Jun 11, 2012

Posted by in Business ethics, Political comment, Social comment, Values | 0 Comments

Greed conquers morality

Living in a capitalist society has many attractions thanks to an underlying premise of reward for effort. Sympathy should be accorded, of course, to those who find themselves excluded from the benefits through no fault of their own. And equal acknowledgement must be made that there are many in that category. Still, given the absence of any recorded evidence of a socialist or communist system delivering a comprehensive utopia of equal and substantive quality of life for all, capitalism wins by default.

Yet capitalism cultivates greed and oft-praised aspiration is all too frequently supplanted by envy, if not avarice. Never attractive qualities. And greed is something we should be most wary of for it contains the seeds of destruction, not just for the individual but for entire societies. The economic meltdown and consequent social dislocation and community violence that have wracked Greece in the second decade of this century is a case in point. The 2008 Global Financial Crisis likewise demonstrated the devastation of lives that can be caused by unrestrained profligacy when those who routinely populate the lesser reaches of wealth and privilege suddenly think they have found a broadly available means of correcting their personal financial inadequacy.

There are few so gullible as those who are greedy. Fewer still who display the cupidity of those who believe they languish behind because it is the ‘fault’ of others. And there appears to be nothing quite like a property or equity boom in a capitalist society to stimulate the creative juices of lust and envy. Together, these forces can create a perfect storm and have done so on quite a few occasions. That’s when the many pay the price for the inadequacies of the few.

So, it is instructive to consider the mindsets of those who help drive the booms – and consequent busts – that make capitalism such a thrill ride.

A startling example was highlighted recently in reportage of legal action that is going all the way to Australia’s High Court, such is the importance of the issues at stake.

A decade earlier, a middle-aged couple were asked if they wanted to unlock the equity they had in their $750,000 home to buy an investment property. The husband had been unemployed for 18 months at the time and earned no income. His wife earned just $23,000 a year. Despite this obvious and unquestioned inability to repay principal and interest on a substantial loan, the couple were provided with a $500,000 mortgage.

Remember that the first casualty of greed is rationality. So it was that avarice and cupidity came together in perfect synchronisation in an environment of so-called ‘low doc’ or ‘no doc’ loans which swept the globe early in this new millennia. The contrivance of this form of lending (if it could ever be graced with such a name) was simply to build ‘mortgage books’ which would then be sold-off to other syndicates, each one further at a remove from the inevitable crash when reality hit. A mega-billion, if not trillion, dollar game of musical chairs with everyone knowing that someone would have no seat when the music finished.

The trouble with this particular game was that it was played with the willing connivance of regulators – and, by extension, governments – who were as complicit as any mortgage broker and who should, but still refuse to, acknowledge guilt. The complicity of governments means it is we taxpayers who, by and large, have to foot the massive bill for this profligacy and will be paying-off the accumulated debt for a generation.

In the spirit that those who fail to learn from history will be condemned to repeat it, we should spare no effort to discern the motivation and sense of responsibility of those who willingly took the proffered low doc or no doc loans.

Back to our magical mystery buying couple who quickly came to grief and, when faced with the prospect of having their home repossessed, resorted to the courts for salvation. And, remarkably, they found it. But don’t be quick to rush to hallelujahs and praise the lords for we prudent ones who restrained any innate greed are still paying the price.

An extraordinary difference has emerged in the way the law has been applied to these sorts of cases in America and Australia. The US experience has tended to be that borrowers were held to account, rather than lenders. Here, in this particular case, the opposite has happened. A Supreme Court ruling has absolved the couple of 75% of their $500,000 loan. The basis for this was that the mortgage broker was found to have falsified the couple’s income and assets to ensure their loan was sanctioned. Two other couples have been absolved entirely of their loans under similar circumstances.

Yet, the husband in this apparently sham dealing freely admits they couldn’t afford the loan at the time and says – without any hint of apparent shame – that had the lender called either them or their accountant, they would have acknowledged they couldn’t afford the mortgage. Somehow that seems a dreadful misconstruction of the adage, let the buyer beware.

The court of public opinion must surely be open to reach a verdict that this couple’s morality is seriously deficient. If they can acknowledge they couldn’t afford the loan, what possible motivation – other than sheer greed or avarice – could have persuaded them that they could proceed to take the money. And bear in mind that this was not a $5000 or even $50,000 loan but half a million dollars with just one job and $23,000 pa income between them.

On the basis of reported attitudes, this couple must have known the almost certain likelihood was that a default was nearly inevitable. Yet, a court has ruled in their favour and freed them of $375,000 of debt. And who pays? Yes, we, the majority who don’t lie and cheat and con inevitably pick up the pieces through higher taxes, premium increases, reduced availability of finance and many other imposts.

Should we be so heroically selfless as to let this type of deceptive conduct go unchallenged? Governments around the world, and their regulatory arms, are still pretending they did nothing wrong. There are still Credit Default Swaps and many other forms of financial chicanery keeping those with lightweight consciences living in a style to which they have no entitlement.

It is sad to think that society still has to guard against those who would defile the majority but it is clearly a price we have to pay to help protect our liberal, capitalist freedom. It is said that eternal vigilance is essential to protect freedom but surely it is just as necessary for the silent majority to develop a voice that demands our elected representatives let their actions speak eloquently on our behalf. Their silence is ruining us.

 

Acknowledgement: Anthony Klan, The Australian, 5 June 2012.

 

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