Not that I was totally surprised. Many, even the FBI, warned that the subprime mortgage fiasco would create a domino effect that would last for months, if not years. And according to some, there is really no end in sight.
Why? Because of greed, plain and simple. Most analysts seem content to chalk it up to poor risk management. Nice euphemism. Risk and greed are totally interrelated. As far as I know, every human action we make that requires risk assessment includes a greed factor. Like playing poker. Or speeding while driving. Or crossing a busy street against the light. Greed is our human emotion (and human sin in almost every religion) to extract more than what we need from a given activity.
And we are constantly reminded that this is what makes America great. C'mon, the USA is predicated on the idea that every individual has a basic right to be as greedy as possible. All you have to do is stay within the letter of the law, or at least be able to afford a legal team to keep your ass out of trouble. There's nothing in the U.S. Constitution that discusses ethics, charity, or humility. No such words exist in the text. It's a framework to allow every white, landowning male (since amended, obviously, to include a few more citizens who have capital to burn) to suck every drop of worth out of whatever resources and labor he controls, to Hell with collateral suffering or future consequences.
Greed is a recurring theme of Western Civilization, which I witnessed over and over while visiting the castles, churches, and palaces of Europe. On whose backs were such monuments built, hundreds of years ago? (Hint: Review your European history if you think Napoleon himself built roads and laid bricks.) So if we want to blame someone for instilling our society with the notion that "greed is good," I suppose we can blame the Romans, or the Spanish, or the French, or the English, or the Germans.
Obviously, the complexities of the financial shenanigans perpetrated on us are beyond the understanding of most CPAs, but that was the whole idea, to confuse everyone, wasn't it? It really was pure genius:
- Offer incredibly unrealistic loans to uninformed people, sold on the idea that any real estate bought with the loan funds will appreciate in value forever. Oh, and don't forget to collect your broker and funding fees.
- Package up these crap loans in opaque financial instruments and sell them to other firms, pension funds, and local governments who are driven by their own greed to increase their ROI. (Don't forget to collect your broker fees when selling these instruments!)
- Package up some more crazy ass derivative, options, and futures investments based on the crap you have created and sell that, too. (Pssst! Collect fees!)
- But most important, when it all starts falling apart, don't forget to pull that Golden Ripcord and book that long vacation in Monaco you've been dreaming of.
Or, maybe we truly are morally bankrupt as a collective society. I recently had a conversation with an ordinary citizen who seemed totally perplexed when I opined that ethics should play a role in everyday life, including economics as well has how we expect others to treat us on a daily basis. If pressed, I'm not sure this citizen could even provide me a working definition of "ethics."
But the blame can't be placed on the usual reasons, like we don't go to church anymore, or our public schools suck, or our prisons are full, or we fill our heads with vacuous television and video game programming. It's because we are interpreting our Founding Fathers' intentions with a twisted slant. Yes, our Founding Fathers were mostly very religious men: humble, modest, virtuous. Those who weren't religious were of like mind, since this behavior was expected in those days. I am certain that they assumed that we who followed would be equally humble, modest, and virtuous. They saw no need to codify the teachings of Jesus, Moses, and Muhammad into the Constitution, since it had already been written before.
So, even though we can tear our collective hair out over the crisis we find ourselves in, and we can lay blame on the greed of a very small group of individuals, these crooks were only following the standards and traditions of how our country and economy operate. And if we want to ever change that, we collectively need to take a hard look in the mirror.