Wild Greed Chase Rolls Over US Economy

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The Albany Times Union (New York)

Wild Greed Chase Rolls Over US Economy

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 of the economy:

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 getting huge salaries -- more in a day, or even an hour, than their workers earned all year.

Anything that was not against the law was not only all right but virtuous so long as it made money. It was the old laissez faire notion that individual and corporate greed contributed by some alchemy to the general welfare of the economy. The maximization of wealth swept away the idealism of the '60s. Greed was now good and devil take the hindmost.

The smart, perhaps ruthless, go-getter on 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 any more 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" (bargain basement) mortgages. Again, that was their fault wasn't it? The mortgage brokers who made a killing on the sub-primes made a bundle. They sold the mortgages to financial institutions which in turn waved a magic wand over them and transformed them into "collateralized" bonds, many of which were picked up by the hedge funds.

But the high rollers who play 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 in 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 all or even most sub-prime brokers were scalawags. Enough of them, however, saw the suckers coming and took them with devastating impact on the suckers -- 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. The chickens are perched on all available roosts. 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.

Andrew Greeley

Andrew W. Greeley is a progressive Catholic priest, sociologist, journalist and popular novelist. He is of Irish decent and resides in Chicago.

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