Understanding greed

October 11, 2011

OPINION by GORDON MULLIN

I’m greedy.

When I do my taxes, I don’t ask myself, “what’s the fair amount I should pay?’  Nope.  I just attempt to follow the byzantine tax rules as best as I can hoping I don’t make a mistake and find myself on the receiving end of an IRS audit.  I work hard, spending a great deal of time looking for write-offs trying to make that “taxes owed” number on my 1040 just as small as possible. And I must confess, never has it crossed my mind to pay more than what the rules tell me.  Greedy me.

My Webster’s Unabridged defines greed as “excessive or rapacious desire, esp. for wealth or possessions.”  With the continued downturn in the housing markets and banks tottering at cliffs edge, we’ve been hearing the word a lot.

We now have entire swaths of occupations deemed to be populated by the greedy- bankers, lenders, Wall Street brokers (ouch-too close to home), mortgage agents and, of course, the usual suspects- lawyers, developers, and every single employee of insurance, drug and oil companies. Wall Street is merely the target du jour.

However, it strikes me that we’ve become so accustomed to hearing greed used to describe others that we’ve come to think of these people as somehow different than us regular folk and I don’t think that’s true.  I know we all like stuff-owning stuff, possessing stuff; using stuff.  Shopping itself has become a pastime for many-kind of a hobby.  “What do you want to do today, dear?  Why don’t we go shopping?  That’d be fun.”  Ever heard that?

I think we’ve simply mislabeled a common and normal human inclination, the pursuit of self-interest, when it is in others we’ve chosen to castigate.  This month it’s Wall Street brokers who sold subprime loans and financial gurus who packaged those mortgages and sold them to banks, hedge funds and your 401k provider.  Recall that in 2007 they were doing the exact same thing and everyone was fine with that.  There were a few voices warning of an impending bubble in the housing market, but like the tech stock bubble of 2001, no one wanted to listen.

Three years ago, Harry, the guy next door who bought his home in 1974 for $30,000 and now could retire on the gains, felt those unplanned riches were his just due and no one considered him greedy for pocketing the eye-popping profits.

The mortgage broker at the bank who offered a suite of alternatives to Maria, the buyer of Harry’s home, perhaps knew that Maria was over extended but Maria was old enough to make her own decisions and there were plenty of other places she could look for advice and options.  She hadn’t saved up any money for a down payment but the lender was willing to finance 100% of the home, encouraged by Congress’s ‘Minority Assistance’ mandates.  She’d be paying only the interest for a couple of years but she wanted, not the starter home, but the nice one, the expensive one and she knew that of course prices would continue to climb, she’d get that raise, and things would turn out well.

The bank packaged up Maria’s mortgage along with hundreds of others and sold them to Fannie Mae who borrowed in the market at government subsidized rates to buy Maria’s loan so that the mortgage was off the bank’s books and didn’t drag on their capital requirements.

Fannie Mae in turn offered AAA credit rated bonds with excellent returns that everyone knew was implicitly backed by the government and investors, mutual funds and retirement plans of public employees, gobbled up the bonds of Fannie Mae, all enjoying the safety of government sponsored returns.

Three years ago, everyone was pleased with the situation.  No one considered an entire financial industry greedy.  All was well.  Till the housing market bubble burst.  And now we look for scapegoats finding them, most recently at, where else, Wall Street.

We are all inclined to desire wealth and possessions.  When the times are good, we’re content but when times are bad we seek out those we deem responsible, label them greedy, and demand our politicians regulate, regulate, regulate.

We should not seek the regulation of greed for that is truly beyond the reach of government.  We can and should demand honest and fulsome disclosure by all, both lenders and borrowers.  Bubbles will occur again; they always do.  But we should not ask for solutions based on the regulation of greed- that’s a distraction from our problem and leads us down a path to where there are no answers.

We merely find ourselves.

Gordon Mullin in a registered financial adviser in San Luis Obispo.

