It is my contention that the recent economic crash can be closely linked to the expansion of 401k retirement plans. Many people are given matching contributions to there plans. That means if it loses 40%, they still are ahead. For others, it simply is a tax avoidance plan. In either case, most of the money in these 401's are put into some type if stock fund in which they own a variety of stocks to supposedly spread out risk. As a result, most people have little idea of what they really are invested in. As a result, they don't vote at the shareholder meetings and a very small majority are allowed to make board decisions. It seems that these people are all on each others boards and feel free to dish out millions if not hundreds of millions to each other as the CEO's of different corporations. The CEO's of many corporations have packages that offer them exoribant wages and then huge bonuses it the stocks go up, and then huge severance packages if they go down. This leads to them taking the highest possible risk since they have very little to lose and so much to gain. The normal oversight doesn't exist since most stockholders have very little idea of what is going on. Short term goals are very much the goal since they reward the CEO's with the greatest potential for huge windfalls. Now, as we can all clearly see, they can walk away from the messes they made with hundreds of millions while we are left holding the bag. An example of this can be seen in Weyerhausers recent takeover of Willamette industries. They needed to keep up stock prices so they could go ahead with the merger. When stocks started falling, they started dumping fully timbered forest land as building sites. A guy I know bought twenty plus 20 acre lots from them at around 100K each. He then proceeded to log it and take an average of around 80k to 90K (after expenses) in timber of each of the 20 acre lots. As a result of the land dumping of thousands of acres of land here in washington and other places, they were able to take land that was on the books undervalued as timberland, sell it as residential for a quick buck, and then show that they made millions, even though all they did was undersell their core assets. The stock goes up in the short term. While I cannot say they did this just to get bonuses from the stock inflation, the stock did get a quick artifical boost . I think nation wide what we are seeing is a replay of this type of mentality. Who cares about 5 years down the road, if we can show a short term profit, we will drive up stocks and make millions. If the risk pays off, we will get hundreds of millions, if not then they will pay us millions to leave. The whole mess is disgusting and we should be jailing these guys, but instead, even as the government takes over the mess, they will just get richer. Another reason why I never, ever, think we should put social security in to the stock market.

Point very well taken. I see where the feds have put a TEMPORARY stop on selling financial stocks short. Needs to be permanent, or at the very least put a huge windfall profit tax on it so the appeal is no longer there. The same should be put on the oil speculators. Oil is not a luxury, but has become an everyday necessity. Anything that has a direct effect on all classes ,such as oil, should be protected from these goons who will, given time,help to destroy our economy.In my opinion, we are on the brink of a very bad downturn that will have long lasting effects. Whomever is elected the new president will inherit this mess and no doubt receive much of the blame even though it has been growing for the past 10-12 years.

mutual fund managers have proxy votes...and they are very concerned with the performance of the stock.

If you are concerned about the management of your 401K, check out a self directed plan. It'sa something not everyone is aware of but you can direct what you buy with your 401k funds yourself thru one of these vehicles.
I know one man that makes short term loans with his, another person that has bought rentals with his. A foirmer co-worker and her husband with their separate 401ks bought a rental house with enough extra land to subdivide and gained two additional lots that she is just keepoing until the market turns with the rental paying for the whole project.
Some banks handle them as do some private companies. It allows you to be in control of your own assests without relying on some faceless manager at a cheaper admin cost.
Maybe Dogfish or some other member can add their thoughts to this approach.

I don't think it's the 401s that cause or allow the crisis to happen. It's the lax regulations, or lack of regulations, that allowed managers to bundle packages of mortgage loans that contained too high a % of high risk loans and give the packages "AAA" ratings. The people that did it and the people who allowed it or facilitated it should all be hung in the public square for starters. And the public should gain the ownership shares of every bundle bailed out. And these aren't my strongest or violence prone opinions.

Sg

The cause is pure, simple and basic greed. Or global warming...