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| In the 1980s, the Reagan Era, an attitude slipped into the corporate world, especially with the young people who were pouring into the financial services sector: Greed is good! The purpose of a corporation is to promote the net wealth of the stockholder. CEOs should be rewarded for producing stockholder wealth by huge salaries -- more in a day or even an hour -- than their workers earned all year. Anything that was not against the law was virtuous so long as it made money. It was the old laissez faire notion that individual and corporate greed contributed to the general welfare of the economy. The maximization of wealth swept away the idealism of the '60s. Greed was now good. | ||||
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The smart, perhaps
ruthless, go-getter at every level of the corporate ladder became the person
of the hour. Credit cards rained down on the country like manna in the
desert. Many people who ought not to have been trusted with credit cards
could not resist the temptation to collect goods and services that they
could not pay for. Collection agencies closed in on these innocents and
wrung them dry. The banks that issued the cards and the collectors maximized
their profits. Some lives were ruined, but that was their own fault wasn't
it?
No one worries anymore about sins that cry to heaven for vengeance. Now the chickens are coming home to roost and, to mix the metaphors, there are a lot of ironies in the fire. Many people will suffer as the market tries to absorb a "correction" before it becomes a recession. The worse losers are the poor who tried to buy homes when they did not have the resources or the self possession to cope with their "sub-prime" mortgages. Again that was their fault wasn't it? The mortgage brokers made a killing on the sub-primes. They sold the mortgages to financial institutions that transformed them into "collateralized" bonds, many of which were picked up by hedge funds. |
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But the high rollers who played at the hedge fund tables and
bet on the safety of the mortgage bond "instruments" on the strength of
their computer predictions lost a lot of money. The shrewd gamblers who bet
against the mortgage bonds, without the help of computers, made a bundle,
one of them picking up $80 million in a couple of days. A lot of people
between the suckers and the gamblers also suffered losses, especially those
with money in their pension funds and those who wanted prime mortgages to
buy new homes.
I'm not suggesting that most sub-prime brokers were scalawags. Enough of them, however, took suckers with devastating impact -- those who would not or could not read the fine print in their mortgages -- and indeed on the whole gambling den called "the markets." The quick buck brokers may not even have broken any laws. Spooked by the collapse of the sub-prime mortgages and the "instruments" created from them, lending institutions have pulled back loans, and the result is the current credit crunch that has shaken the gambling den -- and the economy on which it feeds -- to its foundations. There will certainly be more foreclosures in the months ahead and more broken lives. Greed is good except when it gets out of control. It is in the nature of human nature that once we indulge in greed it has a strong tendency to get out of control. .
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Greeley's latest Articles: |
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