November 16, 2007 – Making Money the Old Fashioned Way

I travel rather seamlessly between two disparate worlds - my job in the mortage technology group of Wells Fargo and the farm.  Mortgage finance is now a pertinent and unfolding story.  I marvel how much better rewarded (financially) mortgage finance work is than farming.  This week the Wells Fargo CEO came out and said it was the worst housing crisis since the great depression.  He was roundly criticized by some for not following the finance party line, which is trying to reassure people that everything is all right and keep on spending.  To his credit, Wells Fargo is one of the few companies that did not fall prey to the easy, if suspect, moneymaking financing schemes that have/are crashing down.  That’s not to say that something won’t come out later, but to this point, the company’s conservative finance position has allowed it to keep making profits, even in these times when other banks are reporting losses of BILLIONS of dollars.

Lately, I’ve been thinking about the old Smith-Barney slogan “We make money the old-fashioned way, we earn it.” It’s ironic that the company that used to be Smith-Barney has been merged into Citicorp, one of the biggest losers in the latest meltdown.  It makes me think about the notion that you can get something for nothing that has infected American society.  People who have bought houses and expected their value go up tens, if not hundreds of thousands of dollars in the span of a few years without doing anything. People who have structured the mortgage loans in new and possibly illegal ways (perhaps only still legal because the law always takes a long time to catch up with crooks in suits).  There have even been cases where people who had their houses recently foreclosed asked a simple question at the foreclosure hearing -Who owns my mortgage – prove it.  Since some people thought to ask that question, 14 homeowners in foreclosure had to have proceedings halted because the “owner” could not produce the mortgage deed showing the finance company’s stake in the loan.  The loans have been sliced and diced so many ways and co-mingled with other loans to make them look legitimate that the trail is broken. Â  Likewise, I’ve come across reports of the same mortgage that was sold to multiple investors.

Hang with me, we’ll get back to the farm.  So what has happened to a country that rewards fund managers to play with numbers on a computer get million-dollar salaries, while others who produce the things necessary for life – farmers, electricians, carpenters, cheesemakers, teachers, and meatcutters are near the bottom of the economic scale?  I don’t have any answers, but I do know a sustainable society cannot indefinitely exist on paper gains only and ever-expanding profits for people that don’t “do” anything.  That’s not to say the finance and providers of capital are not necessary – they are, but the only sustainable way is to invest in enterprises with real worth.  Finance used to exist to help real things happen, now, too often it is an end to itself, with no connection to production of goods or services.  Futures markets are just one such thing – people trading pieces of paper for the future value of commodities – like corn or petroleum future traders.

So I wonder, will there be a time in the future that the work of those that produce real goods and services be rewarded for the importance of their work to society instead of their value to some mysterious financial market?  What do you think?  Will sustainable jobs ever be rewarded?  Will a time come when making money the old-fashioned way – earning it, will come back into fashion?

one year ago…