Now, I am sure you are thinking, what “Divine” notion am I writing of? It is the notion of freedom. We have seen a convenient version of this notion played out in our stock and mortgage markets. Not working too well is it. So what is wrong with the notion of freedom? “Freedom’s just another word for nothing left to loose,” so wrote Kris Kristofferson. So how come we have lost so much?
We have mistaken blind egocentric gluttony for freedom. We have been told that a free market will seek equilibrium, just like nature. OK, so much for that illusion. Freedom is a form of love. You can’t love from an egocentric position; you must take into consideration the other party. Not so in our “free” market system. Unbridled capitalism is single-sided gluttony, plain and simple. The bottom line is all that matters. It takes responsibility for nothing and no one. Even the executives attempt to take everything they can from their company and its shareholders. They give themselves going away gifts, called golden parachutes, while everyone else gets golden showers. And this is somehow legal and the role model for corporate executives! Without regulation we will all be working for the company store, in abject poverty. A few fat cats will trickle down pennies to the starving. That’s why there were laws against monopolies. These laws under the guise of “less government” have had their teeth extracted. Lady Justice without teeth gumming the law.
Washington Mutual (WaMu) is a bank that is teetering at the moment. They were successful at offering mortgages with a 1¼ percent “initial” rate (teaser). The actual rate was whatever the going rate was, somewhere in the four to more than five percent range. You can qualify for a much bigger mortgage at the teaser rate then you can at the actual rate, which by the way was adjustable. All you needed to qualify for a refinance was an appraisal and a pulse. As an added bonus, you could choose to pay all your payments at the teaser rate. Of course, that didn’t cover you mortgage payment, so the balance was added to what you owed. This is called negative amortization, though they did not disclose it as such. If you borrowed ninety five percent, you could quickly owe more then the house was worth. This is especially true if the rate adjusts higher, which it did. Now, add to this the fact that houses have dropped substantially in value and you would have a disaster. That’s what we have. And they are wondering why this happened. Blind greed is why.
Why was this allowed, why did WaMu executives even think this was OK? People who can’t qualify, can’t qualify, just as a pig with lipstick is still a pig. Can you imagine a young person who wants to be a pilot being given an F-18 to train in? Of course not, because it is more plane then they can handle. Similarly, if you can only qualify for an illusionary rate of 1¼ percent interest on a home’s value when the non-illusionary rate is 4 times higher, then you have more house then you can handle, dah! Did WaMu executives get huge compensation for what seemed like “successful” loan campaigns, you bet they did. Did they donate to their local organizations (politicians) that oversee, or turned a blind eye to their actions using bank money, yes! Did they lose any of their funds or bonuses for this, no! Did most of us turn a blind eye to this, yes! WaMu is just an example of a free market, without oversight. In an ideal world the oversight would come from within each person. As it stands, we don’t need to consider this possibility at present, do we?
OK, so now what do we do? It is time to recreate our notions of what are correct behaviors. Human reality, it is now clear, will not adjust to our ideal notions. Our thinking it will and did is our arrogance. Can you hear the whistle of the approaching freight train? It is the Humility Express. It is going to take the world for a ride. Clearly, it won’t be pleasurable.
We need to be honest, educate all, tax highly these overpaid executives and other gluttons who reap huge profits at the expense of other. And forfeiture, penalties and jail time is proper for those that created this, manipulated for and profited by our present situations, and there are many. We are all responsible and we must all make it right. The actual dynamics of how we do this will have to be reasoned out. No question we need the teeth put back in our laws and judicial system that have been removed. But definitely no more lies, no more smoke and mirror illusions. Greed and gluttony must be seen not as admirable, but reprehensible. Who we are being as human being must be a top priority and not seen as irrelevant as long as we’re winning. We need to look clearly at what we have chosen to believe as truth that was self-serving, and the truth will set us free.