The Golden Rule and Our Economic Crisis

WARNING! Serious blog topic ahead. Proceed with caution.

Every morning I catch the tail end of the AfterMidNite radio show hosted by Blair Garner. It is generally a country music show, but the last two days Blair has gotten on his soapbox a little bit about two issues that I wanted to share with you.

The first issue started with the Tuesday morning BrainBuster question which was: "Statistics show that only one in five men do this. What is it?" The answer to the question was give up their seat in. While Blair was shocked that the statistic was so low, Tim, the producer of the show that is frequently the butt of Blair's jokes and is occasionally heard laughing and commenting in the background, said he could understand why men wouldn't because these days many women will get offended if you offer her your seat or open a door for them because they feel it puts them in a subservient position. I agreed with Blair who thought that was a ridiculous reason to not do it. He went on to eventually say that it is an act of kindness and consideration and follows the golden rule. Whether they take it or not is up to them.

Blair's comment about the golden rule sparked another commentary session on this morning's show regarding the $700 billion bailout that lawmakers are trying to pass. Tim and Blair started out talking about how we, as Americans, have become a bit spoiled. We have had it so good for so long that we just want more and more and more. When money isn't readily available, we have ready access to credit cards and loans to get us all that we want right now. When we overextend ourselves, we declare bankruptcy and then start over. It is like a "get out of jail free" pass.

Corporations and banks have become exceedingly greedy these past few years. With the expanding housing market, financial decision-makers took advantage of the population's general financial awareness and engaged in subprime lending practices (the practice of giving loans to those who would not normally get them) and predatory lending practices (deliberately targeting borrowers who may not have fully understood the terms of their loan or lending to people who were never likely to afford the interest payments in the long-run). Many of these loans included exorbitant fees and hidden terms and conditions in the loans that translate to dollars for bankers.

Now that the housing bubble has burst, these practices among others have unleashed an economic crisis that is rippling through nearly every household in America and extending outward to countries around the world. And all this happens as corporate and bank executives take home multi-million dollar bonuses. Did you know that Alan H. Fishman, the newly-hired chief executive officer for Washington Mutual that was on the job less than three weeks before its crash, was given a $7.5 million signing bonus (which he gets to keep) and is eligible for $11.6 million in cash severence? At least Kerry Killinger, the previous WaMu CEO, turned down his $1.4 million bonus for 2007 due to the deteriorating situation of the bank. Fishman can walk away with up to $19.1 million for spending less than three weeks worth of his life guiding WaMu into bank failure. (I think WaMu customers got a raw deal on that one. I would have done it for only $1 million.)

I always wondered what the difference is between an executive that illegally takes millions of dollars and crashes the company like Enron and one that takes millions of dollars while legally crashing the company. They both make their decisions out of greed and self-interest. They both ultimately run their company into the ground. The only difference I can see is that one goes to jail while the other one doesn't.

The point is that all of this could be avoided if Corporate and Bank executives and even each of us, individually, followed the golden rule. How different would this be if the banks really considered the borrower and their long-term ability to pay back the loans rather than focus on the fees and the interest they would collect that would boost their annual bonus? How different would this be if they considered the long-term impact on the American economy if the housing market turned rather than expect it to be booming forever? How different would this be if we stopped throwing billions of dollars at the people who are trying to get the American people deeper and deeper in debt and actually used it to teach and help people to get out of debt?

The $700 billion bailout package that is being considered is like a "get out of jail free" card for the very people who have caused the financial crisis we are in. They get to keep their fancy houses and summer homes, their flashy sports cars and their millions of dollars they have collected creating this mess; they get to keep the job that they failed to do right! And the majority of the American people that are suffering because they got greedy get the tax bill that is going to result because of this.

I don't know about you, but I prefer to get what I pay for. Did you know that if you applied the $700 billion to every existing mortgage on the books today, you would pay down over $20,000 on each and every one? If you took every mortgage under $75,000 that is currently on the books (my mortgage does not fall into that category) that $700 billion would pay them all off completely!

I would prefer not to spend the $700 billion at all and follow a better plan to work our way out of this. Dave Ramsey has an opinion on how we can fix this without putting our nation deeper in debt. See Dave's 3 Steps to Change the Nation's Future and read all of it, including The Common Sense Fix proposal.

Now I did mention that each of us need to follow the golden rule as well. Do you have any idea how much smaller our nation's deficit would be if none of us cheated on our taxes? Do you have any idea how much different your children's lives would be if you set the example of living within your means, paying off your debts and avoiding bankruptcy by any and all means possible? I am sure there are other examples to apply the golden rule to and it is definitely something worth thinking about.

There is no doubt that financial hard times lay ahead for our nation, but if we use the golden rule as a guideline and look at the long-term effects of our decisions rather than settle for band-aid solutions that will fail to stick in the long run, we can weather the storm and make things better all around.