An excerpt from a new collection of essays, Panic: The Story of Modern Financial Insanity, edited by Michael Lewis the author of Liar's Poker. He contributes several essays to the book, including the one here, “The People’s Panic.”
One difference between previous financial panics and the real estate and subprime-mortgage collapse is the sheer number of people involved. “No money down” was an invitation for people far away from Wall Street to take Wall Street-like risks. Just about everyone in America could afford no money down. It wasn’t a financial market that panicked, it was the larger society; and the list of people and ideas that could plausibly be blamed for the mess was long: ratings agencies, mortgage brokers, mortgage originators, Bill Clinton. Gretchen Morgenson at the New York Times blamed Wall Street, for exploiting the middle class. Wall Street people—who lost a lot more money than the poor—blamed their CEOs. The brokers at Merrill Lynch blamed Stan O’Neal, and bankers at Bear Stearns blamed Jimmy Cayne. I wrote a satirical piece…blaming poor people. Seen from the point of view of a rich hedge fund trader, the subprime-mortgage mess looked like a gigantic con perpetrated upon rich people, such as himself, by the poor, who had the hedge fund manager–like audacity to take whatever money was offered to them. Few saw the satire. Some readers were upset by the callousness of hedge fund traders. Many agreed with me, and hoped I’d run for president and teach the poor a lesson.
How many times does the end of the world as we know it need to arrive before we realize that it’s not the end of the world as we know it?
The 1987 stock market crash was blamed on program trading; the Asian currency crisis was blamed on some combination of hedge funds and IMF-induced policies; the Internet bubble was blamed on Wall Street analysts. The subprime-mortgage panic has yet to find its one big culprit, and I’m not sure it ever will. I’ve tried hard to include a glimpse of all the putative villains, but the task has proved impossible. I’ve failed to locate, for instance, anything really interesting written about several of the Wall Street CEOs who led their firms to oblivion. On the other hand, a lot of great stuff has been written and said about this mess…
Just now there’s a feeling in the air that the American financial system has reached some kind of terminus… It’s one thing to need money to tide you over until the next payday. It’s another to need money because there are no more paydays. In this crisis, unlike the previous three, our problem is not liquidity but solvency. We can’t afford to run our financial system in this manner. Another difference between this panic and the others is the sheer amount of destruction it’s caused inside big Wall Street firms. As of this writing one big firm has collapsed, five CEOs have been fired, 50,000 Wall Street jobs have been lost, and Wall Street shareholders have lost more than a trillion dollars. It’s unlikely that markets will allow the big firms to indulge in the same leverage as they have, or to use complexity to hide the risk being taken. It’s going to be hard for them to get into this much trouble again any time soon.
But that doesn’t mean that the game is over. Since the crash of 1987, when the government set out explicitly to prevent this sort of thing from happening again, the cycles of euphoria and panic have become more and more thrilling: whoever has been seeking to minimize drama in the financial markets has been doing a poor job of it. Step back from it and you can’t help but wonder if anyone is really trying. If perhaps this is the nature of global capitalism—ever more complex, ever more opaque, ever faster booms and busts—and it’s not the markets that need to change but our reaction to them. How many times does the end of the world as we know it need to arrive before we realize that it’s not the end of the world as we know it?
At the bottom of the modern financial markets are the incentives that people who manage money have been allowed to create for themselves by investors who continue to place far too much faith in their wisdom. Our allocators of capital, when they make huge sums of money, are allowed to keep a huge chunk of the winnings; if they lose a huge sum of money, they walk away debt-free—and create another hedge fund…Before the subprime collapse, the big Wall Street firms had turned themselves into giant hedge funds, with their profits, increasingly, coming from their trading. It’s easy to imagine this changing, and these firms becoming less risky and less profitable businesses, and the people inside them making a lot less money. It’s harder to imagine the people who are taking home tens of millions of dollars a year for themselves by making big bets with other people’s money becoming glorified bank tellers. More likely, the subprime-mortgage panic will accelerate the trend of the action moving out of these bigger firms into smaller hedge funds.
