Speaking in front of the nation during his inaugural address January 20, 1961, John Fitzgerald Kennedy uttered his famous quote “Ask not what your country can do for you, ask what you can do for your country.” My my, how things have changed in the last 45 years. JFK was asking Americans to step up and put aside time to serve their country like their parents did during WWII, albeit without the sacrifices they had made. For the most part the call was successful in the numbers that signed up for volunteer organizations like the Peace Corps. Now, its seems like the tables have shifted with everyone having their hands out asking what their country can do for them. I have noticed that in society that there are a lot people out there that feel that they are entitled to everything from jobs, health care, food on the table, child care etc without having to making sacrifices on their end. They believe that its the government's responsibility. During the election, one video clip that was shown, it was one of an African-American girl, I believe during the Democratic National Convention or a huge rally that thought Obama will put fuel in her car, pay for her home and overall take care of her. I know that this is one example out of the 300 million Americans out there but I am an observer of society and culture and you have to admit that we are trending away of the things that made the United States what it is today. What ever happened to rugged individualism, personal responsibility and earning what you have by the sweat of your brow?

I do put some of the blame on politicians of both sides. Every year leading up to an election, they promise us the moon, from better health care, better education, money for various programs bribing certain voting groups just to get elected. As humans, we all love free stuff, but most of us don't look at the big picture and the hidden costs that comes with it or who is really paying for it. We let our emotional side dictate, while it should be the rational side taking charge stepping back and questioning everything our government wants to do for us.

There are two examples making news that proves my point. First, on a national scale, all of the bailouts that are planned and Obama's promise of more taxpayer stimulus. Up until now I was a proponent of the government stepping in certain situations, because some companies are “too big to fail”. That if we let these businesses go under that it will cause a ripple effect in our economy making a small problem into a much larger one. Now that we have to bail out the banks, what next. Are we to bail out the auto industry, credit card companies, retailers, airlines, the housing market, insurance companies, financial services companies etc? The first problem with this is that we will be setting a bad precedent, where if we bailout one industry, what makes them more important than another that is going through the same crisis. Secondly, we don't know that these bailouts will work or are we just delaying the inevitable. If we bailout GM, who is hemorrhaging billions of dollars a month, the solution isn't giving them more money just to hemorrhage it, but we need to tackle what is causing the problem. We should let them go into bankruptcy to get them from underneath the legacy costs that is killing them. Thirdly, by giving them bailout loans to survive, are these companies learning a lesson or are we going to have the same problem when another general economic crisis arises. Before we give out dollar one, we need to look at what caused these companies to go to the brink of disaster and set up regulations and set terms of any bailout that the individual companies and industries have to adhere too.

Personally, I think that the only way the government should stimulate the economy except for monetary policy is government works projects. I am a constitutionalist, I believe that the federal government's primary job is national defense, general welfare of its citizens and INFRASTRUCTURE. We have thousands of bridges and miles and miles of road that is in desperate need of repair and this would be a good time to tackle them. All the money spent will go directly into the construction people's hands that will trickle down through the economy. We are a consumer driven economy.

The second example is a local story from Milwaukee, where the voters overwhelmingly approved a referendum giving them all sick days based on the amount they work. Who wouldn't vote for free sick days. We all know they will all be taken for legitimate reasons. (just a little bit of sarcasm) When voters are standing in the booths they have $$$ in their eyes not seeing how giving every worker in Milwaukee sick days will cripple a lot of businesses especially smaller ones that doesn't currently offer many benefits. Also, no one is saying who is going to pay to administer the enforcement of this rule.

While JFK wanted us to do something for our country, paying higher taxes to bail out mismanaged companies wasn't what he had in mind. Plus he didn't mean that we ask the country for free stuff. Also, we shouldn't be bailing out homeowners that bought houses they know they couldn't afford in the long run. Individuals and businesses need to take responsibility for their own actions and that the government needs to really look at all industries across the economy to find loopholes in regulations that caused this crisis.

 

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.