Greed in the Economy: It's the Morality, Sinner

By Jim Wallis 09-18-2008

Everyone has heard the famous phrase, attributed to James Carville, which supposedly won the presidential election of 1992 for Bill Clinton: "It's the economy, stupid!" It's still good advice, especially as the shocking collapse of the financial markets has turned the election campaign into a much more serious and somber discussion than lipstick on pigs.

But the issue is deeper than just the economy. I would now rephrase Carville and say, "It's the morality, sinner!" And I would direct it to the people who have been making the decisions about the direction of this economy from Wall Street to Washington. Here is the morality play:

Aggressive lending to potential home-buyers using subprime and adjustable rate mortgages led to "mortgage-backed securities" being sold to investors at high returns. As housing prices dropped and interest rates rose, homeowners got caught, fell behind on payments, and millions of foreclosures followed. That resulted in the mortgage-backed assets losing value with banks unable to sell the securities. So the subprime lenders began to fail. Asset declines then spread to investment banks. We have now seen the sale of Bear Stearns brokered by the government, and last week, the government took over Fannie Mae and Freddie Mac as mortgage defaults threatened them. Then Lehman Brothers fell into bankruptcy and Merrill Lynch was sold. Now another bailout, AIG, the largest insurance company in the country -- whose potential demise threatened the whole financial system even further.

During the height of the lending frenzy, many people got very rich, as they did during the previous technology bubble. Now with the collapse, experts say the most likely result will be further tightening of credit and lending standards for consumers and businesses. Home, retail, and business loans will become more expensive and harder to secure. And the consequences of that will spread to most of America.

In the accounts and interpretation of these events, a word is slowly entering the discussion and analysis - greed. It's an old concept, and one with deep moral roots. Even venerable establishment economists such as Robert Samuelson now say, "Greed and fear, which routinely govern financial markets, have seeded this global crisis

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