The critical document from this drama—the takeaway—may be…a Wall Street Journal piece…that introduced the world to John Paulson. A hedge fund manager no one had ever heard of, Paulson took home $3.7 billion for himself shorting subprime mortgages. That is more money than anyone has ever made on Wall Street in a year; and you can bet his example has not been lost on others. Just the other day an item flitted across the news wires: Josh Birnbaum, one of the traders at Goldman Sachs who shorted the subprime-mortgage market, made the firm $4 billion, and helped it to avoid the same fate as other Wall Street firms, announced his resignation. He planned to raise a billion dollars and start his own hedge fund to invest in mortgage securities. To get whatever he wanted, everyone seemed to agree, he needed only to snap his fingers.
Excerpted from Panic: The Story of Modern Financial Insanity, edited by Michael Lewis. Introduction copyright (c) 2009 by Michael Lewis. With permission of the publisher, W.W. Norton & Company, Inc.
Author Michael Lewis is currently a contributing writer to the New York Times Magazine, a columnist for Bloomberg, and a visiting fellow at the University of California, Berkeley.
Tracy Quan's latest novel is Diary of a Jetsetting Call Girl, set in Provence and praised in The Nation as a "deft account of occupational rigors and anxieties before the crash." Tracy's debut, Diary of a Manhattan Call Girl, and the sequel, Diary of a Married Call Girl, are international bestsellers. A regular columnist for The Guardian, she has written for many publications including Cosmopolitan, The Financial Times, and The New York Times.
Joe Mathews is a journalist, an Irvine senior fellow at the New America Foundation, and a contributing writer at the Los Angeles Times. He previously served as Justice Department reporter for the Wall Street Journal and as a city desk reporter at the Baltimore Sun. He is the author of The People’s Machine: Arnold Schwarzenegger and the Rise of Blockbuster Democracy.
Gerald Posner is the award-winning author of 10 investigative nonfiction bestsellers, ranging from political assassinations, to Nazi war criminals, to 9/11, to terrorism (www.posner.com). Posner lives in Miami Beach with his wife, the author Trisha Posner.
The Daily Beast is dedicated to news and commentary, culture, and entertainment. We carefully curate the web’s most essential stories and bring you original must-reads from our talented contributors.
Renata Espinosa is the New York editor of Fashion Wire Daily. She is also the co-founder of impressionistic fashion and art blog TheNuNu and a sometimes backup dancer for "The Anna Copa Cabanna Show."
Amanda Fortini has written for The New Yorker, Slate, Elle, and New York, among other publications. She lives in Los Angeles.
Author Michael Lewis is currently a contributing writer to the New York Times Magazine, a columnist for Bloomberg, and a visiting fellow at the University of California, Berkeley. His new book, Panic: The Story of Modern Financial Insanity, comes out next month.
Author Michael Lewis is currently a contributing writer to the New York Times Magazine, a columnist for Bloomberg, and a visiting fellow at the University of California, Berkeley. His new book, Panic: The Story of Modern Financial Insanity, comes out next month.
If one guy can make 3.7 billion by betting on the impending financial catastrophe, why would any of these wall-street guys want the market to do well? There's a law against online gambling; how about some laws that prevent people from profiting from everyone elses' misfortune?
Beautifully written piece. Explains the core issues which we face today...thanks TDB. Hindsight is a wonderful tool. It is very difficult to Reform anything if you cannot identify the problem, in Hindsight. The destruction of Freddie Mac and Fannie Mae being an example of what happens when Governments enter and become players in Financial Markets. They simply can't keep up. The proliferation of new Hedge Funds, described in this article, will only serve the public better since there is a direct relationship between what skilled Traders get paid ... and performance. Hedge Funds are also likely to be better Shareholder Activists since their interest will now be more directly aligned with markets. This is the Key ... being in step with markets and not with the public whim of the day, which is usually proved false, as it has been proven here again in this most recent economic crisis.
This whole "Shorting" and selling "long" for that matter, caused a crash in 1908 I think and was made illegal. They got the rules changed recently to where they could bet on the price moves with no money up front. In 1907 they had "Bucket Rooms" similar to a "Sports Book'" in a casino. AIG and others couldn't cover the bets and now we are!!
