Failure This Big Wasn't Born Yesterday

Failure This Big Wasn't Born Yesterday

By Michelle Singletary, WP | 5 October 2008

If you're mad as hell about what's happening to our economy and need to stay mad to keep from wailing, read the October selection for the Color of Money Book Club. Two years ago, Gary Weiss wrote "Wall Street Versus America: The Rampant Greed and Dishonesty That Imperil Your Investments." The subtitle was changed for the paperback edition last year. Now the book is called "Wall Street Versus America: A Muckraking Look at the Thieves, Fakers, and Charlatans Who Are Ripping You Off" (Portfolio, $14.95).

I like the revision, given current events.

I'll be truthful with you. I've picked this book up a few times since it was first published, wondering whether I should recommend it. But I hesitated. Weiss, a former BusinessWeek investigative reporter, often lapses into market minutiae. So I wasn't sure the average investor would take the time to read his scathing indictment of greed-driven Wall Street.

But now I'm betting you'll find this book quite interesting after the Dow's plunge of 778 points and after watching our elected officials ram through a debt-laden Wall Street bailout bill. Weiss, who was just signed as a contributing editor for Conde Nast's Portfolio business magazine, said he wrote the book for the average investor. "Wall Street's yen for your wallet afflicts with equal rapacity Republican and Democrat, liberal and conservative, Arab and Jew, anti— and pro-abortion, rich and middle class, and even a lot of people who think they're too poor to care," Weiss writes.

"It doesn't matter if you view yourself as an investor or not. It doesn't matter whether you love or hate Wall Street or whether you own any stocks or bonds or money market funds. Chances are, Wall Street is a part of your life whether you like it or not, even if you keep your money in a passbook savings account or a tin box in the backyard." Weiss's prophetic rant against Wall Street is eerie given what we've seen lately. He lambasted brokers who pushed microcap stocks— low-priced stocks issued by the smallest of companies— on novice investors. He railed against the high fees charged by mutual fund companies. He writes with rage about the inadequate oversight of Wall Street.

With every page, I seethed at the case Weiss builds against typical Wall Street practices and the regulators that let them get away with so much. For example, you must read the chapter "Bear in the Woods" on the investment bank Bear Stearns. It's chilling. "The rest of the world has Mother Teresa; Wall Street has Bear Stearns," Weiss wrote commenting on the company being dubbed in 2005— for the second time in three years— 'America's most admired securities company'.

No longer.

Bear Stearns collapsed in March and was taken over by J.P. Morgan Chase. Bear Stearns, founded in 1923, had been the country's fifth-largest investment bank. "Anyone can make money doing things that are nice and decent and safe," Weiss pointed out two years before the Bear Stearns failure. "But it takes a gutsy firm, an envelope-pushing firm, to make money doing things that aren't so nice and aren't so decent or safe." At least there is justice. The company was sold for a song, at $2 a share.

This book reads at times like a novel complete with a cast of dastardly characters. It starts out and ultimately ends with the arbitration case of Rand Groves, an individual investor from New Jersey, who tried but failed to win a case against Merrill Lynch after he lost $5 million that had been tied up in stock options in two Internet stocks. He had gone to Merrill Lynch because he was concerned about having so much money— on paper at least— in just two stocks. Groves complained that Merrill Lynch did not provide the expert investing advice it promised. The company denied any wrongdoing. He lost, of course.

As Rand Groves and thousands of other people have learned, investors in trouble have no friends, Weiss wrote. But you do have a friend in Weiss. He's the type of friend who pumps you up when you're down. He's the friend that tells you not to take being pushed around. "The answer to the market's woes is you," Weiss says. The solution is literally you— your investment choices, your actions, and, above all, all the things that you shouldn't do.

I've been getting e-mails from people across the country worried about the losses in their investment portfolios. But what strikes me as naive is that many of these people never considered that they could suffer great losses. That means they're uninformed [[if not deliberately mis-informed: normxxx]]. No question there's more in this book than you may want to know. But there's just too much you need to know not to pick it up.


Bailout Bushwhack
Thursday, October 2, 2008

I don't know about you, but I'm still not convinced that the bailout bill that is being forced upon taxpayers is going to curb the economic crisis enough to be worth the $700 billion in debt that may be needed to implement it. This bill, now passed by the Senate, brings to mind the now iconic Wendy's commercial with the tagline: "Where's the beef?" If you've got friends or co-workers or family members claiming you're the fool for not supporting this bailout plan, ask them if they've seen this classic Wendy's commercial that, for me, sums up the lack of details on how this bailout will actually work. Lots of fluffy bun, no beef!

