Greed is Not Limited to the One Percent

Tasha Kheiriddin has an excellent column in the National Post today entiled: "Greed Doesn't Stop at the 1%" She begins:

Oh, that nasty 1%. Based on the global protests inspired by Occupy Wall Street, they are the source of all the world’s ills. The placards say it all: “End corporate greed”; “Paycheques not credit card bills”; “Banks for the 99%!”

But what about that 99%? What responsibility do they bear for the situation the world finds itself in? The answer is: plenty. Greed doesn’t just live on Wall Street: it finds a home on Main Street too. And when people think it’s perfectly OK to take out mortgages they can’t afford, or rack up credit card debt to buy flat screen TVs, clothes and appliances, or draw on their home’s equity to finance cars and vacations, well, as they say, you reap what you sow.

Of course, there are people who are hurting as a result of the recession through no fault of their own, she goes on to note:

Yes, there are many people who legitimately struggle to make ends meet. Who work two jobs at minimum wage, who eschew things many consumers take for granted – cable TV, a car – and who watch every penny. For them, I have sympathy: they are the collateral damage of the market meltdown, as jobs dried up and wages stagnated.

But you only have to crack open the business pages, or watch a reality TV show like Gail Vaz-Oxlade’s “Princess” (about heavily indebted young women) to start questioning the moral purity of the 99%. Many of these people are the authors of their own misery: they consider credit to be cheap, if not free, money. The result is that even here in Canada, the ratio of household debt to personal income has hit a whopping 150%, up 78% in real terms in the past twenty years.

This is the problem: many of the OWS protesters are people who have been personally irresponsible and now want big government to bail them out. Any recent graduate of a Canadian university who has a $50,000+ student loan is irresponsible. That represents the financing of a lifestyle, not an education.

The reality of the world is that there are always going to be many good things that some people cannot afford - or cannot afford without self-denial, hard work and delayed gratification. That is reality and many OWS protesters seem to be in denial - not of self, but of reality.

Kheiriddin goes on:

Sure, it’s easy to blame the Wall Street CEOs for bundling rotten mortgages and contriving arcane debt instruments that weren’t worth the paper they were written on. But someone took out those mortgages. Millions of people, actually, who bought more house than they could afford. Did someone hold a gun to their head? No. They were just as greedy as the 1%, only on a smaller scale.

Governments are also just as guilty. In the U.S., Fannie Mae and Freddie Mac granted mortgages to people deemed disadvantaged – minorities, the poor – in the hopes of increasing home ownership. This spurred the private sector to compete and fuelled the infamous subprime mortgage market.

This part is important. Several US administrations, going back to Clinton, have attempted to defy economic reality and common sense by pressuring banks to give mortgages to people who can't afford them. In the name of increasing rates of minority home ownership they have pushed for smaller down payments, longer terms and lower financial qualifications. This does not help minorities. It does not help anyone. What would constitute really helping minorities would be a growing economy in which they could actually qualify for mortgages under the old rules. But liberals cried "racism" at anyone who challenged them and the eventual result was the subprime mortgage crisis.

The subprime mortgage crisis was the main driver of the 2008 financial crisis. The problem was that too many financial institutions held worthless mortgages they had paid a lot of money for and they faced losses that threatened to sink them. They demanded that the government bail them out (using tax payer's money) because it was government that created the mess in the first place (which it was).

The moral of the story is that the old mortgage rules should have been kept in place. As a matter of fact, they were kept in place in Canada and you didn't hear about any banks failing in Canada, did you?

So it was government, coupled with individual greed, that created the mess. Wall St. just went along for the ride and it was no wonder government was so quick to bail them out. That way government can pass off blame for creating the mess to Wall St., which doesn't need to get re-elected.

That is how the world works. But the lesson is that we don't have too much capitalism; the lesson is that we don't have enough capitalism. If we had a real capitalist system the banks would have been allowed to go bankrupt, their profitable assets would have been bought up cheap by their competitors and the system would go on. But we don't have real capitalism; we have cronyism instead. If we actually had real capitalism there would have been no crisis in 2008 because the government would have stayed out of the regulating banks into giving mortgages to people who didn't qualify and there would have been no subprime mortgage crisis.

The point is that greed is indeed a problem, but greed is not limited to the 1%.