The Financial World

I have suspected for years that some dreadful retribution would be imposed upon us because of, the frivolous fashion in which so many have accumulated debt, speculation as to how people might profit from escalating real estate values, the unprincipled way in which lenders have taken advantage of them. I never, in my wildest dreams, speculated that we might face financial meltdown, an Armageddon of the world monetary system. I believe that this is what the people in power confront, and I am unimpressed by much of the response. It appears to me that some, in a position to know what was developing, were either not on top of their jobs, or knew that their superiors would either, not listen to them, or would suggest that they consider resigning. However, we are here, and what is happening?

President Bush authorised his Treasury Secretary to take the necessary steps for the United States to provide 700 billion dollars in financing to relieve the pressures which are threatening the American economy. I believe he was reluctant to take this step, and I think his initial thought was that the Secretary should have complete discretion on how the funds were used. The funds were authorised, but Congress influenced the basis under which they would be disbursed.

While America has been addressing its financial situation, others have also been struggling with similar problems. The British Prime Minister, Gordon Brown, decided one way to tackle the problem was for governments to introduce additional capital to banks which were in difficulty, and Britain moved in that direction. The European Union decided the British initiative was good, and its members adopted it. America has now followed suit.

One of the problems in America is that, with less than 300 billion of the original 700 billion committed, everybody and his brother is trying to get to the feeding trough before the rest of the funds are allocated. If enhancing the banks' capital is a good idea, what about us? One candidate being the automobile companies.

There was an editorial in the New York Times last Wednesday on a hearing in the House of Representatives the previous day about the expenditure of the $700 billion. The Treasury Secretary insisted that the funds could not be used to prevent individual mortgage foreclosures, an opinion Representative Barney Frank demonstrated was untrue. Ms. Bair, the chairwoman of the Federal Deposit Insurance Corporation, apparently demonstrated that, if an investment of $24 billion was made in protecting banks from part of any further loss from renegotiating mortgage payment terms and if the result was to lessen the fall in real estate values by just 3%, an additional $40 billion would be available to individual consumers. Where is the sense in advancing $25 billion to automobile companies who have been in denial since foreign car makers started making substantial inroads into their domestic markets 40 years ago, while we refuse to help, indirectly, ordinary citizens who are fighting to save their homes?

Sixty Minutes

I watched this CBS news programme on Sunday evening to see the first such interview of the president-elect, Barack Obama, since his convincing victory over Senator McCain.


I was, first of all, struck by the apparent lack of preparation. The Senator sat upright on something which almost appeared to be a leather-covered padded bench, directly opposite the presenter, so that there was no opportunity to look at both of them during a conversational exchange, which was, in fact, lacking. It was essentially question and answer, without any opportunity for exploration. I found it distracting that the last four or five inches of the senator's bright red tie, dangled beneath his buttoned jacket. The impression was of something which had been cobbled together at very short notice, without the opportunity for professional staging.

I did not find the senator as impressive as I had when I heard him during the campaign. I have noticed that since the election he has played down the commitments he made so generously while he was campaigning, cautioning people that they cannot expect him to do everything at once. It is, perhaps, a legitimate attitude, especially in light of the current financial situation.

It bothers me that I do not think he is prepared to let anyone inside his mind. It was only when he spoke about his children, and his wife, that I felt I might really be getting a glimpse of who Senator Obama really is.

Art and Something More

The Dulwich Picture Gallery in London is to loan nine paintings to the Frick, in New York. It wants to make itself, a small but renowned gallery, known to American audiences, and what better way than by displaying complementary pictures in that lovely Fifth Avenue mansion.

I cherish the memories I have of wandering idly through its rooms,admiring the paintings, and my surroundings, thinking that I was enjoying a similar experience to that of the mansion's one-time owner, without any of the trauma of ownership.

It brings back a similar memory of walking around J.P. Morgan's study, which one could do when I was first in New York. Everything was as it had been when he was alive, and you were allowed examine priceless items from as close a distance as you wished, but those days are gone.

Perspective

The second world war changed the character of the western world,and of other parts as well. Previous to the war advanced education was the preserve of the upper classes, who were thus able to maintain their stranglehold on worthwhile careers, and on disposable income, whereas the uneducated had to make do with a subsistence life. The war changed all that.

In America there was the GI Bill of Rights which opened college up to all those young men and women who had brains, but no money. Gradually a whole new society came into being, where disposable income was not an elitist perk, but in various measures was available to a wide spectrum of working people.

Unfortunately, nobody, as far as I can see, thought that it would be a good idea to teach these newly affluent people how to manage their new resources. The tragic result we now see all around us. Unsuspecting people thought they could trust banks, especially internationally respected Wall Street firms, without trying to find out what kind of an investment they were buying, from these supposed men of integrity.

This morning I read of a little town in Germany. A local church is gradually losing its congregation, and income. It decided to protect its future by investing its four million euros of funds with a Wall Street firm. What a tragedy.

Awakening

It is as slight as the first tremors of an earthquake, when you are not really sure what is happening, but it is there. America is awakening, and its citizens are deciding that enough is enough, just as the world has been hoping for so long that they would do.

I read on Saturday that 25 million have already voted,under the absentee ballot system, and over the weekend the TV newsreels showed queues of people stretching for hundreds of yards, waiting patiently to vote, people who perhaps knew they would not be able to make the commitment on Tuesday. America is voting,and the listlessness, the sense that nobody is listening, has vanished. They know that every vote counts, and they are determined that they will not squander this opportunity: they hear a voice, and they are listening.

I think that America is about to find its position in the world again, not the voice of vested interests, but the voice which has rallied the world to its dreams for more than two hundred years.