We always knew this– ppl will live up (or down) to whatever is Expected of them.
And so now, the Gov’t Regulators are belatedly realizing, ‘wow– all these mortgage traders were just focusing on short-term gains… regardless of future viability’.
Well, OF COURSE they were. Hasn’t anyone ever hung-out w/ Sales-guys, at Quarter-End? By far & away the majority of them get panic-stricken if they’re below Quota… & they aren’t thinking about their own “future viability”, let-alone of their Company. And what are mortgage traders but basically glorified Sales-guys?
And thus that’s exactly how the ‘Free Market’ works– despite all the paeans to long-term viability (““Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief”, Alan Greenspan, once considered ‘The Oracle’, who presided over one of the longest Bull Markets ever)…
…Instead it’s very simple:
PEOPLE AREN’T INSTITUTIONS… People have their OWN “Self-Interest” in mind.
And even if many, if not most ppl don’t act to ‘take-advantage’ of ‘grey-area’ situations… those that do more than make-up the difference.
So if anyone says, “well, they didn’t know”– sure they did… just by the fact that nobody wanted to talk about how their “collateralized debt obligation” investments weren’t performing as well as expected, by mid ’2006… and yet they still sold them as much as they could(!)
And if anyone wants to instead blame politics, ie
All.That.Doesn’t.Matter. Both Parties blew it on this one!
But regardless of who ‘set-up’ the situation, nobody ‘forced’ anybody to act unethically:
1) Nobody “forced” these traders & trading companies to create those “C.D.O.”‘s, ie. actively hiding potentially risky loans, & rebranding them as AAA.
2. Nobody “forced” the myriad lending institutions to take predatory practices, ie. mislabeling, mis-informing, & outright lying about the risks of variable-rate mortages (ARM)
Just b/c there is potential for abuse, does not mean it’s condoned. Or are Free-Traders saying we need even more explicit laws? More detailed.. um, “Adult Supervision“?(?!)
So the question remains:
“Does the ‘Free Market’ really work?” ie, are these kinds of excesses & damage ‘normal’ & acceptable? That would be the logical outcome of ‘Free Market’ thinking… but I can’t find a Free Marketer who will admit that… and Greenspan just admitted quite the opposite. Really, it’s one thing to have ‘pure philosophical ideals’, & quite another to watch as economic tragedy cuts a huge swath across your Country.
And if Free Marketers are thus admitting, “these kinds of things happen… but the Market corrects for them (eventually)”…
…while -also- saying “this shouldn’t have happened”…
…then basically what they’re saying is, “We Need Regulation”.
So much for “Free Market” philosophy…
It, just like the (small) minority who act unethically, Can’t Be Trusted.