“Greed” as Scapegoat

Though the Vice Presidential debate had its share of irritating points (neither candidates support of gay marriage for instance), there was one in particular that I found to be absurd rather than just merely wrong. It was both candidates insistence that “greed on wall street” was to blame for the financial collapse and ruin. I understand why they said it (those rich I-Bankers are easy targets for the populism-inclined candidates), I just want to speak briefly about how ridiculous the statement is. In short, blaming this collapse on wall street greed is akin to blaming gravity for TWA 800. Naturally, both greed and gravity were integral parts of their related calamaties, but blaming them truly misses the point. Every flight that occurs in our atmosphere at 50,000 feet experiences gravity. A vast majority of them don’t crash. What was unique about TWA 800? Not gravity. Therefore it must have been something else. Similarly, every financial market in the world, for all of history, has been characterized by greed. Indeed, greed is an integral part for the functioning of the financial markets in a way that gravity is not for flight. What one needs to do when figuring out whom/what to blame in this financial crisis is isolate the variable. The constant was greed. What changed? Now there is likely to be much legitimate debate about what changed (and therefore what to blame), but the fact that both Palin and Biden both harped upon wall street greed as if it was a meaningful aspect of the collapse is absurd. In my mind, the likely culprit was lax regulation of the mortgage markets combined with a failure to understand that the new vehicles meant to spread risk across a greater pool of parties only seemed to tie large financial institutions more tightly together, so when Bear went, so too did Lehman and AIG.

The last part is mostly amateur speculation on the part of a bored law student, but I am quite certain that we can all agree that blaming greed is a meaningless and completely unhelpful tendency. It’s a shame they have to do it.

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2 responses to ““Greed” as Scapegoat

  1. Seriously, can you refrain from the plane crash references? At least until I’m safely back on the ground next Monday…?!

  2. Where does personal responsibility factor in? Should I share the blame if I accept a loan I can’t possibly afford? Who is ultimately responsible for understanding the contracts they enter into? Greedy mortgage resellers, ignorant homebuyers, lax regulation. So because one side of a contract I had no part of was unscrupulous and the other too dumb to protect themselves, I as a taxpayer have to suffer a failing economy. I think it’s time the government live within its means and insist its citizens do the same.

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