Is greed good?

greeddiceEven though we always have a few readers who resist it, I wish we were able to cover an even wider area of religious topics or topics that touch on religious issues than we do now. As last week’s breathtaking corporate bailout occurred, I was surprised we didn’t see any coverage of the moral or ethical issues involved.

Leave it to Religion & Ethics Newsweekly to cover the matter. Anchor Bob Abernathy interviewed Brookings Institution economist Rebecca Blank:

ABERNETHY: And that’s what happened in these cases. People were, traders were encouraged to take big risks and not pay attention to all the costs that there would be for people down the line if those risks didn’t pay off.

Dr. BLANK: That’s certainly true in part, but I will also say that there was also a culture where what those traders were doing was what everyone in all the cubicles next to them were doing. And, you know, there’s always the question of to what extent is that an excuse — and a justifiable excuse? There were also a lot of people at the very beginning of this, the whole sub-prime crisis that started this off, who saw themselves as providing more funds for low-income families. They were doing a good thing. So motives here are very mixed. I think it’s hard to say this is all about greed.

ABERNETHY: What about justice? Was there injustice involved?

Dr. BLANK: So, you know, we love a world in which the people in the white hats get rewarded, and the people in the black hats pay the price, and that I have to say doesn’t happen very often, particularly in a very complex economy. We’re in a time of panic right now where people have lost trust in what the banks are doing, what the investment firms are doing — lost trust beyond a level of reasonableness, to be honest, and it’s got to be stopped. And, you know, taking account of that fear and panic in many ways is more important than assigning blame one way or the other.

Dr. Blank’s perspective is interesting, but I think the show could have been greatly improved by a broader discussion. There are many different economic perspectives about what went wrong, which means there are different moral issues in play. I think a few more voices could have added a lot.

The other quibble, sent along by the reader who submitted the story, is that the discussion focused only on ethics and not on religion. While the topic of whether greed is a sin is engaged, Dr. Blank’s answer is not necessarily representative of a great many religious beliefs. A discussion of economics and religion using this hook would be welcome. Perhaps Religion & Ethics or some other outlet will discuss it in greater detail in the future.

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  • Steve

    …we love a world in which the people in the white hats get rewarded, and the people in the black hats pay the price…

    Problem is, in the world we really live in, we’re all wearing black hats…

  • Jerry

    The reason this story got to me is that the moral dimension to the economic crisis is being totally ignored in 99% of the media. Even in this story, there was no real perspective about alternatives to controlled greed.

    When I read many, many stories about groups working day and night to help those in need including Katrina and this year’s events, it’s clear to me that greed is not good and that we need to hear a more righteous perspective being articulated in the media.

  • Dale

    I think there were a couple of things missing from that interview. The word “greed” is used but never defined by Abernethy or Blank, and they may be using the word inappropriately. The definitions I linked to all include the concept that greed is the “excessive” desire for material things, so it’s a relative term. If my desire for material gain causes me to act in a socially responsible way, then arguably it’s not greed. The real question is when that desire becomes excessive. I can’t help but think of the Augustinian concept of misdirected love–it’s O.K. to desire material things because they serve the purposes of God, or serve the purposes of God by serving our fellow man, but that “love” is disordered and thus sinful when it is directed toward the material things themselves, and not God.

    I also think a more explicit discussion of the religious aspects of the story would have helped, but I disagree that Becky Blank was unable to provide that perspective. She’s a practicing Christian, and likely has thought about the theological implications of economic theory.

  • http://www.reenchantment.net Ken

    In 2002 I listened to Robert Spitzer S.J. and president of Gonzaga University at an ethics conference. He mentioned Enron, the big news at the time, but his explanation was simple and basic. The folks in the cubicles and the ones in the mahogany offices were incrementally seeing what they could get away with but had never asked the basic question about the “story” they were telling from the start: “Is this the truth?”

    I think Dave’s points are good, but lots of “practicing Christians” like Becky Blank — at Brookings — are standing with “feet firmly planted in mid air.” On my chart that lists the virtues, greed creeps in when Charity [from Latin caritas] is not present. Many like to think that they are doing “good works” when they “provide more funds for low income families.” It is always instructive to learn how much of their own money they commit for the needy and compare it to what they are willing to take from others for their big plans.

  • Dale

    Ken:

    I think Dave’s points are good, but lots of “practicing Christians” like Becky Blank — at Brookings — are standing with “feet firmly planted in mid air.”

