Fixing The Financial Crisis- Kids Will Be Kids

There really isn’t much in the way of news here today, so feel free to click on something else…I’m just gonna ramble about the economy. Yesterday, in his news conference, Barack Obama made it clear that ‘there’s only one president and administration at a time’, or words to that effect; essentially, he’s saying that while he’s getting his guys and programs together, it’s still George Bush’s baby until January. Today, lame (duck) president George Bush says the economy won’t wait for Obama to get in office. In other words, Georgie still has a chance to do something devastating to our economy for the next two months or so. Oh well.

Of course, everyone is talking about a way to make sure “this never happens again”. And they probably will find a way to make sure that credit default swaps and mortgage backed derivatives don’t bring down the world financial system again, the same way they were able to stop the guys in the old Savings & Loan scandals of the late Eighties from doing the exact same thing ever again. But that’s missing the point. To use an analogy, think of your family and home. The financial system is like your house and the people who work in it’s related markets are like the toddler in your house.

Before the baby was born, your house was really nicely put together. You had candles and crystal vases on low coffee tables, cleaning fluids under the sinks, plastic shopping bags stored on the closet floor, loaded guns on the nightstand. Then you had your baby and of course it was time to ‘baby-proof’ the house. You tried to think of everything that could be dangerous and either moved it to higher ground or locked it up. You thought you were good to go. But as the child grew and started to get curious, they would always find something you hadn’t thought of or forgot about to get into…they climbed the bookcase and took a high dive into the glass coffee table, got the mini-blind cord wrapped around their neck, found the crappy throw-away .38 you were hiding to plant on whoever you needed to kill “in self defense” sometime. Oh, relax…we’ve all done it.

Of course, each time they find something new to kill themselves with, you take it away, lock it up or get rid of it. And that works, at least until they find the next thing. Well, the guys who work in the financial markets are just like those toddlers. They’re always looking for new things to do, new ways to get into trouble. They’re curious. You can baby-proof the mortgage industry, but that just means they’re gonna try and find something else to get into.

It’s the nature of children to think they’re never going to get hurt or hurt anyone else. And let’s face it, most of the financial system is run by bright eyed young kids who are entranced by all those glittery Rolexes and Jaguars, high rise condos and corporate jets. They want to play with them and they’ll usually think of a way to get them. So, we can do our best to think of everything to keep them (and us) safe, but sooner or later they’ll come up with something we never even imagined that could kill us all. It’s not until they develop a sense of right and wrong, a feel for what’s safe and what isn’t, that you can begin to relax your guard. That usually happens after they’re dead.

So unless Barack Obama can find a way to remove simple greed from the financial system, something else will happen sooner or later. Maybe not during his first term, since these guys will still be smarting from the spanking and punishment they just got over the mortgage mess, but sometime within the next ten or fifteen years they’ll do it again. The Savings and Loan Scandal became the Junk Bond Fiasco, which turned into the Tech Bubble which led to the Mortgage Crisis. Kids are kids. I mean, after all, what are ya gonna do?