Confidence in our Financial System is Not What We Need

The recession and gazillion dollar bailouts have provoked a whole slew of articles about the loss of confidence in our financial system.

Frank Rich says that the "wholesale loss of confidence is a catastrophe that not even the new president’s most costly New Deal can set right." Treasury Secretary Henry Paulson said in his October 14th statement justifying the bailout that "there is a lack of confidence in our financial system – a lack of confidence that must be conquered because it poses an enormous threat to our economy."

The Bernie Madoff scandal has now set off a whole new slew of articles about the lack of confidence in Wall Street - articles like Bernie Madoff, Confidence Destroyer and Madoff Scam Saps Confidence in Wall Street. But nobody seems to be questioning the underlying premise that we should have confidence in these people. Isn't too much confidence exactly what got us into this mess?

When I began my current employment, I dutifully filled out my 401k investment form. I glanced at the prospectuses for the funds I chose, but I didn't know the companies that I was investing in. I never met the person who was responsible for investing my funds. I don't read and investigate the claims of the companies in which my money is invested. I don't know how they treat their employees or if they are dumping mercury in a lake somewhere. How many of us know?

Should we be handing over our money to people we don't know to invest in organizations we know nothing about? Should we trust fallible humans with the power and temptation of dealing with billions of dollars? Power corrupts. Nobody is immune. And money buys a lot of power.

What I'm really saying is, shouldn't we have seen this coming? Is it confidence that we need to cultivate or some healthy skepticism?