Palin's Wardrobe Malfunction

Let's see, the housing market is near collapse, the Treasury Department is spending billions of dollars to bail out corporate America and the stock market is at historic lows.

And yet I received the most reader responses in the history of this e-letter when I poked fun at the news that the Republican National Committee had spent $150,000 in less than two months to outfit Alaska Governor and vice presidential hopeful Sarah Palin.

I asked people what they thought of the Palin clothing flack. To my dismay, what I got were personal attacks that included profanity in some cases. One reader even suggested that I should be damned by God. As if God has nothing better to do than damn me to hell for criticizing the wardrobe expenditures for Palin. Some readers, including a college professor, declared they would never read the e-letter or the Post again, a paper that runs commentary from all political sides.

All of this hate because I did my job, which is to provide commentary on money issues. I'm a columnist, people. Columnist. And I write about anything related to finance, including the politics of money, which is playing a huge role in many of our lives right now.

The Palin wardrobe story was news because she said she's a fiscal conservative. She made a point of highlighting how she got rid of expensive services as governor of Alaska. Other candiates -- Republican and Democrat -- have spent more then I would on clothes, hair cuts and makeup -- but Palin made this an issue because she boldly declared herself a penny pincher.

Do you know any frugal people who would allow someone to outfit them in clothes that cost more than their annual salary? I certainly don't. I have my own television show and a stylist provided by the network. I gave my stylist instructions not to purchase expensive clothes because they wouldn't befit my frugal beliefs. Even when you are being dressed by someone else, you have control over what you put on.

Following all the fuss, Palin said she was back to wearing her own consignment shop frocks. Good for her.

I know this is a tight election, and it comes at a terrible time in our economy so tempers are hot, but that doesn't mean you should lose your civility.

The point of this e-letter is to highlight money stories and columns from all perspectives. I was hoping this story would bring some levity during a pretty scary time. In the whole scheme of things, this issue didn't make me want to cuss. I had hoped for a decent, light-hearted debate. Instead, the overwhelming response was just nasty. Funny how when people are vicious they don't leave their names.

Here are the comments from folks who kept their cool and argued their points respectfully:

Alison Preston of Lexington, Ky., says, "I must say I'm a little disappointed in the Palin clothing article. I don't see anyone monitoring the cost of John McCain, Barack Obama or Joe Biden's suits. I can guarantee you this, they are not cheap. If this was not a woman's wardrobe, no one would be looking at it."

Linda J. Higgins of Jackson, Tenn., wrote: "If McCain says that Sarah Palin's professional clothes will be donated to a charity after the election, he must think that she won't be elected Vice President, right?"

Earl Roethke from Curitiba, Brazil says, "I think this was another wonderful gift from the Republican Party to the Democrats. It reminds me of Richard Nixon running the A.C. in the White House during the energy crises so he could feel cozy in front of the fireplace. Leaders need to understand the symbolism of their actions."

"You dress for the job you want, not the job you have," wrote C.M. McGuire of Decatur, Ala. "Sounds like the Republican party wanted her to dress for the part and was willing to pay for it. Doesn't sound all that crazy or irrational to me."

Anna Bradley from Ohio wrote: "I personally have no problem with money being spent to dress the VP candidate and her family. How many of us Americans 'run out' to buy a new outfit for a party, funeral, or other special event?"

"I could live for five years on what she spent on a few outfits and some makeup and hair work," said John Kenyon of Silver Spring, Md. "Clearly what this tells me is that Gov. Palin has no idea what the 'real' America looks like, what we value, how we dress, or what we look for in a leader in terms of judgment, priorities, etc."

That, my friends, is how properly raised adults have a decent discussion. And, for the record, the comment period on this issue is now closed.

Greenspan's Mea Culpa

It's definitely too late, but at least former Federal Reserve Chairman Alan Greenspan is willing to admit he was wrong to think lenders would act responsibly.

Greenspan, once considered an "economic oracle," is now being criticized for not better regulating lenders.

During a recent congressional hearing, Greenspan said he has been shocked by this "once in a century, credit tsunami" and that it's shaken his very understanding of how markets work.

He's shaken?

For more on Greenspan's reflections read Neil Irwin and Amit R. Paley's Greenspan Says He Was Wrong On Regulation (Oct. 24).

Check out the video feed of Greenspan's remarks and read how his comments in 2004 and 2005 were markedly different.

Feeling down about the economy? According to Travis Fox, you're not alone. The waning economy has become the prevailing issue for most Americans. See how the average Joe is faring in Hard Times, a video diary of Fox's travels across the U.S. and his conversations with ordinary Americans.

Who's At Fault?

Greenspan wasn't the only one who faced the Congressional firing squad last week.

At last week's congressional hearings, the heads of three major credit-rating firms were questioned about their involvement in the financial crisis. The credit raters allegedly allowed corporate greed to eclipse their responsibility to perform impartial appraisals of companies for investors.