The advantage to this financial melee as been an eye opening experience. For those who unfortunately signed the piles of documents without reading them while buying there homes its an example of a ignorance and trust we can no longer afford.
till then the depth of my experience with buying a home was, "Mortgages for Dummies". Which didn't come with a subtext about economic trends or explanations for bubbles, or the effects on an economy through short sells and long, or WHAT THE HELL IS A HEDGE FUND!
What unfortunately is driving our economy is a vapid sense of morality. The carrot is setting the direction, content has been usurped by the husk, the effect is substantiating the cause in a cycle of disaster in the belief that the markets will maintain themselves without restrictions. Unwittingly believing that within the short sell or planning of privatization and deregulation there isn't a fundamental contempt for main street by plutocratic monetarist who worship at church of the dollar.
Not even "currency" as a term can identify this malignancy, because that implies an organism systemic to the ebb and flow of an ingredient to agencies requiring a quality and quantity of a precious juice. When this juice wells up disproportionally in one area what happens, the rest of the body doesn't go fishing; those starved extremities die.
That little contemptuous tape of the dudes from enron, laughing at ripping off grandma is an example of causation at the level of the effect. A market that doesn't reflect and isn't willing unless illuminated by regulations that in the ever increasing population on this planet there is another edict that commands our attention, and it is that we are our brothers keeper, however reluctantly we accept this trend.
To Coloradokarl:
I think the author was referring to the 'no money down' Real Estate Infomercials and the techniques that were employed in the Housing Market, again as a direct result of those infomercials. These techniques destabilized Housing Markets simply because the cash component was so small that walking away from the deal and dumping the problem on a Bank became the thing to do. I quote:
"No money down" was an invitation for people far away from Wall Street to take Wall Street-like risks.
The 'shorting' that you are referring to is a Hedge. One kind of short is referred to as a 'short against the box'. This a trade in which the same number of shares that are owned are also shorted. It is a technique for locking in profits, hopefully at market tops. Those shorts then become unwound as investors 'close' the position by buying stock, hopefully at lows. This helps support markets after severe declines and sometimes these loaded shorts cause markets to rally faster from bottoms than they ordinarily would...which is a good thing.
I think the author's point is the 'no money down' component as being the criminal that destabilized markets. I have heard rumors from uninformed persons that 'naked shorts' were somehow to blame for stocks to crash, but there is no such thing as 'no money down' shorting of stocks in our regulated markets....that idea exists only in informercial land, which is unregulated. Hence, the need for Reform.
The 'bucket rooms' of the 1907's were 'counterparty trades' placed by Brokerages to hedge their client transactions. A technique that proved most profitable since as we all know....the customer is always 'right'. This idea flies in the face of math, especially when one considers such revolutionary ideas as James 'Jiffy' Drew's "Odd-Lot Index", the Godfather of the Wall St. Axiom 'the customer is always wrong'.
I think that we need to admit to ourselves that the 'captital markets' have lost interest in providing capital to persons and businesses, unless they can provide fees and profits to the 'market' (themselves) in a very short time frame.
Our capital markets don't provide the useful functions that people think the do, or thought they did, or may still be told they do in Econ 101. They have become businesses unto themselves, they now resemble gambling operations, and they are the house. And when you are gambling the house always wins. Unless they burn the house down. Oh, wait, look at the newspaper, they just did.
I hope the finance houses all go down. We need a new financial services industry that provides needed services at decent rates, and allows American business to flourish and grow, long-term. And we need a new set of local banks, since the M&A of the finance sector has essentially destroyed any local or regional players in the industry.
Government does not need to be a 'player' in the market as magicman wrote, but we need lots and lots of rules for these businesses, because people are simply too selfish to be left on the honor system. I don't really care if it makes them all cry and pout and buy up the politicians again.
I think where I disagree with magicman is the notion that people like John Paulson represent shareholders - from my view they using shareholders in service of their own ambitions; he is making bets with other people's money. Again it gets back to a gambling model, rather than a raise capital -> invest/build -> growth model. At some point America needs to get back to a functional model for business activity and growth, one that can support long-term growth, not short-term profit or asset-stripping. If all we can manage as a culture is selling imported crap to each other, and making bets on who is the next winner (or loser, take your pick), we are screwed.
