National Financial Crisis

The past couple of weeks watching the various players in the financial crisis has me reflecting on our country's history. The memories of the crash of 1929 were told to me by my father and grandparents. Decisions they made subsequent to the depression were forged by that experience.

We are now hearing that some of the laws that came out of that time to protect us from future problems were based on "crowd think." A story I heard on NPR last week as I came home from work suggested the divisions and regulations of investment banking and commercial banking were based on bad analysis. Back then, any bank could be both a commercial bank, taking deposits and doing loans plus have the ability to sell stocks and bonds. It was assumed then that the commercial banks had a hand in selling more risky "paper" to their customers. The historical research since then has (according to the NPR story) proved that the commercial banks did a much better job of selling "good" stocks and bonds than did other financial institutions. A couple of Senators got together and wrote a set of regulations that focused on dividing the business so commercial banks could no longer sell stocks and bonds.

Pondering this leads me back to one of the first blogs I wrote. My dad sent me some money for my birthday and as I normally do, I went to the book store and spent it "wisely." I purchased Tom Peters book Re-imagine. The early chapters had me thinking about the consequences of bad decision making. In business, the consequences results in bankruptcy. Of course, there are a number of other casualties in the business failure. Employees of the firm are as directly affected as ownership. There is financial pain and suffering with both parties but in one sense it is different. Employees are putting their trust in ownership that they make good decisions to keep the firm going. The business either restructures or goes away. The penalty for bad decision making is the death of the company. There are consequences and they are sometimes harsh.

This led me to continue thinking about bad decision making in government. Typically the consequences are not the same. What would normally result in a business death does not happen in government. Maybe someone gets fired but the organization goes on. What usually happens is the organization is reorganized and someone has to clean up the mess. That usually means a new set of taxes to pay for the problems left behind.

So, watching the current situation, we see a clamoring by national figures saying "protect us from the bad decisions people make." There are, of course, impacts on the general public. There will be hard times. But isn't this somewhat nature's way of getting things back in balance when we get out of balance. Having the Federal government step in and save the situation is not good. We have learned that the government will always be there to protect us from the "bad" while letting the good happen. Accountability is lost. I expect we will not learn from these events and we will be paying more taxes until the next lesson comes along. Maybe then, we will learn.