Confidential documents surfaced showing that these firms knew the risks of their actions. In a memo to the board, Moody's chief executive Raymond W. McDaniel wrote, "We drink the kool-aid...Unchecked, competition on this basis can place the entire financial system at risk."

Read Amit R. Paley's Credit-Rating Firms Grilled Over Conflicts (Oct. 23) for more.

The CBS news show 60 Minutes did an amazing job of explaining one of the real culprits in this crisis, credit default swaps, in The Bet That Blew Up Wall Street with host Steve Kroft.

University of San Diego law professor Frank Partnoy explains it this way: "A derivative is a financial instrument whose value is based on something else. It's basically a side bet." It's like when a football team takes the field; the owners and players have a direct investment in how well the game goes. But some of the people in the stands may also have a financial stake in the outcome of the game, like a side bet with a bookie or a friend.

Partnoy says, "the new bet that arose over the last several years is a bet based on whether people will default on their mortgages," reports Kroft. That was the bet that caused the Wall Street turmoil.

Retiring Cents

In last Sunday's column, I discuss the rickety financial conditions of Social Security and the need for an improved system that doesn't include privatization as proposed by the Bush administration.

Many of you had comments. Some of you agreed with me:

Linda Wisher of Boise, Idaho says, "I agree changes need to be made to the social security system but privatization is not the answer. I just retired this April, but I have another two years to go to Social Security. I am one of the lucky ones and have a pension besides 401(k) investments."

Jaime del Pino of Georgia wrote: "I am 71 years old, retired and in poor health. I used to support Bush's [Social Security] privatizing plan but, of course, have changed my mind. I believe the better choice is still government administered Social Security."

Others disagreed:

Mark Beatty in Westford, Mass., says, "It should be seen as a historic mistake, and political cowardice for Congress to have resisted Bush's efforts to address what is obviously a strained and nearly broken system."

Chad Thyes of Alexandria, Va., wrote: "Social Security, in the form it was originally passed, was not intended, as you seem to subscribe, as a 'third-leg' to our retirement savings. It was intended to be a measure of last resort. Today, our Social Security system has become a de facto pension and a way for people to ignore the requirement and responsibility to save for their retirement."

Upside of The Meltdown

There are some good things about the meltdown. Kiplinger Personal Finance editors point out 10 Things That Are Going Right (Oct. 20) these days. Here are a few:

* Gas prices and interest rates are dropping.

* Carmakers are rapidly manufacturing hybrid and alternative fuel autos. In the meantime, Toyota is offering 0% financing and $1,000 cash back on new models.

* Your bank accounts are safer. The FDIC has raised insurance on individual accounts from $100,000 to $250,000.

They Aren't Bailing

With all this talk of foreclosure, one group is being overlooked -- those homeowners who owe much more than their homes are worth, but keep paying their mortgages anyway.

Real Estate columnist Elizabeth Razzi identifies this group as "the walking wounded" and discusses how the declining value of their homes has affected their lives in Upside Down on Their Homes but on Top of Their Debts (Oct. 26).

You Asked

Last week, I hosted a chat with Gary Weiss, author of "Wall Street Versus America," this month's Color of Money Book Club selection. As usual, I didn't have time to get to all of your questions. So here are some leftovers. Even Mr. Weiss took the time to answer a few lingering questions.

Q: I'm somewhat befuddled by all the acronyms. Would you please define ETF, DIA, TDV?

Weiss: Sorry for the confusion! ETF is an exchange traded fund, basically a stock that incorporates a portfolio of stocks, usually to replicate a stock index. DIA is the stock symbol for a stock that replicates the Dow Jones Industrial Average. TDV is more specialized. It is a portfolio of stocks and bonds aimed at people who plan to retire in 2040. That is known as a "target date fund."

Q: Is it better to invest in mutual funds rather than the index stocks themselves?

Weiss: I personally favor a certain type of mutual fund that invests in the index stocks, known as an "index fund." These replicate the stock indexes at a low cost to the investor. Or you can buy an ETF, such as DIA (replicating the Dow) or SPY (replicating the S&P 500). The nice thing about index funds and ETFs is that you do as well or as poorly as the market, without a money manager getting rich by "actively managing" the money -- and usually not doing a very good job.

Q: I read that, during the last bull market, 75 percent of mutual funds could not beat the S&P 500. If this is true then I feel like I am trapped within my 401(k) because my plan only offers about 14 managed funds and no indexes. Beyond the company match, why would anyone bother to invest in managed mutual funds?

A: Yes, a lot of people have the same problem -- being forced to put their 401(k) money in a managed fund, often a bad one. It's a bad situation and benefits managers should snap out of it and give their employees more investment choices. But putting money, particularly matched money, into a managed 401(k) is better than no 401(k) at all. The tax benefits just can't be beat.

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.