I am not like the pundits in the mainstream media who are all acting like Chicken Little and the sky is falling because of all the issues surrounding the financial markets and the upcoming debate on bailing out financial institutions and homeowners. My first question is when watching the news accounts is, “what do these talking heads know about finance.” I have a B.B.A in Finance and Management from the University of Wisconsin-Whitewater, while most of these so called “reporters” went to east coast schools, receiving liberal arts degrees or journalism schools, while there, being indoctrinated with liberalism, knowing nothing on how the economy and the real world really works. We have heard several reasons why we are in this so called “crisis”, from crooked CEOs, Republican policies of deregulation,corporate greed etc. While I do believe there has been crooked CEOs when it comes to Freddie Mac and Fannie Mae and a little bit of corporate greed, its not the type of greed that is being reported by the mainstream media.

I know that this situation has been going on for a few months now and some of you are probably wondering why I am writing about this now, “hindsight is 20/20” but this isn't the case when it comes to my analysis. I am not a reactionary, I like to process the information and filter out what is true and what is liberal propaganda. My analysis is as follows. The investment community, especially the stock market runs on two things; larger than average growth and beating analyst's projections. If neither of these things happens for a particular company, there stock isn't “sexy” and doesn't appreciate the way management would like. I equate it to the story of “The Tortoise and the Hare. The “hare” being the sexy stocks, securities that everyone wants to own and there price shoots up and investors making a quick albeit risky buck. These are company's with high rate of growth especially in industries that are mature, where growth is hard to come by. We are not talking about Google, who's maturity hasn't been reached yet but the Enrons and WorldComs of the world, where management would do anything (legal and illegal) to keep their share price growing. The Tortoises are the Proctor and Gambles who's growth is slow but steady and they eventually will win the race, just ask my dad who is enjoying a nice retirement on P&G stock while the employees at Enron have to start over. Taking this example to the mature financial services sector, the housing market was slowing down and the banks and other financial institution are under pressure from their shareholders and partners to keep their growth going at the rate they have been enjoying, started taking on riskier loans. They were giving out sub-prime loans to people to buy homes and capital needs that they couldn't afford under normal economic conditions. They banks knew that in the long term a lot of these people couldn't ever pay them back but they were looking at the short term and will handle this problem in the future. Well the future is NOW.. They need to show their shareholders and partners that they are growing the company and they are earning their large salaries. To make more loans (because they need to keep the loan to cash ratio set by Federal and State regulators),they would sell off these loans to Freddie Mac and Fannie Mae and they would bundle these loans up and sell them as securities in the open market. This circle kept on going and going until.... guess what, the housing market bubble burst and the underlying assets of these loans are not worth as much as they once were. This along with an increasing rate of defaults put the banks in a precarious position that we are now in.

This problem didn't affect banks and other financial institution that didn't get in this business of risky loans but it did hurt banks like Citi, AIG, Lehman, Merrill Lynch, Freddie Mac and Fannie Mae that did practice making and buying up risky loans. Now the banks and people who bought homes and properties they couldn't afford, expect the federal government to bail them out. Shame on the banks and shame on these Americans, its greed on both sides. While I disagree in principal with the bailout of Freddie Mac and Fannie Mae, it had to be done because of the massive amount of loans they own and them being quasi-governmental agencies. What I don't want to see is the government get into bailing out these companies and individuals because of their greed. There are thousands of banks and millions of Americans who lived within their means and now have to pay for stupidity with taxpayer dollars. Instead of being shortsighted all the time like we have been with immigration, Social Security, Medicare etc we need to have the foresight to see these problem before they become too big to handle. The only politician I have read about speaking out years ago has been John McCain, who had the foresight, but was rebuffed from the likes of Chris Dodd, Barney Frank and Barack Obama who were in the pocket of Freddie Mac and Fannie Mae. What ever happen to corporate and governmental responsibility to keep the markets running smoothly. Where was Bernake, Paulson (who has a lot of private sector experience) and others? They were all caught up with the sexiness of growth or being political and the need to get elected or keep their government job. Obama shouldn't say a word about this situation because of all the dollars he accepted from Fannie Mae and Freddie Mac and having their former CEOs as financial policy advisors. Instead of bailing out people and business out of situations they should have known better not to get into, we should be looking at the rules so this wouldn't ever happen again.

I don't think the economy is as bad as the pundits in the media says it is, but we do need some tough love. We do need to strengthen the dollar to reduce oil prices and the way we do it is by raising interest rates and taking money out of the economy, politically a non-winner. We might go into a recession next year, but we are overdue for one (if you look at economic history they happen around every ten years) and it should be mild. Right now I can't stand is the contempt from the media to those out there ,like John McCain who says the economy isn't bad who are they to judge the economy. NBC, CNN,ABC,CBS, New York Times must have opened up a MBA program when we weren't looking.