Monday, March 30, 2009

Change of Plans

I meant to write about GameStorm, and some of the things I thought about after spending an entire weekend playing games.

Instead, I came home and caught up on my reading. This article scared me: "The Quiet Coup" by Simon Johnson (The Atlantic, May 2009)

Mostly, I don't think about the financial crisis. It's too big; there's not a whole heckuva lot I can do to fix it. And it's not affecting me personally right now. In a pinch, CKL and I have enough money for a few years (barring hyperinflation or other horrors), so we can just concentrate on spending within our means without changing our lifestyle much.

The only real change I made was to set up a recurring donation to a couple of charities each month. I figured that if I have a recurring deduction each month for fun stuff (Netflix, Xbox Live), I can match that money for charity.

So, that's me. I don't think about the financial crisis. It doesn't bother me. Until I read an article that hits me hard enough to actually write to my elected officials.

It's a long article, with a lot of important points, but this was the one that hit me hardest:

[The banks] don’t want to recognize the full extent of their losses, because that would likely expose them as insolvent. So they talk down the problem, and ask for handouts that aren’t enough to make them healthy (again, they can’t reveal the size of the handouts that would be necessary for that), but are enough to keep them upright a little longer. This behavior is corrosive: unhealthy banks either don’t lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all.

I know this problem. We all know this problem.

In my case, it looked like this: my brother asks for a few hundred dollars to tide him over until payday. I give him the money.

Months later, I get another call. Now my brother needs a thousand dollars. Times are tight. We have an uncomfortable talk, and eventually I give him that money too.

Months later, I hear from my sister that my brother is in a desperate situation. He might actually lose his house. His kids could go hungry. And, finally, the whole sorry story comes pouring out: my brother had been using payday loans to finance his lifestyle for the better part of a year.

The money I gave him (that my mother, brother, and sister gave him) was never enough to pay off his debt. But it was always enough money for him to get deeper in debt. Until, finally, he was on the verge of collapse.

The consequences of doing too little can be worse than not doing anything at all.

The banks (and AIG) look an awful lot like my brother. And it looks like our government is acting an awful lot like me. Look at how many times they government has given BofA and AIG bailout money.

It's scary to think that our government might be doing what I did--giving a few dollars and compounding the problem--instead of actually providing a solution. Instead of making sure that those few dollars will actually help.

It's even scarier to think that our government is treating banks like family and not watching out for the rest of us. We're family, too.
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