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These days the papers are filled with stories of average Janes and Joes who though that a richer lifestyle was just a “flip” away in the hot real estate market. In a quest for easy money they scraped together miniscule down payments after having been assured by sales people that the sky was the limit for that little bungalow in a so-so neighborhood. Here in California you’d only have to look at a twelve year history arc to know that wasn’t true. Capitalism is hopeful and involves calculated risks, but greed is simply blind.
Last year one of my vendors decided to buy a fixer house with her sister, and they planned to flip it for a quick and easy profit. The advice I gave was repeating something I’d been told years ago: “By the time you can see the parade, it’s too late to get in it.” They did get the house repaired and sold, but were lucky to break even. By the time they factored in an hourly rate for their time, they would have done equally well delivering newspapers.
At every level from the top down, greed has played a part in this financial disruption, and it may have impacts far beyond the lives of people who simply gave in to accepting interest-only loans and other mortgage plans. Fannie Mae and Freddy Mac may sound like kissin’ cousins from a southern state, but they are entities created by Congress to help create, package and facilitate home loans. A couple of years ago the heads of both agencies were removed for irregularities in accounting and reporting. Big bonuses and greed were involved.
Earlier this year while in the Waldorf Astoria branch of the Cellini Jewelry store in New York, I had a conversation about who was buying the most expensive wristwatches ($50,000 plus) they offered. Several hedge fund managers, investment bankers and mortgage brokers was the reply. I have to admit that as a watch collector it was easy to drool over their selection and fantasize about having that kind of “wanna buy a watch” money.
Greed isn’t restricted to those people in the top floor corner office by any means. If the employees at Enron hadn’t felt they were in a special position with inside information and easy money to be made, they wouldn’t have thrown their savings into large stock purchases of the doomed energy trader. Warren Buffet is one of the world’s richest people, but you’d be hard pressed to find anyone who refers to him as greedy. When you hear Warren Buffet speak it is obvious that he has been passionate about the pursuit of smart business people who could benefit from associating with his Berkshire Hathaway holding company. Warren Buffet has made his fortune slowly, systematically and by seemingly playing by fundamental rules. That is my view of capitalism at work, creating or finding value as well as rendering a service to others.
Here’s another thought from the fictional Gordon Gekko: “Well, ladies and gentlemen, we're not here to indulge in fantasy, but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market, when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company!”
Beware those people who want it all without the work or the wait. Take a skeptical view of those who think they deserve a lot while creating very little. Don’t be afraid to call greed what it is, a lower part of the spectrum of human behavior.
“A people that values its privileges above its principles soon loses both.” President Dwight D. Eisenhower
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