A Crisis In Character

The financial crisis of 2008 is an example of what is happening today in the character of our leaders in both our government and in business.  

When the tech bubble burst, the government was looking for a way to boost the economy.  So they found a way by manipulating the real estate market through Fannie Mae/Freddie Mac.  This created a housing bubble.  Fannie Mae and Freddie Mac are government sponsored corporations.  The government funded these organizations lavishly, and then they were also allowed to contribute to political campaigns at the same time.  There was also not much supervision.  There are laws concerning fiduciary duties and fraud, but they were never enforced. 

The idea of home ownership was elevated to a national goal.  Both republicans and democrats were seduced by this idea that everyone should own a home.  This set the stage for Fannie Mae and Freddie Mac to grow into toxic institutions. 

Wall Street saw a tremendous opportunity with an area that was poorly supervised by the government and made it a tremendously large opportunity to make money.  They would take large bundles of mortgages and sell them to large financial institutions such as pension funds, then at the same time sold them short.  They really hammered them by buying credit default swap insurance.  Then they bought the bonds back after they crashed.  They were deceiving the people they were dealing with at every level.

Almost everyone in financial authority embraced this.  The Federal Reserve “saw no evil”.  The ratings agencies stamped their highest ratings of approval on these debt instruments.  Wall street loved the instruments because of the money they were making from them. 

Alan Greenspan even said that we would never have a financial crisis again because we have an instrument called “credit default swaps” which have taken the risk out of lending.  As it turned out, it magnified the risk instead. 

At the heart of this is a series of unethical acts.  Wall Street acted unethically because the packaged products they knew to be risky which should have made them largely worthless, and then on top of that they sold them short at the same time they were selling them to clients. 

These were mortgages for people who couldn’t really afford the homes.  That made them all risky.  So the general public acted unethically because they were letting the lenders lead them into buying homes they couldn’t afford.  The people borrowing this money knew they ultimately wouldn’t be able to pay it. 

Government didn’t use its moral authority to stop Wall Street from playing their game of selling risky mortgages and then selling them short.  It didn’t stop lenders from making loans to people they knew couldn’t repay.  And they should have warned the public that they are setting themselves up for failure.

Then after the crisis in 2008 happened, our government leaders started telling us we shouldn’t point fingers.  So we were all avoiding accountability.  In this lack of accountability we started swimming in a murky sea of collectivism.  There was no longer any personal responsibility. 

It has become obvious there is a growing lack of personal responsibility and our leaders are failing to live up to the virtues this country holds dear.  What do you think we should do about it?