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The Economic Hangover: Part Two

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And I get on my knees and pray, we won't be fooled again.
-- The Who

I hate to say I told you so. I am in a small subset of lifelong Democrats (I voted for Obama) who vehemently opposed the Wall Street bailouts since day one.

Being right doesn't change what is happening.

We are in an economic hangover. Part Two.

Just like in the movies, the sequel is usually worse than the original.

Looking forward from 2008, It was easy to see what would happen.

The bailout and stimulus money allowed us to limp along for a couple of years. Now we are back to where we started, but worse, since we borrowed trillions to pay for it.

The housing market is in worse shape than before the 2008 crash. Unemployment is bouncing along the 9% to 10% level and there is no quick solution for changing it.

Goldman Sachs and Wall Street firms given bailout money made big profits. They couldn't help it. It's like going to the casino where the house covers the losses and the gambler gets the gains.

America limped along like a person who uses their credit cards to pay for groceries and utilities. Now, we are maxing out the credit cards and have to start making hard decisions.

Those decisions would have been easier if we had weeded out the "too big to fail" companies with lousy management and had not spent trillions to push the problems down the road.

We propped up bad companies and allowed bad behavior to be rewarded with record bonuses. No one went to jail. Most of the worst actors didn't even lose their jobs.

So what do we do now?

Pete Mahurin, the Bowling Green Kentucky financial guru, featured in the Huffington Post piece, "The Person We Should Be Moving Our Money To," once told me that, "generals often fight the last war, instead of the current one. The same thing happens in the financial world."

I have thought about Pete's insight a lot and realized that Bernanke, Geithner and Obama often throw around references to the Great Depression.

They have the wrong era and wrong economic war.

Using the economic strategies of 1930 is like fighting in Iraq and Afghanistan using the trench warfare tactics of World War I.

Modern armies use the latest technology. So does the financial services business. The documentary Inside Job begins with how banking deregulation in Iceland had a worldwide impact on the economy.

The world being interconnected was not the case during the Great Depression.

The invention of derivatives and how a home mortgage from Main Street is split it into parts and sold on Wall Street are related to the advances we have made in technology.

I love technological tools. They allow me to obtain information quickly but it doesn't make me wiser.

We need to look at the future knowing that technology will continue to get better and play a bigger role in how we live. How does that help us and how does that hurt us?

Wisdom is needed in Washington. Someone needs to hear the voices of Main Street and not Wall Street.

Instead of talking about something that happened 80 years ago, we need to be looking at the 1990 "lost decade" in Japan and recent examples of how propping up bad businesses failed.

Harry Truman said that "the only thing new is the history you don't know." It would help if the people in Washington were reading the correct chapters.

If Bernanke and Obama were real students of American history, they would skip the Great Depression and go back to the Robber Baron era. That is a better analogy for what happened in 2008.

Teddy Roosevelt and other progressives saw the evils of big business running amuck and did a number of things to reign them in.

If Teddy Roosevelt were president, today, I don't see him giving billions in bailout money to Wall Street. I see him pushing real regulation and prosecuting the bad guys.

I could see Teddy appointing a regulator like Elizabeth Warren. It is ironic that Warren has generated strong opposition as she is the one person in Washington who understands how Main Street is taking it on the chin (or in other parts of the anatomy) and trying to do something about it.

I'm not counting on Obama's Justice Department for help. A Joe Nocera NYT column titled, "Biggest Fish Face Little Risk of Being Caught," says it all. None of the big players in the economic crisis are being prosecuted. The Justice Department is focusing its big guns on John Edwards' sex life instead.

Edwards, who unfortunately, I once backed for president, is a great tabloid story but won't impact how my children and grandchildren live. Wall Street does.

Wall Street took our money, laughed in our faces and is walking away scot free.

Running a "too big to fail" bank is far more profitable, and less risky, than robbing one.

As Arianna Huffington pointed out in her book Third World America, there are things the individual can do.

I live my life by the concepts of Move Your Money movement. My money is in local banks in my home state of Kentucky. I don't use credit cards or the ways for Wall Street to slap people with big fees and interest rates.

Simple steps can make a huge difference. It will really make a difference when big endowments and pension funds move their money away from Wall Street.

I feel like a bartender who told people to stop drinking but they kept doing it anyway. 2008 was the first Wall Street hangover and now we are going through the second.

I hope that with movements like Move Your Money and by making enough noise on Main Street to drown out Wall Street that we can avoid "The Economic Hangover Part Three."

Also, parts Four and Five.

Don McNay, CLU, ChFC, MSFS, CSSC of Richmond, Kentucky is the founder of McNay Settlement Group, a structured settlement consulting firm. He is the author of the book, Son of a Son of a Gambler: Winners, Losers and What to Do When You Win the Lottery.
He has appeared on the CBS Evening News With Katie Couric along with numerous other television and radio programs.
You can read more about Don at www.donmcnay.com or email him at don@donmcnay.com

McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.

McNay is a Quarter Century member of the Million Dollar Round Table and has four professional designations in the financial services field