Greed at heart of economic nightmare

By Jack Z. Smith

“Where is there dignity unless there is honesty?”

Marcus Tullius Cicero

“Honesty is the first chapter of the book of wisdom.”

Thomas Jefferson

“There’s one way to find out if a man is honest — ask him. If he says, “Yes,” you know he is a crook.”

Groucho Marx

Diogenes, the Greek philosopher who is said to have searched in daylight with a lantern for an honest man, might become quite discouraged in today’s world — especially if he were regularly reading newspaper headlines or watching CNN.

The world always has been amply endowed with liars and crooks. But it seems we’re exceeding historical norms in today’s troubled times — and wherever we’re finding brazen dishonesty, its companion is unbridled greed.

In the past week, Americans have been outraged by the dubious morality of AIG shelling out huge bonuses totaling $220 million to hundreds of employees while the insurance giant accepts $170 billion in bailout money, courtesy of U.S. taxpayers.

While AIG might not have broken any laws in playing Santa Claus to employees who helped wreck the company’s bottom line and spawn a global financial crisis, most Americans regard the bonus payouts as a despicable, fundamentally dishonest action.

We’ve also been treated to the likes of Bernard Madoff, who will probably will spend the rest of his life in prison as a result of his long-running Ponzi scheme that prosecutors say bilked investors of tens of billions of dollars (and apparently prodded two investors to commit suicide); and R. Allen Stanford, the Texas billionaire whom the Securities and Exchange Commission says hoodwinked investors through a “massive Ponzi scheme” and whom the Internal Revenue Service says owes $226.6 million in back taxes, penalties and interest.

Then there’s Christopher J. Warren, a suspect in a nationwide mortgage fraud scheme centered in Roseville, Calif., who was arrested in February at the Canadian border with $1 million in Swiss bank certificates and $70,000 in cash stuffed in his cowboy boots; and Annette Yeomans, booked into jail this month in Vista, Calif., during an investigation of claims that she embezzled $9.9 million from a her longtime employer, a cabinet company, to pay for personal expenditures such as $240,000 for 400 pairs of shoes and $300,000 for designer clothing.

If you think about it, dishonesty and runaway greed are at the very heart of our economic nightmare, a wrenching recession that has resulted in 4.4 million Americans losing jobs, a stock-market meltdown, the cratering of powerful financial institutions, a severe credit crunch and soaring real estate foreclosures and bankruptcies.

Housing crisis

The biggest trigger for the recession was a housing crisis brought on by an overpowering avalanche of dishonesty and greed.

There were real estate agents and mortgage brokers steering homebuyers into deceptively high-cost subprime loans; lenders making loans with hidden fees, balloon payments and interest rates resetting to much-higher levels; appraisers artificially inflating home values; Wall Street firms selling pools of mortgage-backed securities without fully disclosing their risk; credit-rating agencies giving gilded ratings to those securities; and homebuyers lying about their incomes to get loans.

The ensuing housing crisis and collapse of home values from Florida to California fueled a much-broader economic meltdown.

Most of it could have been prevented by basic honesty and personal self-restraint against rampant greed, coupled with decent government regulation of financial institutions.

The sad truth is that disturbing flaws in the human character probably contributed more to America’s horrific recession than did systemic weaknesses in the economy’s infrastructure.

X Jack Z. Smith is an editorial writer for the Fort Worth Star-Telegram. Distributed by McClatchy-Tribune Information Services.