Are we capable of responsible capitalism? A definition of terms is in order. Responsible capitalism is defined as capitalism performed in such a way as to perpetuate the system as a whole as well as create profit for the individual. Reliance on short term thinking is a sign of decadence and eventual decline if the future is not considered when making present profits.
In the vernacular, "I got mine!" The carnival atmosphere of the Boom has now given way to sober reflection of how to cope with the aftermath of overproduction and subsequent surplus in the housing market. Derivatives are now known to be gambling but how the taxpayer ended up paying for losses incurred is beyond comprehension.
I have not read the new financial regulation legislation. It does look as if investigations for fraud are just beginning. The raters will now be rated and schemers will keep company with Madoff. Do the regulators and the appraisers really work for the lenders? This cozy relationship needs to be dismantled, distanced, anything to remove them from such proximity.
So the scheme unravels to begin with easy money pumped into the system from the government. Developers seize on this opportunity to get loans to build houses that were then sold to people who previously could not get credit. Since credit standards were apparently nonexistent why not charge more for the units and get more money on return? All they had to do was find an appraiser who would raise the appraisal on demand in order to facilitate more profit per unit.
This was a good deal for everybody, the developer, the builder, the broker.....These became the fodder of the subprime mortgage derivatives. Empty calories were these 'investments' touted to be good returns for investors, but were actually just failing vehicles for hedge funds to bet against. Who was not surprised when these derivatives failed?
But to forge ahead, we must plan for the future. We have Ponzi schemes and now we have Subprime schemes, both of which will be run by outlaws. At least we can now identify the scams. I can't help but wonder what the next scam will be. We can all pray for some morality to continue this economic system.
Profits expectations remain too high, with incredible luxury demanded, not just a comfortable living expected. In this world of excess human population, every rich man can be viewed as having the portions of many. I think some luxury is deserved for work, but not deserved for social manipulation resulting in profit, like the subprime scandal that morphed into an insurance scam betting on failure. So they created a scam and hit it big for a while. Clawbacks are hell. How about rebating the money cities, counties and states lost in the housing market crash instead of paying off foreign bankers and irresponsible moneylenders and brokers? The boom debt needs to be paid off. Who owes whom? Let the courts decide.