“Oh, bother,” as Winnie-the-Pooh would say.
The country’s financial mess seems to be getting worse and worse as our federal legislators dither; some suggest that using the word “bailout” was their big mistake. And of course everyone wants a piece of the pie, so the legislation is being festooned with tax credits, tax incentives, and similar goodies.
One of the reasons the bailout or “rescue” legislation is having so much trouble is that it’s being defined as rescuing Wall Street from its own excesses. Politicians are trying to communicate the fact that the credit problems of the current crisis affect “Main Street”—small businesses—as well as big corporate entities.
And people are inclined to forget that what happens on Wall Street affects ordinary Americans: more than half of us have investments in individual stocks or mutual funds, most of them representing our retirement savings.
I just made the mistake of checking the balance in my 403(b) account (that’s like a 401(k) for employees of not-for-profit entities), into which I’ve faithfully put a little bit of every paycheck for the past twenty-five years or more. After watching my nest egg grow pretty steadily over the years with only a few bumps, it’s distressing to see that the total has taken a substantial dip—more than twelve percent since last year, despite the fact that I’ve continued to make deposits into the account. I guess it’s a good thing I like my job.
Years ago when I first realized that I should put some of that 403(b) money into stocks and bonds to keep up with inflation (I’d first put all my funds into a risk-free interest accumulation account), the representative of the firm that holds my savings warned me that there was only one thing to be said about the stock market that is always true: “It will fluctuate.” And it does, and it has, and I hold balanced stock-and-bond mutual funds to let the professionals try to make the best of that, and for the most part they’ve done well by me. I’m certainly not going to panic and bail out now, but will sit tight and hope that what has come down will again go up. But it is scary when the sums aren’t so big to begin with.
Of course I want to blame someone. I want to blame the corporate executives whose annual salaries are many times the amount I’ve been able to save during my working life and are way out of proportion to the earnings of their employees. I want to blame the unscrupulous lenders who lured people into mortgages they couldn’t afford for houses they couldn’t afford, on the false premise that inflated home prices would continue to rise. I want to blame the financiers who sliced and diced and “securitized” those mortgages so that the risk was disguised and spread to institutions where it didn’t belong. I want to blame somebody for the jobs being lost, the savings that are evaporating, the anxiety of elderly people dependent on dividend income, the loss of trust in the American dollar that’s going to hurt us around the world. Greed is one of the seven deadly sins, and there’s little doubt that greed is at the heart of this fiasco.
Most of us grew up equating capitalism and free markets with democracy and apple pie. But Catholic social teaching has also warned against unfettered capitalism. Capitalism can be a very good thing, but the little guy, the worker, the small investor, needs some protections. The current crisis is, I suspect, the result of government deregulation or no regulation of sectors of the financial markets. Some parts of our financial system, notably traditional banks, have been regulated since the Depression, and people with their savings in FDIC-insured accounts are, in a saying now ironic, as safe as houses.
I think it’s a safe bet that a fix is going to be provided for Wall Street. But I want it to come with strings attached—oversight, regulation, transparency—some sticks, not just the carrots of tax incentives. And let’s throw in some direct help for the ordinary folks. Foreclosures aren’t good for homeowners, lenders or neighborhoods: let mortgages be restructured so that people can stay in homes they’ve been making payments on. If recession is as inevitable as it looks, provide as much cushioning as possible for the poor and the middle class (extending unemployment insurance and expanding the food stamp program, for example) instead of those who can get by nicely on their own. The trickle-down theory hasn’t worked too well when it comes to monetary gain, but it does seem to be a law of bad times that when there’s systemic trouble the poor take the hit. Can we change that?
I don’t have the answers. The system is going to be well shaken; I hope it shakes out in a way that helps the people who need help.