I'm certainly not alone in my skepticism. Last week, I asked readers whether or not the bailout was a good idea. Most of you who responded indicated you were against it.

Do You Get It? Post Business columnist Steven Pearlstein says we don't get it. In his column They Just Don't Get It (Sept. 30), he says that America's now stagnant economic growth "threatens to bring down the global financial system." My colleague says the only way to overcome this current crisis is to "have governments all around the world borrow gobs of money and effectively nationalize large swaths of the financial system so it can be restructured, recapitalized, reformed and returned to private ownership once the crisis has passed and the economy has gotten back on its feet." And just who will be left holding all that debt?

Or perhaps we just need to trust that our elected officials and federal regulators know what needs to be done now after they've led us into this financial catastrophe. Well, many Americans aren't buying it. In Fear and Distrust Run High (Sept. 30), Post staffers Joel Achenbach and Ashley Surdin write the "Emergency Economic Stabilization Act of 2008 in the end was a $700 billion piece of legislation that few people could truly love, and it offered citizens from across the ideological spectrum a little something to hate." This is an interesting read showing that, in fact, we DO get it. We're just not sure "it"— the bailout— will work.

What Does This Economic Crisis Mean For You? Americans all over the country have been submitting their economic questions to the Post. Some are worried about their mortgages; others are concerned about the bailout and their savings and investments. We've answered a number of questions from readers in a series entitled Q&A: The Crisis and Your Pocketbook.

Have a question that hasn't been answered? Send it to us.

Personal finance reporter Nancy Trejos wanted to tell the stories of these fretful readers. Read about how this crisis is affecting some of them in The Financial Crisis and You (Sept. 28).

One woman, Cynthia Shank is worried about her individual retirement account. "I'm afraid to look," she says. In the last nine months, her IRA has dropped by roughly $100,000. The fifty-one-year-old single woman is already struggling to make ends meet with a mortgage, $16,000 worth of credit debt and a student loan that will be due soon. Shank wrote to the Post asking how she could rebuild her retirement savings. Trejos responded with expert advice for her and others.

The Great Depression Guru

Does it comfort you to know that Ben Bernanke, chairman of the Federal Reserve Board, is an expert on the Great Depression? Post columnist Richard Cohen is comforted. Read Topical Depression (Sept. 30) to find out why. [[But his 'superior' knowledge of the Great Depression and what led up to it certainly didn't help him keep us out of that pit!: normxxx]]

Bank Failures

I've been getting e-mails from people worried whether or not their deposits are safe. I understand the fear but it's unnecessary if you stay below the FDIC deposit limits, which may be increased if the bailout bill is ultimately passed into law. When Washington Mutual was taken over by the FDIC and then sold to JP Morgan Chase, nothing really changed for customers says Kiplinger's contributing editor Kimberly Lankford.

• Lankford has an account at the bank and she says "Nobody lost any money on deposits at Washington Mutual" even if they had more than the FDIC insured amount in the bank. Here are some details about what the acquisition means for Washington Mutual customers:


• Use of ATM cards, checks, debit and credit cards, online services and branches continues.


• Direct deposit and automated payments are still the same.


• WaMu customers should continue to send their credit card and loan payments to the same place.


• Loan terms are now governed by contract, but will remain the same.

For more information, read What the WaMu Collapse Means for Its Customers (Sept. 30).

Many people are now worried that their bank will fail. So how do you choose the right bank or credit union? Ask the Experts has the answers:

• Steven E. Richardson, Partner with Potomac Financial Private Client Group in Fairfax


• Annette Simon, Principal at Garnet Group in Bethesda


• Terence E. Burns, President and founder of Campion Wealth Management in Vienna

To become a member of the Color of Money Book Club, all you have to do is read the recommended book. I invite you to join me online to chat about the book. Join me for a live discussion with Weiss at noon Eastern time, October 23 at http://www.washingtonpost.com.

In addition, every month I randomly select readers to receive a copy of the book, donated by the publisher. For a chance to win a copy of "Wall Street Versus America," send an e-mail to colorofmoney@washpost.com. Please include your name and an address so we can send you a book if you win.

• On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and at http://www.npr.org.


• By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.


• By e-mail:singletarym@washpost.com.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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Normxxx    
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