So much for idealism . . .

By the time Jim finished his MBA studies at Wharton and we got married and moved to Annville, it was obvious that if I didn’t agree to join the teacher’s union my life as a public school teacher would be made miserable, so I decided to apply for a position at a local college; I wasn’t looking for a fight in those days. Many years later I would run up against the union again—during a eight-year foray into education politics—during which the confrontation escalated from slashed tires to death threats and finally to a physical attack by a union rep, which led to his arrest. But that’s a story for another day.

The local college hired me as director of publications (I was grossly under qualified), and later I was promoted to director of public relations. These jobs allowed me to finagle myself back into the classroom as a part-time journalism instructor, advisor to the school yearbook, and manager of several community internship projects involving English students. All the while I also did part-time feature writing for the Harrisburg newspaper, which allowed me to illustrate my stories with my own photographs. I had begun learning photography from Jim, who had become a hobbyist in graduate school, as well as from a very talented student photographer with the yearbook. When I won a local newspaper’s Kodak snapshot contest, I was convinced I had what it takes to be a pro.

The original soccer mom?

By the mid-1970s I was one of the few moms who kept on working after having kids, and my after-hours writing and photography jobs allowed me to purchase more equipment. I looked forward to the day when I could quit my job at the college and build a small studio in a garage that sat on the farm property where we lived. I guess you could say that I was one of the very first “soccer moms.” Those plans changed dramatically when Jim came home one fine fall day several years later and announced that he had decided to quit his well-paying job as general manager of a plastics company to help me start up my photography business that he now intended to join. That decision, which I fully supported, set into motion a series of events that severely jeopardized our then pleasant way of life and hopes for the future. In the process, I learned a lot about the banking industry.

Most of my business students know the story of how I came to owe $187,000 at 23% interest because of the bad decisions we made investing borrowed money at a time when America’s banking system was out of control and inflation threatened every family’s way of life. During this period, many hard-working farmers lost land that had been in their families for generations. Fund-raisers were held around the world for these American farmers, who, like anyone who borrowed money during this period, had been victimized by banks and savings-and-loan institutions that racked up commissions by convincing farmers and others like Jim and me to keep on borrowing because the value of our land was escalating, and it represented the vehicle by which we should fulfill our dreams. When regulators got nervous about this frenzy, lending institutions began calling in loans, and the house of cards began to collapse, precipitating what became known as the Savings and Loan Crisis. If you want to read more about the history of the origin and effects of this debacle, click here. It illustrates that we’ve been down this path before, and it begs the question: Why are we repeating it again?

Surviving economic disaster

Jim and I were among the fortunate few who survived this bleak period by liquidating personal assets and working double shifts in the studio so that we could pay down debt. Early on I was fortunate enough to meet the late Bud Haynes, who became my business mentor; he made me understand that creating a business could be every bit as creative and rewarding as making photographs. Eventually, Bud recruited me to teach with him, which developed in me a sense of calling because of my gratitude to him and other PPA instructors who helped our business to succeed. Furthermore, I had learned so much from the School of Hard Knocks that I wanted to do what I could to help others from making bad business decisions. The experience also strengthened my awareness of the importance of sticking to fundamental business principles such as the importance of staying out of debt, creating a plan for every aspect of your business, and practicing fiscally conservative oversight in all affairs of business and personal finance. Having watched so much harm come from government manipulation of markets also hardened my belief in the wisdom of allowing free markets to function, even if it creates financial pain and hardship. Unfortunately pain sometimes is the ONLY path to wisdom and progress.

If you’re still reading, I want you to know that I’ve recounted this personal history as an explanation as to why I have more than a passing interest in the state of our economy. When the banking system began to implode last fall, I began using what little spare time I had to learn more about the worldwide banking system. (This activity is the main reason that my blog has been so quiet lately.) The more I studied, the more convoluted the subject became, and I began to understand how a nerdy guy like Bernie Madoff (whom the media inexplicably calls “charming”) could cheat his clients out of so many billions of dollars: When so few people understand the complexities of international banking, you can get away with almost anything . . . until the Ponzi scheme finally plays out.

One thing has become abundantly clear to me: The same kinds of greedy manipulators who orchestrated the Savings and Loan debacle were alive and well and flourishing in the 21st century, and if you peeked into their business plans, you could find government lending a helping hand. I have no doubt that government bureaucrats (under both Clinton and Bush by the way) had very good intentions in promoting and tolerating sub-prime loans: They wanted to increase home ownership, a noble ideal to be sure. I doubt if they envisioned the spectacle of houses replacing land as the new free ride to the top. I’m sure they regret cracking open the door for lenders with visions of non-stop commission checks to break it down.