 


43 Comments

  1. abigchocoholic says:

    Johnny B,

    You are dominating this conversation and you’re pointing the finger at government and banks rather acknowledging that we the borrowers were at least equally responsible and in reality overwhelmingly primarily responsible. Millions and millions of us took out loans we couldn’t realistically pay back. It is simply absurd to point your finger and say “you never should have loaned me that money I asked for because you should have known I was either too stupid or lying when I told you I could pay it back.” That just doesn’t fly. It’s a complete abdication of any personal responsibility and it’s un-American. America is about self interest and the corollary is personal responsibility.

    And it’s now history. Talking about it further isn’t really going to change anything. What we should be talking about is policy going forward. And going forward, the real problem isn’t the rich. The real problem is the bottom 40% of America that contributes nothing and has its hand out at every turn. That 40% would include the retired, the low income and the welfare. They use 75% of the public services and contribute nothing to them. They are in the cart and the rest of us, the 60% pull them around. They need to get out of the cart and help us pull–however they can.

    I regularly hear people use the cliche “the rich aren’t paying their fair share.” What does that mean? The rich–the top 60% are paying everything. Since when is paying everything not a “fair share”? The super rich, the top 1 or 2% pay tens of millions to the government every year. How is that not paying their fair share? In reality, they are paying 10,000 times their fair share. When you hear people say “the rich aren’t paying their fair share” that’s really code for, “they have so much money, we think they don’t need all that so let’s try and make it legal for us to take some of that and give it to ourselves.”

    The reality here is that the bottom 40% are going to take a hit going forward. They reality is that they are going to have to get out of the wagon and start helping push it. They are going to have to start paying their fair share. And that’s not a cliche when we’re talking about the bottom 40%. The burden of government and the rich are going to be to make sure that the opportunity to help push the cart exists. Key word “opportunity” not a hand out.

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    • justme says:

      This guy is exactly wrong on all counts. A guy and his wife go into the lender’s office and ask HIM or her what they can afford after putting down their “proof” of income, etc . People were taught they were going to be fine, prices are going up and up , remember? Where was the warning it’s all going to crap out?? Never happened! Was it from the lying mouth of Greenspan or realtors or local bankers, stockbrokers, the Pres’?
      We rely on the BS evening newzzzzz, THAT”S what Americans believe is reality so hell yes it’s off to the mortgage guy for YOUR new house.
      This dude above is blaming the most scammed (poor people) for being, what? uninformed?

      The problem is a worn out, abused capitalistic system. Now the banks don’t lend to poeple so the rich are left as the only people in the game with no competetion around now. They’ll get richer, the 99% will get poorer because they have no capital to enter the game with. The scam will be exposed more and more and peole will hit the streets.
      With guiys like abigcholoholic pushing their “poor people need to work harder for the rich” concept in a time like this means we are going down hard. Always works out that way, always will.

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  2. justme says:

    “Wall st.”(s) & banking worldwide can now create money (the U.S. since 1913) and put whatever value on it they wish. That gives them the ability direct 99 per cent of all wealth toward themselves. That’s the process “downloaded” into our system by buying politicians mostly.. But now the program is outdated and corrupted now that’ll cause the system to run slower and…….

    So what do you do? You either fix it or let it crash. I’m sure fixing it has to take the form of public protest (tired of waiting for the program to happen) so you either take in to the repair guys or replace it, which hurts (the headknocking part of protesting).

    World financiers direct human affairs today with huge amounts of funny money that they (corrupt your system) with.
    The major media and the web are the key, if the “Cloud” happens (central net traffic keeping thus their long desired info filter) and the networks keep the facts in cold storage as usual then we’ll look back at today and wish we had it so good. Actually the problem is simple, try to dissolve the Fed system by electing Paul.
    I admire him for several reasons, the foremost being that he is aware Kennedy was the last person to “End the Fed ” since Wilson took their money for his election and granted European and New York bankers the ultimate prize, A MONEY TREE !!

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