    That’s what would make her perspective more interesting. She’s an extremely well-qualified economist, but has religious commitments as well. It would be interesting to hear if she sees any inherent conflict of values between the two viewpoints, and how she resolves them herself.

  • http://www.reenchantment.net Ken

    Dale: Sorry to have failed to see what your name is. No question about your request for more. I love to hear people explain in detail where their “first principles” lead them. That’s one of the more interesting spectator sports in the breakout sessions at “ethics” conferences.

  • http://www.reenchantment.net Ken

    Another thought: Accountability

    When no one is held accountable — please, I understand that there will be an ultimate accounting — they will do what they have managed to get away with in the past. Archbishop Chaput’s and other Catholic Bishop’s recent correction of politicians Pelosi and Biden on their slander of Catholic teaching is one kind of accountability. But for this Chaput is ridiculed by such as Ms. Sullivan of TIME magazine. And do you think she cares? Do you think her paycheck is in jeopardy?

  • Clare Krishan

    Since Peel’s reform of English financing rules, we’ve kinda trusted our deposits to the banks, with the simple trust one has for traditional historical institutions, for we thought that the money supply in bank notes could not be embezzled: what we deposit we can demand back with interest right? If we are less risk averse we can loan out our money in return for a share in a company’s limited stock right, as a stakeholder in a business enterprise with concommitant risk.

    But what Peel overlooked is that the practices of fractional reserve banking means that niave fiduciary trust is misplaced. The moral, ethical, if you will “religious’ aspect of the story isn’t man’s concupiscence aka his tendency to put his own interests ahead of those of others, ie greed, is much more plain vanilla question of jurisprudence: seignorage is stealing, keeping 90% of my deposits to lend to your other bank clients (expanding credit out of thin air, aka counterfeiting currency, by 900% using the money multiplier effect) and pocketing the profits is embezzelment, and monetizing the debts of others (by packaging them in securities “marked to market” that earn income so long as the counterparty’s efforts at economic industry are successful but which earnings evaporate under default) is a Keynsian fraud.

    Sadly the basic truths about private property have been so long ignored by our “betters” that they are addicted to the spiggot of cheap credit created at the wave of the Fed’s FIAT wand. This fantasy is about to come to a spectacular denouement, many claiming it as an “unforeseen” crisis, wherein lies a second aspect of the moral, ethical, one could even say “religious” narrative: that folks have an almost infinite capacity for self-delusion and will accept bold-faced lies being told to them just to keep themselves safely ensconced in their comfort zones. The financial sector has functioned under a form of deceit: since in fact we DO not really have 100% of our current account balances at our disposal, for 90% is used to float the financial media needed to extend the credit it profits from. A number of economists have predicted exactly this financial system collapse, but the academics in the US who disagree with them have dissembled about the complexity and sophistication needed to debate banking reforms. Its quite simple, all trade exchanges between banks and their clients are actually contracts and can be regulated under existing civil and criminal law, with 100% reserves so no misappropriation of our property is permitted, and the parties are not constrained to follow terms set by interfering central bankers setting the risk price for credit aka interest).
    see Jesus Huerta de Soto “Money, bank credit and economic cycles” for the historical jurisprudence going back to Roman precendence acknowledged by the Spanish Jesuits of Salamanca during the Age of Discovery serg,e mises.o
    and Acton.org’s Schola series at their “Journal of Markets and Morality”

  • Linda

    Where Credit Is Due: A Timeline of the Mortgage Crisis
    A field guide to the loan sharks and politicos who got us into the predatory lending mess”

    http://tinyurl.com/6bkeo7

    Dr. BLANK:

    the whole sub-prime crisis that started this off, who saw themselves as providing more funds for low-income families. They were doing a good thing. So motives here are very mixed. I think it’s hard to say this is all about greed.

    Dr. Blank overstated the cause of the sub-prime mortgages. The loans to low-income individuals is estimated at 1 of 4 subprime foreclosures. Some of the statements about minorities have been terrible. I have heard the media say people were responsible for reading the loan documents and understanding what they were doing.

    There were many disreputable loan maker using fraudulent methods to sell the borrows on the sub-prime mortgages to buy more than they could afford using adjustable rate loans. They were betting on the value of the house increasing; therefore, they would not lose during a foreclosure. The financial industry could have withstood the foreclosures, the investment banks got into trouble in the unregulated futures market.

    Dr. BLANK:

    Yes, I do think there are a few villains, but it’s probably too strong a word. . .

    there were no requirements here for greater openness and greater transparency, and of course that’s now what’s being called for.

