the government.   Bernard Madoff notwithstanding, the bankers, the traders, the financial movers and shakers, the world-wide network of financial operatives that we associate with Wall Street act as beleaguered victims instead of perpetrators.
The Savings and Loan crisis of the seventies and eighties should have been a wakeup call, but America’s banks shifted from locally owned and operated banks to mega-banks with international outreach. Banks that once provided lines of credit to small business and even unsecured signature loans to qualified customers became undistinguishable parts of much larger banks. Locally approved credit for mortgages and business loans was severely restricted and credit cards were pushed as the answer to unsecured signature loans and became the prime source of credit for small business owners. Mortgage lending became part of what seemed to be an occult process that involved mortgage brokers and money changers.  
Individual home mortgages were bundled with a hundred, a thousand, and tens of thousands and sold once, twice, three times to buyers round the globe. Packaging and repackaging mortgages time and time again became an operative art among the money changers.   Savvy traders picked up big bonuses by including—hiding—poor performing mortgages, mortgages that were near default into packages of good performing mortgages. Money could be made quickly and a lucrative market was immediately created for marginal and underperforming paper that progressively worsened with each repackaging.  
Try if we must, but it is a diversion to blame the government for our economic frailties.   Government is guilty of being asleep on watch, of fiddling while our money burned, but there is yet to be found a single government employee that designed, engineered and implemented financial gimmickry. Ancient gimmickry like “shorting” when a person invests in a stock, profiting only if the stock drops in price, or “calls” and “puts” that became routine terms of the trade. Now we deal with  newer “gimmickry” like “hedge funds” packed with “derivatives” that deal in financial products called “swaps” and “forwards” and “interest rate contracts” and “credit default swaps,” financial terms and products that did not exist in the recent past. 
Some repackaged paper became EFTs, or Exchange Traded Funds that trades much like stocks, but with little accountability or regulation and remains mostly in the domain of institutional investors and hedge fund managers. 
No, that art of the deal fell to bankers, traders, financial movers and shakers and that network of financial operatives that we associate with Wall Street. Americans, we are told “have lost confidence” and that is claimed the reason we are staying out of the stock market. That might be true, but a recent poll shows Americans trust their government, their elected officials and even union leaders more than they trust bankers and traders and automobile makers.
Are individual investors in Sydney, Singapore, Stockholm or Seattle, men and women who work for wages and hoped to better their financial condition, their retirement, are they right to blame financial wizards in the United States for what has become a world-wide financial debacle? If they are right, what must we, the United States, do about it? Show trials?
I do not expect a single person—Bernard Madoff and his ilk the notable exceptions—will serve jail time for financial shenanigans, but we do have options; there are changes we can make that will improve our lot. Universal health insurance is one; 72% of Americans now want it. We can change our economic models. Business schools ought to seriously rethink our existing economic models. Perhaps Jack Walsh, the man credited with saving General Electric by laying off 60,000 workers should not be used as a proper business paradigm. Companies want loyalty, but it seems to me there is little incentive for an individual remaining loyal to a company if he or she is going to be laid off—out of a job.
Prestigious business schools like Wharton or Harvard or Cornell ought to design an economic model based on something besides greed—the quick profit. Build an economic model around a four day work week, even a three day work week. I once proposed a three day work week for the telephone industry. The work week would be divided into two, three day shifts; Monday, Tuesday, and Wednesday and Thursday, Friday and Saturday; a three day work week, but without pay increases for the duration of the contract. 
 The company would gain a six day work week without paying overtime for Saturday. Sundays and holidays would be on overtime.  Company negotiators chuckled at the idea at the time and dismissed the offer as foolhardy. However, years later and when telephone companies began to lose their monopoly on the industry, the President of that company confided that he wished he had taken the offer. 
Instead of building our economic models around the lowest common denominator, cheap wages and cheaper products made popular by third world countries, we might ought consider the high end with emphasis on durability and quality instead of built in obsolesce and throw away products.
 It might not be a bad idea to develop a business model where the company president in a luxurious penthouse office with exotic rugs and antique furniture trade offices with the company receptionist. We might even consider rejecting the term “Human Resources”, a deliberately demeaning and pejorative term, and return to the less provocative “Personnel Department.”  We have been conditioned to accept the American Dream; a dream that remains elusive for many.  Perhaps, we as a nation would fare better if we pursued happiness over wealth. That would be change. 


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