Sadly, magicman, people like John Paulson are not the ones to help us re-build the systems that they themselves destroyed.
To Builder:
This is the 'egghead conundrum' that I have been speaking about. And yes, Financial Markets are dysfunctional, but in a rational way. John Paulson simply acted to protect his client's money. Had he failed, as many others did, things would be worse for more people. That's the 'conundrum'. Do you shoot the guy going after your flock? Of course you do. Markets are rooted in Human Behavior. When Human Behavior runs amuck, this is the fallout. You can't blame John Paulson for shooting first. It's an act of self defense after a certain point.
When markets rally to 14,000 how much does it now have to rally to make a 7% return over the next 7 years? The answer is 49% or an additional 7,000 points in the Dow bringing the total on the Dow to 21,000. Then what?And where is the cash going to come from to make this rally happen? Can you rally the Dow to 21,000 while people are playing 'no money down' on Real Estate?
The Real Issue is that additional cash only comes into markets as a result of Mercantile Theory, i.e. the ability to sell products abroad, not to import them from abroad. So far, we haven't been able to sell cars abroad, but Junk Bonds and Financial Instrument Sales have done well. Including Treasury Securities which have made Congress Fat with an endless supply of Foreign Money. All of these actions put us in Peril. It destabilized Society by exporting old jobs and inventing new ones...at lower pay scales. It scattered our debt around the Globe, creating a 'virus' effect that now includes the whole world. The good news, if there is any, is that others are holding the worthless paper, not us in total. The damage would have been worse if we hadn't exported the rotten paper. But here now is the future. Who will buy the next piece of paper after everything that has happened? The answer is, apparently, no one. It is at that point that we now find ourselves. Until such time as the US Dollar falls enough to allow for the export of manufactured items, things are going to be bleak. The silver lining in the current cloud should be that a sharp fall in the dollar may be the proper conclusion to this economic panic and would have the effect of allowing more exports of manufactured goods OUT of this country. That would help jobs and spur the economy from within. And it is long overdue....The Flooding of Bush/Obama money into the system may accomplish this end in itself, thereby causing a fall in the value of the US Dollar. This would have the effect of righting the ship...at least from a currency standpoint. But it would devastate holders of dollars, especially those who bought the worthless paper which is denominated in dollars. It is a 'contagious virus'. Just like SARS.
"We exported worthless paper and now they won't buy any more" That's It !!
Mercantile theory is based, more or less, on a limited or fixed set of assets, which can be cut up and bought/sold. Nothing bad with that notion, in an immeidate short-term view. But it does assume that the system never gets beyond selling the same stuff to one another, and watching the markets to see who ends up with all of the assets. Like when you Monopoly, the number of assets is fixed, and we know how monopoly always ends: someone has all the stuff and everyone else is busted.
But in the long run, things are not fixed, thank goodness.
I'm looking for an economic theory and finance sector to match that produces or at least aims for real growth, not just trying to see who ends up with all of the chips. Real growth should come from enhancing productivity and human development, not solely from trading a fixed pile of assets.
And I actually have nothing against Mr. Paulson, he really is just advancing his interests, and there is nothing wrong with that. I just don't think that people like him will offer us any help at these larger problems in the long run.
Odd though about the dollar, our economy goes into crisis and the rest of the world still wants dollars. I guess even though we're bad off, everyone else is worse.
The financial meltdown is clearly a Republican issue. Regan championed de-regulation and Bush 2.0 championed being asleep at the wheel.
When "The Daily Beast" prints things like blaming Bill Clinton on the financial bailout it's like Bush 2.0 all over again. I grow increasingly concerned about who's producing this stuff. Republican's are so spineless. Do you really want a party that can't even take responsibility for a mess they created when they've been in power for 20 of the last 28 years?
The financial bailout is a moratorium on Reganomics.
