My Way Credit

"So, oft it chances in particular men,
That for some vicious mole of nature in them,….
By the o'ergrowth of some complexion,
Oft breaking down the pales and forts of reason,….
That these men,
Carrying, I say, the stamp of one defect,
……be they as pure as grace,
As infinite as man may undergo--
Shall in the general censure take corruption
From that particular fault."

It seems to me that this selection from Hamlet does as good a job as any I have seen in describing the character issues that are at the heart of our current economic woes.  In particular, I’m thinking of the many executives who initiated the current economic malaise that we are all dealing with.We need to include tens of thousands of employees who weren't "just following orders."

From the subprime lenders to Wall Street to the rating agencies to the investors who bought the loans to the overly creative people who put together the scary credit default swaps, all of them were co-conspirators in this gigantic fraud that was perpetrated on the rest of society.

You can cast a net that includes very smart people like Alan Greenspan who thought that the capitalist system would be self-correcting enough so as to prevent exactly the kind of thing that has happened.  It also includes some super-smart executives at some of the largest financial institutions in the country who simply did not understand the level of risk that their organizations were both taking and passing along to others.

Arguably it could be said that if they should have put a halt to any activity that they didn’t understand, but when large corporations are involved in over 100 different kind of discrete business, can anyone understand them all? Perhaps not, which is a pretty good argument for not allowing companies to get involved in more businesses than they CAN understand.

Then there are outfits like Washington Mutual and Countrywide that were in just one business, making mortgage loans to consumers. Each had a slightly different but warped business philosophy that they executed perfectly. And then there are Fannie Mae and Freddie Mac, each of which had basically one mission, but flawed executives and inadequate oversight. The result of their destruction was a loss, so far, of something like $500 billion in shareholder equity and bailout funds.

In every case, the mostly well-meaning CEOs were caught up in their own hubris, the thought that they really had it nailed, which really was nothing more than their inability to overlook their own defects of character and the defects, cupidity, and greed of those around them.

If I had a wish, it would be to send to each and every CEO of a financial institution and the regulators this quote from Hamlet for them to read every morning when they head off to work. Those defects are alive and well, although today perhaps sitting in some mental closet just waiting for the next opportunity to wreak havoc again. Perhaps if those CEOs were better armed they might be more diligent in seeing it when it arose.

I am not so naïve as to think that this can’t happen again. It surely will and, to quote Shakespeare again,

"The fault, dear Brutus, is not in our stars, but in ourselves."

At least when the Grinch stole Christmas, he wasn’t out to make a fast buck.

According to CNN, reports of Christmas tree theft are soaring this holiday season. The thieves seem to be targeting commercial lots (in Hillsborough, Fla., officials are trying to figure out how more than 20 trees managed to vanish from a single site). Authorities chalk it up to the tanking economy. But absent any evidence for a Christmas tree black market, officials suspect “this year's thieves are likely stealing trees for their own living rooms,” says reporter Alyssa Abkowitz.

Much like the economic crisis that precipitated it, the effects of the Christmas tree crisis evidently know no boundaries. British newspaper the Telegraph reports on the theft of holiday flora from the country’s “plantations and nurseries and, more shockingly, also from public parks, private gardens and even from in front of a church.” But unlike their American counterparts, British tree thieves may be targeting the holiday accoutrements in order to make a “quick profit” from their resale, according to Tim Price, a rural security specialist with insurance firm NFU Mutual, who spoke to the London-based daily.

Obviously, having your tree stolen could be the least of your worries during the holiday season – and beyond, especially in the midst of an economic crisis.  Credit card fraud and identity theft cases stand to rise in times of need, so it’s no time to let your guard down.  Credit.com has tips on avoiding common identity fraud schemes.

On the bright side, Great Britain’s politicians have made sorting out finances a top priority for 2008, according to Money News. We hope the same can be said of American politicians as the holidays give way to the new year.

After a $25-million lobbying campaign in 2005 by Bank of America, Citigroup, JP Morgan & Chase and Washington Mutual, Congress passed a law forcing people to continue paying their credit card debt even after they file for bankruptcy.  The banks got what they had wanted…and more than they had bargained for.

What wasn’t protected under the new bankruptcy code were mortgage payments. So now, instead of defaulting on their credit cards to keep their house, hundreds of thousands of Americans may be forced into home foreclosure, according to a story by Bloomberg News.

Removing credit cards from bankruptcy protection is causing 32,000 more people to foreclose on their house every quarter than otherwise would have under the current economy, according to a recent report by the Federal Reserve Bank of New York.

For the big banks, the results couldn’t have been more catastrophic. Washington Mutual earned $689 million from its credit card business in the third quarter of 2008, up 8.8 percent from the same period in 2007. Meanwhile, WaMu’s overly-aggressive investments in risky mortgage-backed securities caused it to be seized on Sept. 24 by federal regulators, who immediately chopped up what had been the nation’s largest savings and loan, and sold its best pieces to rival banks.

In 1998, when the nation’s largest banks created the National Consumer Bankruptcy Coalition for the purpose of rewriting the bankruptcy code, they already were earning billions of dollars every year from credit cards. But they wanted more. And in their rush to grab higher credit card fees, banks forgot about their huge investments in mortgages, which already have taken a $40-billion hit during this crisis.

“Be careful what you wish for,” Jay Westbrook, a business law professor at the University of Texas Law School in Austin, told Bloomberg. The big banks “wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures."