Problem Stated:
Continued market unrest of uncertain duration follows a decline of more than 10% in the value of the average tax favored retirement savings account invested in publicly traded stocks, bonds and mutual funds.
Indirect Cause:
General acceptance of the faulty economic theory that financial growth as well as fair wages and prices are best achieved by allowing "the market" to govern.
Direct Causes:
In the category of "I wish I'd said it myself," here's the text of an email that I received yesterday (author requested anonymity), with my response in the extended post text below:
George Bush and Hank Paulson finally cowed Congress into passing the Emergency Economic Stabilization Act of 2008. Congress didn't like the idea of voting for something that almost everybody described as a "bailout" of Fat Cats on Wall Street, but our representatives managed to throw in enough other provisions – foreclosure-prevention plans, tax breaks for left-handed Eskimos -- so that the whole package could be sold as good for all of us. Many Congressmen, including the one representing our district, still voted "no," but most went along with the notion that our economy might collapse without another government rescue. The Act provides for a Troubled Assets Relief Program: The Treasury will be able to buy dud mortgages and other hard-to-sell assets from banks so they will have money to make more loans, presumably not as silly as the old ones. This seems like a fine proposition for the banks: If you don't want it and it's hard to sell, Uncle Sam will buy it. Why not extend this program to everyone? I have a fair number of troubled assets. For instance, a technology mutual fund I bought back in the 1990s that has never really performed. I also have a rusty one-speed bike in the garage that would be very hard to sell in our hilly, old-bicycle-glutted local market. We have a lot of clothes that we never wear and that no one else seems to want very badly. All of this we would gladly sell to the government. Our neighbors have garages, basements and attics full of slightly scuffed in-line skates, ski boots, eight-track Bay City Rollers tapes, rowing machines and burnt-orange electric fondue pots. Even a modest cash offer from the Treasury would be accepted with no quibbling. If the government will buy all of these troubled assets from us, we promise to spend the money wisely next time. Just a thought.
In 1999 and 2000, I spent about 18 months responding to collections calls on behalf of medical providers, gathering, sorting and re-sorting bills and receipts, and communicating by telephone, mail and email with my doctor's office, my law firm's administrator and the group insurance provider (United Healthcare or Blue Cross/Blue Shield--they blend together in my mind) over the denial of coverage on infertility treatments that were expressly covered and pre-cleared with the insurance company for up to a $35,000 lifetime benefit (my husband, my children and I will be forever grateful to the women who convinced the firm to provide that coverage!).
I couldn't just pay the bills and fight with the insurance company later because (i) I was broke after the birth of my twins (thanks again!); and (ii) I knew that if I paid the bills in the amount charged by the providers, without the reduction that the insurance company had negotiated, I would at most eventually be reimbursed only the discounted amount, which was a fraction of the provider's charges. After wasting countless hours of otherwise billable time (including hours during sleepless nights) that would have benefited the law firm that provided this important coverage, the insurance company finally sent a note of apology and paid the providers. Of course my credit rating had suffered, and I'll spare the details of consequential damages that I have written off to experience. When I began practicing as a self-employed attorney, I first paid excessive premiums to partially replicate the health coverage I had when I was employed by a firm, then dropped insurance for several years because the premium was far greater than my family's medical expenses, and finally settled on a $5,000 deductible policy realizing that with three children it might be imprudent not to have coverage in case of a major medical problem arising.
Recently, I read an article that convinced me that I pay close to full price at the pharmacy even with the card provided by my insurance company not because the insurance company is too incompetent to figure out that I will reach my deductible faster by paying the inflated amount for prescriptions, but because they actually receive a kickback from the drug companies when I pay that excessive rate, and that when and if I reach my deductible and they start paying it will be at the negotiated rate for the prescribed drugs. Do I have time to try to follow this through to figure out whether my suspicion is correct and then to try to take action to end this abusive practice? No, as the insurance companies are aware, no one has that kind of time until they are already receiving Medicare coverage.
Why is it not obvious to everyone that single-payer health care is the only way to rationalize the cost of health care? It is clear to me that medical providers could be paid more than the insurance companies are willing to pay and that the overall cost of health care in the US would be lower if the money that should go to paying our doctors and other providers generously and encouraging well-conceived preventive health care measures by both the medical providers and the public would cost less and benefit everyone.
As long as the abusive, monopolized industries (insurance, pharmaceutical, big agriculture, oil, service companies with connections to the administration, and now, banking and finance) continue to collaborate with government to fool the public with fear tactics and false rhetoric (socialized medicine; problems just like in Canada; caving in to our enemies; etc.) we will be puppets on strings, keeping our heads down and working hard to pay off our credit cards and make our mortgage payments while receiving the same or lower pay than we received ten to twenty years ago when we, briefly, enjoyed living closer to those earning in the top 5% annual incomes.
We have allowed ourselves to be corralled into a situation where we are duped into supporting the oppressors as they carefully tighten the web of control over our minds and our government. Maybe if I get the word out that I know what's happening they'll cut me in on the deal? It worked for Sarah Palin!
I've been frustrated by the lack of detail available to allow voters to understand and evaluate the proposals being considered for the $700 Billion bailout that's currently under consideration. I emailed Colorado's senators and my other favorite senators (Barack Obama, of course, and Kent Conrad of ND) last weekend to express my concerns--the text varied somewhat as I enited each message, but the gist of my messages is set forth in the extended material below.
And what's with these secret weekend meetings that result in major transactions to consolidate failing institutions into three major banking institutions? Even with the abolishment of Glass Steagall I thought that Hart-Scott-Rodino approvals were required for transactions that result in one major company acquiring a competitor. And without regulation to limit the power of financial institutions, mortgage lenders, insurance companies, investment banks and commercial banks (as well as Fannie Mae and Freddie Mac) are all competitors in many lines of business.
It seems to me that the rush to pass a huge bailout bill is less prudent than taking smaller steps after more complete analysis of the implications by our elected legislators. I understand the function of the executive branch, but giving broad powers to industry insiders like Henry Paulson is an abdication of oversight responsibility. I'm sure that Paulson sees a collapse of the financial system in the works (suddenly, after months of false assurances that the economy is sound), but his vision is limited to the distress of his friends and colleagues on Wall Street whose jobs and portfolios are rapidly disappearing. While that feels like disaster to some people, it ignores the ongoing financial disasters faced by homeowners for whom the so-called mortgage bailout legislation doesn't provide a workable solution to the debts of those who have supported "economic growth" over the past two decades by obediently consuming and borrowing against non-existent equity in their homes.