Until we rejigger the economy to value long term growth in terms of quarters rather than years, the stock market and the banking institutions around the world will be volatile and a fragile house of cards waiting for the next credit tumult... probably it will be all the people suckered into paying 23%-28% interest on supposed no interest store credit cards decide to default on their debt rather than be indentured servants for the next 20 years. Until we reform all areas of the banking and stock trading industries and get the country back to producing innovative long term durable goods, this will be a cyclical problem that will sink the country.
Dwurry:
You are correct. I didn't really want to go political with my post, but you did, so I will agree with you.
The myth of free markets is a largely republican fantasy, at least republican as defined since Reagan, as you pointed out. The most ruinous aspect of Reaganism was the way that the whole ting was built on nostalgia. The fact that the reality that Reagan nostalgically conjured up never even existed is beside the point.
It is Morning in America again, but this time it is more like the morning after. We've wasted the last 24 years on a set of principles that have lead to a dead end of huge debt, lots of McJobs, and declining living standards for the average American.
The Genius of republicanism was in being able to look at something such as 'working mothers', and sell it as a 'social values' problem, rather than admitting to the real problem, the fact most people need 2 incomes to make a middle-class living today, when 30 years ago, 1 income would have done it.
The sad thing is the republicans have been so good at selling and so sucky at governing. It really takes something like Katrina or Iraq to really penetrate the psyche and change the conventional wisdom, even when the conventional wisdom is wrong.
Family values indeed.
Get ready for the big greed brain drain as the hedge fund community becomes the post modern Wall Street...On a side note, it's interesting to note how 95% of the population which controls maybe 10% of U.S. wealth caused the worst financial crisis since 1929 -- kinda of an oxy moron like the term hedge fund.
the song lyrics from a song in the 80's Easy Money by Rickee Lee Jones see to resonate today:
There was a Joe
Leaning on the back door
A couple of Jills with their eyes on a couple of bills
There eyes was statin'
They was waitin'
To get their hands on some easy money
They flipped a dime
One said " well I'll take heads this time"
One stepped up
One stepped back
One was loosin' her shoulder strap
She couldn't speak
Her knees got weak
She could allmost taste that Easy Money
There was this old black cat
sittin' in this old black cadillac
The Joe smelled sweet
She curled up her boyfriends feet
She said "I got a plan
Listen Sam, how'd ya like to make some of that easy money?"
He said "Yes, oh yes Jus' tell me what you want me to do"
She said "Baby, you can trust me
Baby you must be hidin' in my room
At a quarter to two"
Well, the cat told the boy
"Come up to the room and play with my toy"
But the Jill set the bait
And she wasn't gonna sit around and wait
But this guy was wise to all of the lies
And he flies out the door
With the Easy Money
Because there ain't no man
Who got the money in his hand
Who got any of that bread
Bein' slow in the head
The easier it looks
the harder it hooks
There ain't no such things as
Easy Money
We say "Yes! Oh yes!"
Saturday night
There was a terrible fight
between two dames who was loosin' the same game
It wasn't clear
But I hear that somebody was looking for some
Easy Money
Business is not just Business, it goes beyond the egotistical compensation and self help interests of the executives. Business is a serious undertaking; it carries with it responsibilities and duties to a broader community, it affects other peoples livelihoods and not only just those that work for the business, it affects whole communities, and as we have recently discovered, it affects the entire world.
It is time top management took the words seriously.
Integrity, Trust, Duty, Honor, not just words!
During Mr. Greenspan's testimony before congress a couple of weeks ago he acknowledged that he had made one mistake.
He had assumed that the corporate "Elite" in charge of governance of our corporations, would behave with integrity and fulfill their duties with the honor deserving of the trust the rest of us, including himself, had invested in those who held the highest of corporate offices.
We can discuss the problem of using the word "assume" for ever but as we all know many people interpret it to mean "assume makes an ass of u and me" which is of course exactly what has happened.
However, the discussion here is whether Mr. Greenspan had good reasons to make the assumption about integrity when he did or not.
Around the 1980's, the Foreign Corrupt Practices Act and its requirements for compliance forced corporations to clean up their "act" in terms of ethics and code of conduct.
