The Current Financial Crisis Results from Unregulated Greed

The Nation’s Financial Crisis Resulted from the Follies of Capitalist Greed
By Robert N. Taylor
A folly is not just a mistake. It is a mistake whose outcome could have been clearly foreseen if the person committing the folly had merely applied logic and paid attention to historical lessons.
The above applies to the financial crisis currently rocking Wall Street and threatening to plunge the nation into a terrifying job losing, income reducing recession. Some of the decisions made by Wall Street financial experts, government regulators and capitalism-is-better-than-God politicians defy all rational thought.
The above culprits behaved as if the Great Depression of 1929 had never occurred. The essential lesson from that period came from the great British economist John Maynard Keynes. Keynes taught that capitalism - the so-called free enterprise system - had no self-regulating mechanism which guaranteed continual economic growth or full employment.
However, starting with President Ronald Reagan in the 1980s and culminating in 1998 when President Bill Clinton signed legislation doing away with the Cass-Steagal Act, politicians eliminated most of the major regulations which had been put in place to prevent another Great Depression.
Former Federal Reserve Board Chairman Alan Greenspan explained this before a Congressional hearing recently saying, “Our regulators became enablers instead of enforcers. Their trust in the wisdom of the markets was infinite.
This basically means that government regulators came to believe the myth that all regulation was bad and the best thing for the economy was to allow businesses to pursue their own greedy self-interest.
Thus, government stopped enforcing anti-recession rules and freed businesses, especially banks, to follow no regulation but that of pure greed. This is even though the Great Depression showed us that unregulated capitalism could produce tremendous profits in the short run but would lead to self-destruction in the long term as a result of excesses and mindless greed.
The chief example of this irrationality was not so much selling sub-prime loans to too many people with questionable abilities to repay; but allowing mortgage companies to sell these weak loans to investment banks which then magically converted them into securities and then sell the securities to other banks - both in America and abroad.
At each step in this process of greed, money handlers made a profit. But the financial geniuses lost track of the fact that housing prices were falling and the original suspect loans were not being repaid. When these loans were not repaid, the entire house of cards began to fall and we (taxpayers) ended up being forced to bailout the super rich to the tune of $700 billion because they made mistakes based on greed which blinded them to the underlying stupidity of what they were doing.
The bottom line is that capitalist greed must be regulated or that same greed will lead to folly and folly will lead to self-destruction.
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