    Villain is not too strong of a word. The blame rest on Congress/President & administrations that were influenced by lobbyist to deregulate the financial industry and the futures trading industry (credit default swaps)

    There were two major laws that caused a large portion of the problem: the Commodity Futures Modernization Act and the Gramm-Leach-Bliley Act of 1999.

    As chair of the powerful Senate Banking Committee, Gramm engineered passage of legislation that effectively ended the major regulatory restraints applied to the financial industry in response to the Great Depression. … It was legislation that the financial community, which contributed heavily to Gramm’s campaigns in the previous five years, desperately wanted and obviously has abused. So why now bail these institutions out?

    http://www.commondreams.org/archive/2008/07/16/10401/

    Congress has known since 2001 (Enron) that the following law needed to be changed. They have held many hearings, but no action. The hearings have focused on oil speculation, once again the investment banks greed increased the price of oil.

    A long, but educational article:

    The Commodity Futures Modernization Act allowed Enron to evade regulatory oversight. In addition to Ken Lay, the investment banks were lobbying for the Act. “President Bush’s presidential campaign received significant financial support from Enron ($1.14 million). Upon assuming office in 2001, Bush promptly scrapped plans put into place by former President Bill Clinton

    From 1993 to 2001, Enron gave three-quarters of its $5.3 million in contributions to the GOP…. Enron was a flea next to the corporate giants “

    http://tinyurl.com/4c5qke

    “Lurking in the background of this weekend’s collapse of two of Wall Street’s biggest names, is a $62 trillion segment of the $450 trillion market for derivatives that grew huge thanks to John McCain’s chief economic advisor, Phil “Americans are Whiners” Gramm. That’s because in December 2000, Gramm, while a U.S. Senator, snuck in a 262-page amendment (“The Commodity Futures Modernization Act”) to a government re-authorization bill (7,000 plus pages) that created what is now the $62 trillion market for credit default swaps (CDSs).”

    http://tinyurl.com/56rkcb

    “Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today’s subprime meltdown. [UBS hides American money in Swiss bank accounts to avoid taxes]

    Commodity Futures Modernization Act Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. “Nobody in either chamber had any knowledge of what was going on or what was in it,” says a congressional aide familiar with the bill’s history

    It’s not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act’s inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying.

    The act, he declared, would ensure that neither the SEC nor the Commodity Futures Trading Commission (CFTC) got into the business of regulating newfangled financial products called swaps—and would thus “protect financial institutions from overregulation” and “position our financial services industries to be world leaders into the new century.”

    http://iraqwar.mirror-world.ru/article/175497

    Congress has been told all of the above for several years during Congressional Hearings sometimes multiple times per year.

    Goldman Sachs made 4 billion dollars in 2007 betting (futures trading) the opposite of the other investment banks. Goldman bet that there would be foreclosures. Now Goldman is asking for government help to save the losers.

  • http://www.reenchantment.net Ken

    Linda writes:

    “Dr. Blank overstated the cause of the sub-prime mortgages. The loans to low-income individuals is estimated at 1 of 4 subprime foreclosures. Some of the statements about minorities have been terrible. I have heard the media say people were responsible for reading the loan documents and understanding what they were doing.”

    Inasmuch as loans were made without documentation, low-income when considering credit worthiness or appropriateness as a borrower likely constitutes far more than the 25% figure noted above.

    The fact that a great many of the borrowers happened to be minorities may be fact, but I haven’t heard any “terrible” remarks by anyone, even those in the media. And Linda, aren’t people supposed to be responsible for understanding what they were/are doing? Should these people be voting if they don’t know “what they were doing” ?????

  • Linda

    Ken says:

    Inasmuch as loans were made without documentation, low-income when considering credit worthiness or appropriateness as a borrower likely constitutes far more than the 25% figure noted above.

    I have not seen any numbers for no documentation loans.

    The point is the motive for approving the subprime mortgages. Was the motive greed or was the motive to help people get a house?

    Ken says:

    And Linda, aren’t people supposed to be responsible for understanding what they were/are doing? Should these people be voting if they don’t know “what they were doing” ?????

    The paperwork for financing a home loan in very thick. I remember many pages of “sign here.” There are a large number of people that are not capable of understanding the details. I have a couple of friends with Masters Degrees that struggle with financial things. People have different aptitudes for learning. It is a shame that people cannot trust others.

    A large percent of votes are cast by emotion rather than issues, which is why experts are telling Obama to give short passionate answers.


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