Since then a new wave of other management techniques, mainly to cope with a myriad of social legislation (e.g. equal opportunity, diversity, sexual harassment, etc.) gave birth to the Vision, Mission, and Code of Conduct statements which turned up on a mostly voluntary basis in the more forward looking organizations.
It took until the post Enron/Worldcom era Sarbanes Oxly (SOX) legislation to make having these Vision, Mission and Ethics/Code of Conduct statements almost compulsory as evidence of the "tone at the top"
The problem with all these expressions of desired behavior was that they were just that, expressions of desired behavior. Agreed many companies trained their employees with lengthy and numerous training sessions, and management was encouraged to give these statements endless lip service, but with some minor exceptions nothing really changed especially not in the top echelon of the corporation. Top management rarely walked the talk.
Evidence the continued raping of the corporations and by default the shareholders with outrageous executive compensation, the blatant cheating by secretly backdating options, the petty thefts committed by executives on expense reports which ensured that hardly any private expense of the executive remained unpaid by claiming it as an entitlement or fringe benefit.
The reason why most people in high offices behave this way is because being in a high and powerful office is a new experience to them. Even though there are guidelines of how to behave with integrity and honor, it is not part of their DNA. There is no "noblesse oblige" mentality in their make up. They have worked hard to get to a position that they had no reasonable expectation to get to so they are "worth it", they deserve everything they can get. It is difficult to deal with power responsibly if you have never been close to it or have never personally experienced it before.
Many fresh new executives have had no role model, no father who was in a high level position of power, whom they could have learned from at an early age, who they saw agonizing over difficult decisions he had to make which had major implications for a community, what it was like to be responsible for a large number of people, other than his immediate family's, lively hood, how they had to be an example in their community and had to continue to earn their trust and confidence and so on.
Being taught by ones parents how to behave and conduct oneself in a position of power vis a vis ones servants thus learning how to treat them with respect, dignity and care is another example of learning at an early age that power demands duty and a sense of responsibility.
These are all things that shape an individual leader's DNA. Admittedly it sounds like the preaching's of an old era that is outdated and cannot work in a meritocracy. Therefore to assume that "noblesse oblige" is the M. O. in every high level executive is an unreasonable expectation. To expect that the ethics and self governance in the highest offices of the land are a substitute for sensible regulation and legislation is naïve and old fashioned to say the least. In this modern world omissions of a sense of duty and responsibility in some individuals can have global implications on the lives of millions of people.
Business is not just Business, it goes beyond the egotistical compensation and self help interests of the executives. Business is a serious undertaking; it carries with it responsibilities and duties to a broader community, it affects other peoples livelihoods and not only just those that work for the business, it affects whole communities, and as we have recently discovered, it affects the entire world.
It is time top management took the words seriously.
Bou van Kuyk
546 Yacht Club Drive
Rockwall TX 75032
972-771-9887
The "no money down" thing was used to feed the maw of the hugely profitable MBS system. People were making money on every step, similar to pyramid schemes, as long as more of these came in. One of the main corrupting factors was that the no money down mortgages were in fact set to be relatively short term; the idea was that the borrower would refinance every few years and so keep the system running (and reduce the risk period). The borrower would not care as long as the home value grew faster than the increasing mortgage (from added points and fees). This would have been a perpetual motion machine if only home prices kept rising.
As to who is responsible, the ibankers have to take a lot of the blame, including Goldman (who was selling these securities and shorting them at the same time). The reason a number of them got in big trouble is that they had the gall to leverage (borrow against) these devices (the securities, the CDSes, etc).
As to how to prevent it, that is not so clear. Referring to it as just complexity is not really fair. The model is fairly simple in the sense of loans being packaged, securitized, and the securities being tranched (divided by risk). The CDSes should reduce risk since someone else takes a defaulted loan off your hands. The complexity was not the issue as much as the lack of transparency. Those buying the securitized tranches and the CDSes were relying on risk assessments that were bogus, as they relied on the bubble not bursting and fake models. That is, giving a AAA rating to something that relies entirely on home prices going up at a fixed rate for 5 years (which has no historical precedent if you consider it as continuous) is absurd. So, the previous year's default rate was used to forecast the next years default rate. This is like predicting the direction of a stock market or commodity based on an assumption that it will just trend the same way as now. I admit that real estate is less fluid traditionally (asset is not that liquid), but once you have many loans with the borrower having little of their own money at stake, the risk profile changes. That is really the issue. All models were built on traditional home loans, which assumed a borrower would lose a lot of their own money on default (e.g. 15-20% of the loan amount as down payment).
