Did You Know?

Most of us are keenly aware that our government is in the midst of a "Depression Era-Sized Bailout". I hope that all of us are being responsible citizens and writing our Congressmen to implore them to do the right thing for the taxpayers.

If you don't know how to contact your Senator, please click this link: http://www.senate.gov/

I personally am not enthused about paying more taxes because lenders over lended, or lended to bad debt to income ratio clients, or tricked people into bad decisions on mortgages such as ARMs, or because people bought bigger houses than they could afford. But, it needs to be done. However, it needs to be done correctly and without all of this pressure that the people who should have been paying attention in the first place are now placing on it.

For those of you who are wondering, I am referring to the portion of the bailout that democrats, in Congress and otherwise, purport to pass that will assist Americans who are behind on their mortgage. Besides shooting up the price tag exponentially (some analysts project the figure goes up to 1.25-1.5 TRILLION) it just isn't fair to those of us who have done nothing to participate in the drama!

This is one of the reasons I am so passionate about financial planning, is that although most of the business is conducted on the up-and-up, a lot of corruption exists. People prey on the ignorance of their neighbors and make millions of dollars doing it. Besides helping people make a plan, FPs actually do advise them on investments and insurance. You can sell them the same services you recommend, so long as full disclosure is given about fees and commissions. Too often financial advisors or money managers are recommending things that aren't sound investments to their clients, but will yield crazy commissions for them, like the very mortgage-backed securities that our government is now slated to purchase for above-face value.

What's interesting to me is that in my financial planning studies I have learned that as a result of the Great Depression of the 1930's, the financial services in the US have been divided into three segments: commercial banking, the insurance industry, and the securities brokerage field. You will notice that this is no longer the case, as Bank of America now owns Merrill Lynch, AIG (the one who tanked and was purchased by Uncle Sam last week) sells insurance and securities and pretty much any financial institution you set foot in nowadays has financial advisors on the ready to sell investments to you after you deposit your check and make your loan payment.

This is due to the fact that in 1999 the Glass-Stegall Act of 1933 was repealed and replaced with the Gramm-Leach-Bliley Act (GLBA), also known as the Financial Services Modernization Act. Sure, there had been several decades of debate about this before it finally passed...but, how interesting that an act designed to prevent the Great Depression from repeating was repealed and less than a decade later the system is failing.

I agree, it is in large part due to greed. And the fact that securities brokerages are able to leverage their dollars 30:1 in order to make profits. I don't think Vegas will give you those odds very often, and it's a pity our fiscal juggernauts are extended them on a daily basis.

Please be sure to write your Congressmen and express your opinion on the bailout. It is a huge pivotal point in our nation's history and should be motivated by what is best for John Q. Public, not the deep pockets on Wall Street.

If you don't know how to contact your Senator, please click this link: http://www.senate.gov/