Posted by: Administrator in wall street, Troy, Sublaban, Steve Jobs, Standard and Poors, refinancing, myblog, mortgage brokers, moodys, moderation, Microsoft, Mark Zukerberg, Greed, good, Faisal, Facebook, CEO, Brooklyn Troy, Brooklyn, Bill Gates, bad, Apple, Adam Smith on
Mar 21, 2009
The current economic meltdown can largely be attributed to greed. It was the greed of everyone involved in business over the last several years. Sure on the surface all there is to blame are the bankers on Wall Street, Mortgage Brokers and the CEO's at the major financial firms, but the consumers themselves played their part as well.
Examples of this? The first time home buyers buying houses they knew they couldn't afford, but had to have because everyone was doing it, and ''the only way you could lose is if you didn't buy.'' Of course they may or may not have fully understood the loans or how severe the potential downside could have been, but there needs to be some accountability. It was greed that drove these consumers to keep refinancing and using credit to support their newfound lifestyles, using their homes as ATM machines. The automakers were greedy offering 0% financing and practically giving away cars to consumers, who were ready and willing to take home a new car. The examples go on and on. The fact is that everyone played their part in the financial mess and that has left me to answer two simple questions. When is greed good? When is greed bad?
Greed is good and necessary in order to have forward progress as a nation built on capitalism and opportunity. Greed creates innovation and creativity, it is what drives people to invent things that were once inconceivable. Examples of this are Bill Gates and Microsoft, Steve Jobs and Apple, and Mark Zuckerberg and Facebook. In 1776, Adam Smith explained how pursuing profit helps others: ''He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.'' There is however always the saying that everything is good in moderation.
It is when this greed becomes the core of decision making that everyone starts to head in the wrong direction. Mortgage CDO's were created with blatant disregard to the downside, especially for the investors who had their advisors shoveling their money into these things. In fact there was even a market created that banked on their demise. Banks were writing loans to consumers not based on eligibility, qualification, but how much money they could make or how much earnings they could report. It is here that greed begins to consume industries and even a nation. As a result whistler blowers cant afford to blow their whistles and credit rating agencies, like Moody's, Standard and Poor's, begin to loosen their belts and that is when you end up with a financial mess that we have right now.
So what is greed in moderation? That is a very fine line to try and find. There are a few simple principals that I have learned that seem to be a pretty good indicator of when you may be over eating on greed. First when everyone is pretending that you can't lose with an investment and unqualified people begin entering into uncharted waters , i.e. stock and real estate boom. When Tom the plumber begins giving out Real estate or stock investment advice then you know that too many people have gotten too greedy. Second if something sounds and looks to good to be true it usually is. Third you always have to keep your moral character in check, by that I mean if you feel and know you are or shouldn't be doing something, buying something or are sacrificing your reputation, and character for the paper chase then you have become too greedy. Moving forward there will always be another boom or bust, another recession, or another time when you just plain get caught with your hand in the cookie jar but it is the people, the investors, the companies with the largest amount of mental clarity and self-check and balances that will and always will remain on top. Remember life isn't a sprint its a marathon, live each each day like its your last but remember to always prepare in order to have a better tomorrow. The last thing you want to do is set your tomorrow up to deal with the consequences of yesterday.