Blah, Blah, Blah, As if more words could resolve what lying words have created. "No money down." "Variable rate mortages." "Credit default swaps" Practiced in arguing about the meaning of phrases in the Bible, Christian Capitalists once again triumph against the world. Somalai pirates are more honest.
A culture that defines its very raison d'etre by endless accumulation of material possessions; by the unbounded acquisition of more money, money, money, money; by recklessly overconsuming and relentlessly hoarding limited resources, demonstrably declares to all the world that greed is good.
Are we not members of a culture that worships consumerism? Are the products of greed nothing more or less than the objects of our idolatry?
Are the pin-striped suits, fleet of cars, chauffeur, private jets, McMansions, distant hideaways, secret handshakes and exclusive clubs...... all signatures of success in a culture borne of the 'goodness' of greed?
Consider for a moment what greed has wrought.
Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001
@stevenearlsalmony, you seem to equate all striving for a better life and material things with greed. But, greed is the *excessive* desire for more, more, more. The American dream is built on working hard to gain a better life for you and your children.
In all societies, we see a bell curve. Those on the right are greedy and want ever-more (by any means). Those on the left do not care (or are self-destructive). The great middle are those that just want to do what is right for themselves and their family by working as hard as they need to. There is "greed" all across that bell curve; those on the right are the ones that can and will do something about it (based on circumstance, effort, personality, etc) whether legally or illegally.
Each society across time and across the globe has seen those boundaries shift and the definition of "what is right" get recalibrated, but the behavior is the same. In Communist and Fascist societies, the greedy on the right run the country and hoard for themselves, leaving much of their country struggling; as a result, more people are on the left - they stop caring because their own actions have little effect on the result. In capitalistic societies, we find the majority are pushing for a better life for themselves and their children; yes, there are those on the right trying to game the system for their own gain. In poverty stricken societies, we see the same pattern, only the standards change. In some societies, those on the right are not gaming the system for money/things, but for power and control; whatever the justification of this power and control (e.g. enforcing one's own religious beliefs), the behavior follows the same greed-model.
The point is that you cannot create a society where everyone is the same. There will always be those who will "work" twice as hard to get more than others. There will always be those who will do what they need to do to. There will always be those who give up. The percentages and the standards of "enough" and the opportunities are all that really change from one case to another.
What we see in our own society is that many want a 'better life" for themselves and their kids. The definition of that continues to change and evolve, whether measured by home ownership, number of friends, flat screen TVs, happiness, number of cars, or education. But, you cannot suppress it here any more than you can in say Egypt or Sudan or France; you can only calibrate it. What we do need to do is adjust the barriers that try to thwart the excesses of those on the right (ie. regulation). My two cents anyway.
My thanks to all contributors here, and to the Daily Beast, for hosting and encouraging such discourse. This is the best post sequence I've ever read.
Mr Lewis, you have now told us a number of times why all this has happened! Why do you not devote your energies toward solving the problem.
That would require original thought I guess.
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What a wonderfully engaged conversation this is. I enjoyed reading the article, but enjoyed almost as much the lengthy comments that make me feel I'm getting a better idea of what the heck actually happened.
But hey, I can't be the only one who's been cringing with dread about something along these lines brewing since before the Enron can I?
As someone who has made a living by trading I can tell you what really caused this crisis: Averaging. We have a saying on the floor of the Chicago Mercantile Exchange "The market almost always comes back" Traders dealing with the CDOs and other derivatives kept adding to their losing positions hoping they would come back in value just enough for them to avoid the jaws of death. Well this was one of the times the market didn't come back and these massive losing positions did what 9/11,the invasion of Iraq, and $150 a barrel oil couldn't do, bring the world financial system to its knees.
Thank you.
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