Greed, Conscience, and Big Government
26th September 2014
The financial crisis of 2007-2008, which led to the Great Recession, has been blamed on several things. Financial institutions are leading scapegoats. In particular, there were the retail institutions that lent money at low interest rates (made so by the Fed) to high-risk borrowers (in keeping with government policy), and there were the Wall Street institutions that “poisoned” financial markets by securitizing bundles of high-risk mortgage loans.
In both cases, the institutions are said to have been “greedy” in pursuit of greater profits. That “crime” (which is only a “crime” when someone else commits it) was in fact “committed” in ways that were perfectly legal and passed muster with government regulators. In sum, the financial crisis and subsequent recession were deeply rooted in government failure — not “greed.” For chapter and verse, see Arnold Kling’s monograph, Not What They Had in Mind.
Nevertheless, greed is often blamed for the financial crisis and its aftermath. Why? Because it’s a simple, mindless generalization that plays into the left’s perpetual campaign against “the rich” — a.k.a. biting the hand that feeds them. And it’s certainly a lot easier for ignoramuses (leftist or otherwise) to parrot “greed” than to seek the truth.