Forgive the clich?, but we have seen the enemy and he is us. Doug Dachille, writing in the Wall Street Journal, echoes my column this month in Boomer Market Advisor. Paulson’s bailout plan has so many problems it’s tough to know where to begin. Chief among them is the fiduciary responsibility that companies owe investors. Despite the demonization of the mortgage industry, most holders of debt are not investment banks, but rather your clients through their retirement accounts. Freezing interest rates violates the contract they freely entered into, expecting the maximum return for the given level of risk. As Dachille writes:
The retired schoolteacher who invested in a bond fund for retirement income did not intend to participate in reckless subprime lending transactions.