I wrote earlier that the current financial problems are the result not of "greed" but of government meddling. My contention is that a system based on "greed' will run smoothly, while one where the government meddles gives us our current crisis. However, as the poster who original raised the "greed" issue argues with me that these people will do anything, let me make my point a bit more clearly.

Let us assume that every individual in the financial market cares about nothing but his own bottom line. Let us imagine they have no interest but their own income and would not be stopped by any thought of the harm they might do. In short, let us imagine the absolutely amoral environment the left says exists.

What would happen?

Well, first of all, we would not have our current mess. Our current mess actually benefits no one, not even those CEOs who fled Fannie Mae with earnings. The only beneficiaries were those who temporarily lived in a house they could not afford, and the regulators and politicians who got to wield a bit more power and enjoy the reputation for helping the poor. But no one else. So, even if we postulate evil, greedy motives for everyone the current mishap would not have happened.

Why not?

Well, first of all, the lenders would not have made these loans. Foreclosures are often denounced as favoring the lenders, but that is rarely the case. As modern loans have 10% or less down, often very little, the amount owed on the loan is often less than can be realized by a foreclosure sale. So, lenders do not want to foreclose, even in a rising market, as it is a loss until much later in the loan.  So, even lenders driven by nothing but greed would not have made these loans. So, in a greed driven system, these loans would not have existed.

Nor were the purchases of these loans driven by "greed", they were driven by the mistaken impression that lenders would not intentionally make a bad loan. People bought them knowing there was risk, but underestimating the risk, as the government had short circuited the system. So the buyers were not buying what they knew to be bad loans, as that would have been only a sure way to lose money. If they were driven by greed, and had been informed of the circumstances under which the loans were generated, they would never have bought them. Greed would have stopped the spread of this problem, had the information been available.

So, "greed", even the most immoral, careless sort of greed would have produced better results than government "altruism".

Now to return to one last point, my contention that those who benefited from the plan, such as the Fannie Mae heads, actually lost too. It is true. Think about it, the Fannie Mae head sworked a very long time to develop a reputation of trustworthiness that got them that position. True, they managed to pocket some money, but had they not created these bad loans, had they been a responsible manager their future salaries would have been far greater than the short term sums they received. They have, in the long term, lost more from their mismanagement than they could have possibly gained.

And that is why "greed" properly understood produces a stable, orderly capitalism and not the anarchic crime the left says it will. Only those who do not understand economics think that crime pays. A criminal may make some impressive short term gains, but on balance, the time a criminal spends on crime (not to mention time in jail or fleeing arrest) would have produced far more in productive ventures than it does through crime*. Stealing from others seems profitable, but in reality it is not. Even at the top levels, compare crime lords to Bill Gates or Ted Turner. There is simply no way that anyone looking at the long term costs and benefits would choose crime. Yes, some may make this bad choice, but it is not really "greed" so much as a bad cost-benefit analysis that leads them to their choice**.

Greed is not a thing to be despised, it is the force that drives our entire system. Without greed there would be no economy, no civilization. Without greed, we would be hunter gatherers still. So, please, do not blame our problems on "greed". Greed would have made a stable system, it is the government's "charity" which broke the system that greed erected.

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* Some crimes, such as drug manufacture, more resemble productive enterprise and thus pay more. Those who provide a service, even if it is criminal, make more than those who simply defraud or rob others. Even the criminal world proves that, as no bank robber has wealth anywhere close to a drug kingpin.

** I am not arguing that a free market would end crime. People make bad choices under any system. My sole point is that "greed" does not lead to crime and fraud, those are the outcome of a bad understanding of one's best interests. Reading the life story of almost any criminal will convince anyone with a hint of sense that crime is actually one of the least profitable careers possible. (Again, ignoring services such as prostitution and drugs which are not what I consider "crime". When I speak of crime I mean force and fraud used to take goods form others. Productive ventures which society has criminalized are a different case.)

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POSTSCRIPT

One final point. Some have been making much of the fact that here and there people used the system to defraud others through various scams, and running with that have blamed the entire problem on "Wall Street greed". That is absurd. People run scams based on every law imaginable. There are those who benefit from the fact that marine fuel is not taxed at the same rate as automotive fuel. Does that mean that the production of maritime fuel is immoral? No, it means that con men will figure out how to exploit any situation.

The small number of profiteers, and those others who exploited their circumstances to make a bit extra do not mean they are to blame for the problems, any more than "tax cheats"* are to blame for the deficit. The tax cheats may add 0.1% to the deficit, and these scammers may have amde our current crisis 0.1% worse, but to focus on them is to ignore the huge part of the problem caused by the government itself.

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* I used quotes as the IRS tends to label more people tax cheats than I think deserve the title. Thanks to the rather adversarial approach the IRS has historically taken, they often ignore very real claims of confusion over tax laws, and label as "cheats" those who simply could not understand the byzantine tax laws. But that is the topic for another post.