Robert Stein 1924-2014

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If anyone has comments, questions or condolences, please feel free to send a private message to the family at robertstein@optonline.net.

Tuesday, May 12, 2009

Prudence Doesn't Pay--Much

Under all the boom-and-bust news, old-fashioned American caution and thrift still exist, but the exemplars of those virtues are not being rewarded for them.

Smaller banks across the country complain they are being tarred by stress-test results of the Citicorpses and Bank of Americas that are soaking up bailout money after turning the old-fashioned business of savings, checking accounts and loans into high-stakes gambling.

“Banking should not be exciting,” says a small-town Indiana banker. “If banking gets exciting, there is something wrong with it.”

Depositors are suffering, too. Those who have saved enough to take out certificates of deposit now find one-year rates barely averaging 1 percent as worried banks see their FDIC insurance premiums soaring to cover the cost of sobering up institutions that went on drunken-sailor sprees.

Meanwhile, back on Wall Street, buoyed by recent market gains, the fast-buck boys are starting their spiels again, a recurrence of euphoria alarming enough to turn the usually cheerful Arianna Huffington into Cassandra.

Prompted to caution by, of all people, Eliot Spitzer, Ms. Huffington recalls John Kenneth Galbraith's warnings about "the pathological weakness of the financial memory" and a "mass escape from reality" in America's past.

Prudence is getting a lot of press these days, but those who practice it aren't getting much else.

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