Friday, November 28, 2008
One of the liberals favorite words when it comes to free market economy is “greed”. But what is greed? Merriam Webster defines greed as: a selfish and excessive desire for more of something (such as money) than is needed. The problem with this definition is it uses relative words like: selfish, excessive and needed. These words have no absolute definitions so they are subject to arbitrary definition by anyone who wants to make a point or further their agenda. One of the favorite targets of liberal politicians and the liberal media are CEOs. But who has more greed, the CEO of Toyota (a fortune 500 company employing over 750,000 people) earning 1 million dollars annually or the president of The University of Chicago (a relatively small university probably employing only a few thousand people) earning 1.5 Million dollars annually? You could make a case that the university president is greedy relative to the Toyota CEO. It’s interesting that liberals never criticize as greedy liberal CEOs like Warren Buffet, the second richest person in the US, who made his fortune practicing free market investing. Thomas Sowell said in his column today: “The average pay of a CEO of a corporation big enough to be included in the Standard & Poor's index is less than one-third of what Alex Rodriguez makes, about one-tenth of what Tiger Woods makes and less than one-thirtieth of what Oprah Winfrey makes. But when has anyone ever accused athletes or entertainers of "greed"?” Some people think that greed caused the recent mortgage crisis. I agree. It WAS greed that caused the recent mortgage crisis. It was political greed of politicians to grant their constituents favors so as to be re-elected, it was social greed of moderate/low income people to live in houses with mortgages they could not afford and it was financial greed of investors buying risky investments based on those risky mortgages. Greed is relative like beauty – in the eye of the beholder or like pornography – you know it when you see it.
Monday, November 3, 2008
With all the talk these days about CHANGE by both presidential candidates it brings to mind a story I recall from my childhood. Be careful what you wish for. A small boy with a crippled, badly deformed left arm went to a wishing well one day. With his good arm he pulled out a coin and tossed it in the well saying: “Wishing well, wishing well, please change my arm to be like my other arm.” POOF: His right arm was immediately crippled. Moral: Be very careful of the change you wish for. It may not be what you expect. Also, watch out for unintended consequences. For example: The Community Reinvestment Act (CRA) passed in 1977 is designed to encourage commercial banks and savings associations to meet the needs of borrowers in low- and moderate-income neighborhoods. The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to relax mortgage loan qualifications. The intent was to make home ownership more available to low/moderate income families. A valiant goal. However, this act gave rise to the “sub prime” mortgage industry that is at the heart of the current financial crisis. Congress passed a $700 Billion dollar “bail-out” bill to shore-up the financial institutions from complete collapse. The saddest thing is that many of the low/moderate income families that this act was meant to help are losing their homes in foreclosure and declaring bankruptcy. Now their credit records are ruined and THEY STILL DON'T OWN A HOUSE!!