Monday, March 12, 2007

Greed and Responsibility

I wrote yesterday about the sub prime real estate lending market. There were a lot of comments on the post by My Money Blog regarding who was at fault. On one hand some people called the lenders greedy because they were preying on "innocent" people - enticing them to accept the introductory "teaser" rates knowing that they could not afford them if the prime rate increased dramatically. Then there were those people that were milking the system for every dime, constantly refinancing their property every time their home value went up. Were not these people also greedy? They thought that they had a cash machine that could provide them with an unlimited source of money that they could use to indulge in their personal desires. I doubt many used the money to improve the property or to invest. Certainly none of the clients in foreclosure that I have encountered did any home improvements with their "windfall" profits. (I thought only oil companies could have "windfall" profits?!?!)

We live in a society today where we automatically blame "big business" for many of the social ills we encounter. But both "big business" and "big government" only reflect what we are individually and individuals tend to act the same way at work as they do in their personal lives. So, personally, I put 90% of the blame for the rise in foreclosures on the individual. But, unfortunately, society would reverse this ratio. Heck, why not sue these lenders for "forcing" you to over finance your home? I'm sure someone, somewhere has already thought of this.

The question is - is greed wrong? Capitalism itself depends to a certain degree on the greed of individuals to work in their self-interest. By working in your self-interest a person generally must provide good service to his fellow humans. The better service you provide, the more money you can make.

I think the problem with greed comes into play when you no longer provide a service to make money but are trying to "get something for nothing". The concept of gambling fits into this as does this whole "re-financing" pyramid that has occurred during the last 5 years. The government and or banking system has facilitated the ability of people to stoop to their basest level and get something for nothing. And a lot of them did with no thought to the consequences. And when the pyramid collapses, fail to take personal responsibility.

I am old I guess - I feel that success comes from hard work. When something is "too good to be true" - it's probably the wrong thing to do. And when you screw up you take responsibility and correct your errors.

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