In an attempt to reassure the youth of Everytown that the elected leaders had a plan that would give them a hope for their future, a town-hall meeting was arranged at Everytown High School.   After the speeches…


In an attempt to reassure the youth of Everytown that the elected leaders had a plan that would give them a hope for their future, a town-hall meeting was arranged at Everytown High School.   After the speeches…
Senior:  Can I ask about something?  My teachers say the ultimate goal of every business is to “maximize shareholder wealth.”   Is that right?
Official #1:  Right.  You must be a good student.
Senior:  I am a little confused.  My teachers also say that risk and return are always positively correlated.  If you want higher returns, you have to take greater risks. Is that right?
Official #1:  Uh, yeah.  I think that is also a well established principle. 
Junior:  My grandfather says that “in the day” — he always uses that phrase — the savings rate in America was much higher.  He says people stopped saving and started investing.  But investing got complicated if you wanted the highest returns, so they turned things over to professionals. He said professionals were trained to believe that their job was to get the highest return possible, and if they didn’t they would lose business. That meant taking more risks.  His says the savings rate in America today is just about zero and almost everyone is living at least a little beyond their means.
Senior:  My grandfather says the same thing.  Sir,  can I ask about the rescue we have been hearing about.  I heard a number I thought was just imaginary — over a trillion dollars?  Where do they get that kind of money, anyway?
Official #1:  Government gets money from taxpayers.
Junior:  So my family is paying for this trillion dollar rescue plan?  My dad says our family net worth lost 30 percent in the last few months. We are cutting back on everything to try to save enough to get it back up to a safer level.  We don’t have any extra.  How are we going to pay higher  taxes?
Official #2:  Don’t worry.  Your family may not pay more taxes.  You may even see a tax reduction.  The government may even send your family a check.
Senior:  I just don’t get it.  Does the government have a ton of money in Fort Knox or something?  I thought the government was running a deficit.
Official #1:  Yes, well, maybe the government will borrow some of the money.
Senior:  How will it pay it back?
Official #3:  OK, this is the genius of the rescue plan.  Wherever the government gets the trillion dollars, the plan is to invest it.  Tax payers will be investors and get everything back eventually.
Senior:  Invest it?  Where?
Official #1:  Well, in sub-prime mortgages and companies like AIG, Fannie Mae and Freddie Mac.
Junior:  But I thought sub-prime loans were worthless and aren’t those companies bankrupt? 
Official #2:  Its complicated.  Don’t worry, the taxpayer may even get a profit.
Junior:   So, My dad will actually get a check?
Official #3:  Well, not exactly. 
Senior:  So, if we don’t actually get a check, what happens to all this so-called return on our investment?  Who gets the money?
Official #3:  Well, I see our time is just about up.  I hope our coming here has helped to answer some of your questions and assure you that your future is in good hands. 
Junior to Senior:  This so-called rescue stinks. 
Senior:  No one in their right mind would give money to a mutual fund manager with that plan.  You know who is going to get stuck with this bill, don’t you?
Junior:  Yeah.