"So, oft it chances in
particular men,
That for some vicious mole of nature in them,….
By the o'ergrowth of some complexion,
Oft breaking down the pales and forts of reason,….
That these men,
Carrying, I say, the stamp of one defect,
……be they as pure as grace,
As infinite as man may undergo–
Shall in the general censure take corruption
From that particular fault."
this selection from Hamlet does as good a job as any I have seen in describing the character issues that are
at the heart of our current economic woes.
In particular, I’m thinking of the many executives who initiated the current economic malaise that we are
all dealing with.We need to include tens of thousands of employees who weren't "just following orders."
From the subprime
lenders to Wall Street to the rating agencies to the investors who bought the
loans to the overly creative people who put together the scary credit default
swaps, all of them were co-conspirators in this gigantic fraud that was
perpetrated on the rest of society.
You can cast a net
that includes very smart people like Alan Greenspan who thought that the
capitalist system would be self-correcting enough so as to prevent exactly the
kind of thing that has happened. It also
includes some super-smart executives at some of the largest financial
institutions in the country who simply did not understand the level of risk
that their organizations were both taking and passing along to others.
Arguably it could be
said that if they should have put a halt to any activity that they didn’t understand,
but when large corporations are involved in over 100 different kind of discrete
business, can anyone understand them all? Perhaps not, which is a pretty good
argument for not allowing companies to get involved in more businesses than
they CAN understand.
Then there are outfits
like Washington Mutual and Countrywide that were in just one business, making
mortgage loans to consumers. Each had a slightly different but warped business
philosophy that they executed perfectly. And then there are Fannie Mae and
Freddie Mac, each of which had basically one mission, but flawed executives and
inadequate oversight. The result of their destruction was a loss, so far, of
something like $500 billion in shareholder equity and bailout funds.
In every case, the
mostly well-meaning CEOs were caught up in their own hubris, the thought that
they really had it nailed, which really was nothing more than their inability
to overlook their own defects of character and the defects, cupidity, and greed
of those around them.
If I had a wish, it
would be to send to each and every CEO of a financial institution and the
regulators this quote from Hamlet for them to read every morning when they head off
to work. Those defects are alive and well, although today perhaps sitting in
some mental closet just waiting for the next opportunity to wreak havoc again. Perhaps if those CEOs were better armed they might be more diligent in seeing it when it arose.
I am not so naïve as to
think that this can’t happen again. It surely will and, to quote Shakespeare
again,
"The fault, dear Brutus, is not in our stars, but in ourselves."
Randy Johnson Randy is a Credit.com contributor and seasoned mortgage expert. He writes about home buying, mortgage laws and real estate finance issues. He has financed over $1 billion in properties, is the author of How to Save Thousands of Dollars on your Home Mortgage and he is a feature columnist for Savvy Borrower.
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