The Relentless March of the Financially Clueless

September 24, 2008 by  
Filed under Debt and Credit, Money and Behavior

Congress Plays the Blame Game

As expected, Congress is fully engaged in grandstanding and pontificating over the Paulson/Bernanke bailout plan.  Public statements from congressional hearings serve as a catalyst for continued volatility in the markets.  The Democrats countered Paulson’s three-page bill with a forty-page bill of their own.  “OK Mr. Paulson, I’ll see your $700 billion and raise you another $300 billion!” 

In search of solace, Mr. ToughMoneyLove resumed his daily tour of personal finance blogs and financial news outlets.  In so doing, I came across some outstanding comments left by Ron from The Wisdom Journal blog to a post at My Two Dollars.  One of the reasons that I enjoyed Ron’s comments was that he agreed that Congress and the White House are collectively responsible for the current crisis because of their unreasonable insistence that mortgage loans be made available to unqualified borrowers.  Ron’s comments includes past quotes from members of Congress, demanding that more be done to move the financially weak into home ownership status.  They got what they wanted.  But they won’t blame themselves for the results. 

Germany Knows Better than to March with Us

The German government has already dismissed attempts by Washington to get the Germans involved in purchasing mortgage backed securities from troubled U.S. investment banks.  Who can complain when the Germans are saying what many U.S. taxpayers are thinking? 

State Politicians Join In

Apparently, some state level politicians were envious of all of the attention being given to our national leaders.  I found this report from Investment News  particularly discouraging: 

Massachusetts Secretary of the Commonwealth William F. Galvin today called on Congress to temporarily suspend the 10% penalty tax on early withdrawals from 401(k)s. 

Yes, folks, when all looks lost in desperate government attempts to solve a national economic crisis, financial genius Mr. Galvin thinks we should remove one of the few effective barriers to premature employee raids on retirement funds.  Maybe Mr. Galvin believes that his public demonstration of poor judgment will earn him votes from broke constituents eagerly looking for just one more spending binge.  When credit limits are maxed out, that 401k money is quite appealing. 

Many American Consumers Remain Oblivious 

Meanwhile, over at the excellent Simple Dollar blog, Trent wrote about a college freshman who posed the following question: 

I know I need to build up some good credit for the future, when I have to get a car loan and such, but I don’t know where to start. I’m worried about getting way into debt like some people I know.

I left a comment pointing out how sad it was that this young adult had apparently resigned herself to a lifetime of credit usage, including having a car loan.  Instead of worrying about how to establish a credit history, I recommended that she use some college classroom time learning economics and personal finance.  All of the other comments completely ignored this option and remained focused on what kind of credit card would be best for a college freshman.  Credit crisis?  What credit crisis?  We must recruit more soldiers to march in our long green line of credit score obsession

It seems that there is a never ending supply of those who are financially clueless.  They push on, undaunted by the mountain of terrible economic news around them.  The problem is, there are lots of them and they vote too.  Will Congress get in their way?  If history guides us, I think not.  Indeed, Congress marches with them.

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5 Responses to “The Relentless March of the Financially Clueless”
  1. goldenrail says:

    I worked in the collections department of a bank for a few years and it amazed me how people could be several months behind on their mortgage (and 2nd mortgage) and just tell me they’d pay it from their revolving line of credit (usually also “secured” by the house). Even worse, some people would get upset that we wouldn’t accept credit cards as a form of payment for past due loans!

  2. Doctor S says:

    Great point! It is so envident that the youthful generations (myself included) are so dependent on living on credit or some sort of loan. More emphasis needs to be put on the consequences a person faces when getting in too deep with this situation. It needs to be stressed even before they step foot on college’s across the US because how much do they realllllly learn when they go to college? Great point.

  3. @Goldenrail – too bad that you weren’t allowed to send them to a personal finance class as a bank giveaway.

    @Doctor S – I have told my last son (still in college) that he needs to take a personal finance class and he will.

  4. Wow, an attempt to remove the 401k early withdrawal penalties as a response to an economic downturn? That boggles even my free-spending mind.

    The most notably clueless lines I have heard lately have been people pulling their money out of the market completely because of recent declines. It’s probably the least logical, least efficient response a person could have. My attempts to point this out are met with cries of “You’re crazy! I’ve already lost $xxx!” Yup, and you just ensured that your loss will stay that way. The march continues…

  5. MGL: To be honest, I am afraid the people like you and I are talking about are going to be scared into becoming hard-boiled socialists.

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