Friday, September 26, 2008

Greed is not the problem

Some people have apparently forgotten what the road to Hell is paved with, and are under the impression that the mortgage crisis is a result of an excess of greed. Some of the people who believe this are now trying to sell us a bailout plan. But what if the problem is not greed? What if greed is exactly the opposite of the problem? And what if the people who have the problem 180 degrees wrong are asking you to place confidence in their bailout plan?

Here is Lawrence White, explaining why the Greed Hypothesis is so preposterous:
On greed, let me repeat: If unusually many airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual. And let me add: This isn’t a morality play. What we’re seeing are the consequences of monetary-policy distortions of interest rates and regulatory distortions of incentives, amplified in some degree by private imprudence, not the consequences of blackheartedness.
In fact, if we look at the causes of this mess, we find that it is not greed at all that caused it, but compassion. Not compassion on an individual level, not the compassion of the Good Samaritan--not the compassion of the person who loves his neighbor, but the compassion of the kind of person who loves humanity.

We're in this mess because policymakers wanted to make mortgages available to people who couldn't afford them. But now compassion has given way to blame shifting, and they are blaming the people they pressured to do this as being greedy.

Beware of compassionate government.

1 comment:

Lee said...

Beg to differ, sir. Greed played a role. Not the initial role. Perhaps not the crucial role. But it was in there.

When the federal government began pressuring lending institutions to ignore the time-honored requirements for borrowing large sums for building and homes, the correct response from the lending institutions was: FY/SM. Stands for "sue me".

At least, bring it out in the open.

But. They discovered they could make money, so long as properties continued to appreciate. So instead of standing in court with both middle fingers extended, they went down the road of going along to get along.

It's the businessman/Republican way. And in retrospect, who can blame them? When I lose money in investments, nobody will bail me out, but they have friends in high places.

There's a financial crisis of one sort or another every thirty years or so. It happens when the old salts who lived through the last crisis have all retired, and the ones running the show are the young bucks who think no matter what they do, everything will always come up roses for them.