The Bank Bailout is Taking Your Rights (again)!

One of the major contributing factors to the current bank crisis has been traced to the deregulation of that industry, and the “all things to all people” approach many financial institutions took on as a result. While this new format promised convenience for investors, many firms took advantage of their ability to offer multiple lines of financial services to manipulate and obscure the true value of their assets through the off-book, non-public exchange of financial products between corporate divisions and between financial institutions.

Investors were kept in the dark about many of these deals, which were often buried in corporate reports and incomprehensible to auditors. At the same time, mutual fund investing and third party money manager programs were aggressively promoted by those same financial institutions, further removing the investor from their ability to apply oversight and exert influence on individual investments, relegating them to a passive role.

A key tenet of 100-Mile Investing is personal responsibility. Clients are encouraged to become more informed by investing in locally based companies, to attend annual meetings, read corporate literature, and make their voices heard through proxy votes and shareholder resolutions. In the end, this approach will not only help investors understand why companies perform the way they do, and allow them to have anticipate movement in the market, but to effect change when necessary.

I have taken issue with the recent bank bailout, not just because, as Ralph Nader put it, we’re getting “socialism without the benefits” like universal healthcare or secure retirement. This new move by George Bush and the U.S. Treasury Department - direct investment in the stock of banks to prop up their values - effectively puts your money at significant risk for loss while taking away your voice in how those companies are run, limits your ability to perform any due diligence before your money is invested, and prevents you from deciding when to get out. We can’t even charge the government interest for the loan.

At least investors had a choice before in being passive, and could choose to self-direct their investments. Now we’re all being relegated to the role of silent partner.

While past performance is not an indicator of future results, the performance of politicians in systematically taking our fundamental rights as shareholders has been nothing but consistent, and does not bode well for the future of the individual within our financial system.