The level of public, political, and press ignorance about matters financial is truly staggering.
The Boston Herald for Monday, August 11, carried the story, “Morgan Stanley to Be Hit Again.” Massachusetts Secretary of State William Galvin, the story said, has filed a $1 million suit against the brokerage firm for — get this — giving their sales reps extra commissions for selling their own branded mutual funds, as opposed to mutual funds the company does not own. Supposedly, Morgan Stanley did this in secret. Uh-huh. A secret incentive. That’ll work a treat.
Now, even allowing that State Attorneys General in Eastern Democratic states are vicious grandstanders, this beggars belief. Yes, Egbert, all financial products are sold. (Except in Massachusetts, where regulation has virtually eliminated national insurance carriers. New Jersey follows not far behind.) And yes, salesmen get incentives for selling a company’s products.
Try driving into a Mobil station and asking for a tank of cut-rate Haffner’s gas. Try buying a Ford at a Chevy dealer. It’s the same deal. This may possibly escape the notice of some consumers. The NASD is currently working on a footnote to disclose the practice among mutual fund companies. Man, that had me worried. I’ve written those incentive programs in my role as corporate communications whiz. I’d hate to have Galvin after me.
Of course, I’ve got shallow pockets, and suing Larry Henry wouldn’t make many headlines.
The week before, the Lawrence Eagle-Tribune carried an indignant story about “predatory” lenders. The story cited the pitiful example of a Lawrence woman who had borrowed $44,000 from Household Finance Corporation to buy a home. HFC is indeed a “sub-prime” lender, a company that lends money at higher than bank rates to people somewhat less credit-worthy than bank loan customers. But HFC are hardly loan sharks.
The story recounted how the woman had been paying almost $400 a month on her loan for three years. In that time — gasp! horror! — her principle had been reduced by only slightly more than $500.
Did anyone at the Eagle-Trib (ordinarily a good paper) think to do a spreadsheet on a 20-, 25-, or 30-year loan? Or to plug the words “mortgage calculator” into Google? No matter what the interest rate, in the first years of a long-term loan, payments work that way.
Did an editor suggest that, after all, the woman had a house, and that her mortgage payments were nearly 100 percent tax deductible?
Nah. Can’t do that. It gets in the way of a good scare story.
Finally, last year’s Booga-Booga Award winner: Beth Healy, the business columnist for the Globe whom everybody reads, wrote without question a column based on a complaint by a Harvard student “activist” (a term which should always be placed in quotes). The “activist” whined that Harvard’s endowment had owned shares in Enron (gulp!), and that the fund had shorted a large position in those shares before Enron’s share price collapse. “Shorting” means they borrowed Enron shares and then sold them, betting that the price would go down and that the shares could be re-purchased at the lower price, then returned to the lender, thus making the borrower money.
The “activist” did not understand, as Beth Healey surely must have, that Jack Meyer, the head of Harvard’s endowment, did not make that decision. Some money manager Meyer had hired long before made that decision, and, what’s more, it was a good one. Endowments are supposed to make money. That’s how Universities stay open. That’s how “activists” get to stay in universities.
“Beth ought to have been ashamed of herself for printing a piece of crap like that,” one investment pro of my acquaintance practically spit.
Shame does not register, of course, on crusading Attorneys General or Senators hopped up on mainline shots of righteous indignation or on hard-pressed reporters, especially not television reporters. But neither does ignorance, and that’s the real shame here.
Brokerage sales incentives, mortgage interest payment schedules, and short selling do not rank with the really knotty concepts in the world of ideas. Anybody can understand them. Yet their blatant misrepresentation makes hay for politicians. Those lies — no other word for it — get reported without question (or without what they do deserve, a braying guffaw) in the press. Those tall tales gain currency in the public sphere.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?