Sunday, September 21, 2008

It's Like Being in Bastogne

So I've been listening to the talk radio show hosts and guess what they're all talking about?

That's right, the housing debacle.

And not that I'm criticizing them, or belittling them, but they're talking about this as if it is something new and shocking. That the collapse of Wall Street just kind of "sprung up" on them. Again, its because I had the "advantage" of working in banking and saw this coming, but I kind of analogize it to being in the 101st Airborne during the Battle of Bastogne and then getting relieved by the Third Army and having them ask "So, what's going on?"

I want to yell back at them, "WHERE THE HELL HAVE YOU BEEN?!"

Regardless, the timing of this housing/banking debacle more or less mandates that I address something about how to prevent this in the future (and coincidentally publish a very appropriately time excerpt from my book). The premise being;

Would this have even have happened if we mandated personal financial management classes in school instead of worthless subjects like "psychology" or "foreign-languages-you'll-never-use."



But of all the recommended courses of action, the single best thing to prevent another housing crash or any other economic catastrophe from happening ever again is quite simply education. People do not realize how powerful and what the potential is for a nation that adequately educates its population in finance and economics. Not only would such debacles like the housing crisis be avoided, but bankruptcies would dramatically decline, debt levels would drop, crime would plummet, unemployment would be perpetually low, standards of living would jump to levels never dreamed possible, and recessions, just like Polio or the measles, would be eradicated. It is merely a question of whether we care to eradicate the ignorance that causes these ills. It is a question of whether a society is willing to be intellectually honest enough to abandon the Thin Skinned Economy, take the time to study economics and live in the real world.

Not that we don’t make some efforts to educate ourselves when it comes to economics and finance, but it is an absolute disgrace the poor job today’s education system does. If at all, economics is a token requirement usually taught by a history teacher with no real background or understanding in economics and finance. Worse still anybody with real world experience is prohibited from teaching in the public schools on the flimsy grounds they don’t have a “teacher’s license” (Alan Greenspan himself could not teach economics at the majority of our schools). Furthermore, as no doubt has been the majority of people’s experiences, economics was such a boring class that instead of embracing it, it was loathed and feared by millions of high school students. It is no coincidence Ben Stein’s accurate depiction of an economics teacher in “Ferris Bueller’s Day Off” resonates so well with society.

This is just as much as a tragedy as the housing crisis itself, for in failing to educate the masses in finance and economics, we have failed to educate ourselves on one the most important, if not the most important aspect of our lives. Furthermore, it is almost criminal because the costs of such ignorance are so severe. Had personal financial management been taught in the schools would the sub prime market even exist? Would most 25 year olds have credit card bills larger than their student loans? Would there even be a housing crisis? Would the Baby Boomer generation be so woefully unprepared for retirement? Blame the bankers, blame the brokers, the utter failure of the education system to instill any semblance of fiscal discipline is just as much to blame...."

There's more where that came from.


langmann said...

It might have helped people at least have a conscience, ie: implicitly know deep inside that what they were doing was wrong.

However what doesn't help is a system of banking which involves government intervention and regulation which time and time again has bailed out these people, as well as produced regulations that require lending to poor credit in order to encourage home ownership.

There is no incentive to be careful.

Norman said...


By the way, I'd also add "how to raise kids". That and money management are the most important things a person needs to know, yet we assume they'll pick it up on their own.

Anonymous said...


You've opened up the huge box of "what is the purpose of education" arguments.

Well, I certainly agree that a good education should teach financial sense, just as it should teach hygene and the three Rs.

You maybe are complaing about state education that has been reduced to baby minding, socialist indoctrination and ... can't think of anything else .. these things normally come in threes for rhetorical effect. Dang!

Anonymous said...

Oh, yes, I remember ... the three Rs. But they seem to have slipped in the priority chain under state education.

Anonymous said...

The problem is that we all think it is our right,not privledge to have the newest cell phone,car ,video game,huge tv,massive house and so on and so on.

Anonymous said...


Anonymous said...

Wrong. The problem is not education, it's narcissism. The baby boomer, me first, now, generation brought this on themselves and everyone else. Our parent's generation didn't rack up huge debt, and a large number of them didn't have a high-school diploma. Many of the younger, forty-five and under generation, seems to have grasped the concept of "spend less than you make" and they don't have any special courses either. So the only difference I can find between the boomers and other generations is a selfishness that transcends common sense. If you must have a course how about one that teaches personal responsibility and not whining for some sugar daddy big government bailout every time they screw their, and everyone else's, lives.

Not that I have any strong opinions on this...

Stormhound said...

Education is helpful, but you cannot change basic human nature. Instant gratification vs. planning for the future, 30-day bottom line vs. long-term results, cut corners vs. create quality...these are all decisions that require wisdom and judgement to make, and let's face it: too many folks have too little of either. Education will provide mitigation, but the sheer mass of predators and idiots will ensure that history will repeat itself painfully.

Anonymous said...

The corruption going on inside the Banks and company's like Freddie Mac is just coming to the surface I think.
The White House blew it to when they blamed the borrowers instead of the Lenders. Bush could have averted this by taking the proper action, now it's a really bigger worser mess.
AIG is just more calateral damage, this could even be funny if it wasn't.
Education in finance is a real good idea but wouldn't help when the students are all corrupted by the greed of big business.$$$$$

langmann said...

What do you think about what this guy is ranting about in regards to your experience?

Alfred T. Mahan said...

Except, of course, there's no snow, we got warm grub in our bellies, and the trees aren't f*****g exploding from Kraut artillery, but yeah...Captain... other than that, it's a lot like Bastogne.

Captain Capitalism said...



"Bull, will you hit him for me?"

Hot Sam said...

I may have convinced my boss to buy a copy of the book for our perusal! Let's just say that my employer has a keen interest in what goes on in banks behind closed doors and in the hush-hush conversations.

Reverse Mortgages require government approved counselling sessions prior to origination. That should also be a requirement for anyone who is a first-time homebuyer or using a non-conventional product such as a subprime ARM.

Somehow, I don't think that it was college educated people who had the greatest difficulty understanding their loan terms, but I could be wrong.

Giving a six-figure loan to a borrower without verifying income and exercising due diligence in rating the risk is just criminal negligence! But government provided the products and prevented "discrimination."

I really don't know what this "bailout" entails. The news media is doing a poor job of explaining, either because they don't know or don't understand it. Is the government buying up the nonperforming loans or are they just extending unlimited opportunities to raise capital?

Anonymous said...

"That should also be a requirement for anyone who is a first-time homebuyer or using a non-conventional product such as a subprime ARM."

Be careful what you wish for. I bought my first house in May of 07 (30 year fixed). Bank of America offered me something like a .5% break on my interest rate if I attended a first-time homebuyer group hug session. The mortgage officer said "yeah, the group is great; it's called 'ACORN'". I had never heard of them, so I did some research. I called him back and said "I don't know if I like these guys so much"; he assured me that they were legit. I did some more research and called him back and said "to hell with that .5%, I'm not giving those assholes one iota of my time or information." Once he realized that I was going to walk he scrambled and found another organization (a local one) that I couldn't find any dirt on.

Moral of the story: don't push for mandatory sessions if you want to keep the likes of ACORN in check.