Bad behavior with the color of money

As an unabashed advocate of capitalism, it has been extremely discomforting to witness the parade of capitalists—especially those in the financial sector—behaving so badly; but I am mindful that layers upon layers of government bureaucracy make it so much easier for bad financial behavior to go unnoticed. It is instructive to note that it wasn’t the FBI that “got their man” with Bernie Madoff; he turned himself in when his evil house of cards began to flutter. With a few more layers of bureaucracy, perhaps he would still be in business “spreading the wealth.”

So for the last four months I’ve been looking to see which way government would go in addressing our financial crisis. The years I spent in politics made me fairly cynical about politicians on both sides of the aisle. It’s been pretty hard to tell a Republican from a Democrat for a long time or even to define if there is a “center” operating anywhere in the political spectrum. I’ve been watching closely and hopefully, but the recent unveiling of a so-called stimulus package, followed up by the pork-laden omnibus spending bill that represents an all-out assault on the business sector, has set me to emailing and calling my elected representatives. Their mindless responses have not lifted my spirits.

So what’s next?

At this writing our government seems hell-bent on repeating the mistakes of the past: thinking the government can supplant the private sector, and by sheer force of will and taxation reverse what it helped to cause, using the same tactics that precipitated the problem in the first place: spending money we don’t have to subsidize failing institutions; borrowing from nations who may not have our best interest at heart; and targeting the “rich,” so that government can orchestrate the next rocketing bubble that will do what all bubbles eventually do: burst when they have wreaked maximum havoc.

Most concerning of all is the prominent lack of a concerted effort to attack the proximate causes of the problem: housing and banking. Instead we are told that we must undertake to fundamentally restructure education, medical care, and the electric grid. Give me a break! What I’ve heard from my elected representatives is that we have no choice but to do so because of the Mother of All Cop-Outs: “We are in uncharted territory, so we need to act boldly and swiftly.” In other words: We will exercise our cluelessness by experimenting with your money and that of your children and grandchildren. They have learned NOTHING from the past.

Checking in with Dow Jones

So it is no surprise the Great Global Financial Scorekeeper at the New York Stock Exchange keeps heading south. I know it’s hard for Main Street to care much about Wall Street these days; I agree that these folks need to spend some time in the national naughty chair. Jim and I got burned twice by the Market, so we got out years ago when we were sick of worrying about the market’s volatility and how value could drop every time Alan Greenspan caught a cold. But the most sobering fact of all to me is that the financial wellbeing of more than half of America and a lot of the world is tied to the stock market. Consumers won’t regain confidence until the Market rallies. So attention My Government: It’s about the Market! It’s about the Houses! Tell the guy in charge (who couldn’t figure out how to pay his self-employment taxes) to pick up a book!

Also tell Mr. Geithner that it’s also about the small business sector that powers economic progress in America: Encourage us, then get out of our way! Don’t tell us you will punish us if we get rich. Most small business owners, such as photographers, will never hit that magic $200,000 + income level in the proposed Tax Code revisions where the government will start lowering deductions for state and local taxes, mortgages, and most cynical of all—charitable contributions. Just the specter of economic punishment will rob small business people of the desire to takes risks. As an economic growth strategy, these proposals are about as foolish as trying to strangle a hen in order to make her lay more eggs.

Reading about the budget’s provisions has made me wonder what I would be doing today if my parents hadn’t encouraged me to sell potholders door to door when I was six years old. What if they had told me that I could do it, but I had to give them more than half of what I earned? I suspect that single act would have robbed me of the great gift of Hope.

When the history is written . . .

I don’t much like labels, but I am just fine with being called an economic conservative, because most of us who identify with this mindset believe that if it looks too good to be true . . . it simply IS too good to be true. We tend to trust what we know to be true from personal experience and what we can learn from history. When Enron collapsed, I studied the reasons why. The reasons no longer matter: what I learned is that if a company cannot explain to you what it does to earn money in less than three sentences, then you should not go to work for it or invest in it. What I’ve learned so far about accumulating wealth is that is fine to want to get rich, but the best strategy is to get rich SLOWLY! And you’d better have a plan to do so. What I’m afraid I will be studying in the years to come is what happened when the government couldn’t explain its economic recovery plan in less than 1,000 pages and the Congress voted it through the day they received it without reading it.

I feel better now that I have gotten all this off my chest. I’m finding that writing about my concerns is cathartic. I don’t know whether I’ll write about this subject again, but if I do, I promise to keep it short. I’m learning every day, and perhaps I’ll pass on some of the resources I’m looking at in case anyone out there is interested.