Greed Watch

By MICHAEL HALEY

One of my contentions about the cause of the recession has been that it has been brought about out of greed, the other issue being a lack of direction which leads to more greed.

It doesn’t appear that Wall Street gets it, even yet. One really fun demonstration is Christopher Lehman’s take down of a recent New York Magazine article by Gabriel Sherman bemoaning the fate of the poor rich Wall Streeters.

Lehman writes:

"The secret conviction coursing through Wall Street’s caverns (according to Sherman) is this": "Those who select careers in finance play an exceptional role in our society. They distribute capital to where it is most effective, and by some Ayn Rand-ian logic, the virtue of efficient markets distributing capital to where it is most needed justifies extreme salaries -- these are the wages of the meritocracy."

Um, let’s see, as Lehman points out, efficient markets would have sent capital to Katrina aid where it was most sorely needed, and the claim that capital going to lying mortgage brokers and wildly inflated mortgage securities is hardly efficient. That is what they are using to justify their high salaries? There is no doubt that the "free market" in mortgage lending badly broke down.

It is not just Wall Street, we see the same thing with the California government and public employee unions. They still don’t get that pensions are too high and that we cannot just go on paying people that much money and expect the state to be solvent.

The way the unions operate is to constantly demand as much as they can get, and there has been no direction or regulation about what makes sense. It does not make sense for Wall Street to be able to pay billions to hedge fund managers who are risking other people’s money for their greedy financial games.

But it also doesn’t make sense for us to have no limitations on what people can make and can get in pensions from the government. It makes no sense to pay prison guards over 200K a year. A pension of 90% of your highest salary is too much, and most government salaries have risen much faster than the cost of living or inflation, yet there is no plan to address any of this, it isn’t even being talked about. Until we do we are going to have big problems.

People are going to have to give up their entitlements and accept real change, change people say can’t be done is going to have to be done. California has kicked its problems down the road for decades now, and we have come to the end of the road and it is starting to kick back. Everything has to be on the table, all sacred cows, or it is not going to work.

The real underlying problem is a lack of community, a lack of stated and shared values. America is now a place whose values are that everyone is split off into special interest groups, and each of those groups tries to get as big a piece of pie as they can.

Greed is as old as humans, but what is lacking in our country is a social system that reigns that in, a set of community values that on a societal level sets high standards and watches out for the interest of the whole. We used to have that in America, but that old order has broken down to the point that it really barely exists any more. My sense is that people on the right and left are nearly desperate for that, but they don’t know how to make it happen.

We need a new sense of direction of what we value and what boundaries we are going to place on various groups. For the employee unions, not long ago they were clamoring for pay parity with the private sector, and did so successfully. They went from there to making more, then a lot more, for most of them. Maybe the direction we need to give is that pay in the public sector should never grow faster than the private economy as a whole.

Wall Street should be prevented from making investments that are too risky, financial instruments should be strictly regulated to limit risk. That will also limit salaries and bubble type profits, but the community as a whole will be far better off.

The real problem underlying all this is that lack of community, is that lack of shared values that gives a direction to behavior. That is how favored employee unions can get 100k plus pensions at age 50 that are protected, while Home Health Aides making $11.00 an hour are getting $2.50 an hour pay cuts.

That is how Wall Street traders can make millions by legally stealing the average wage earners life savings. That is what is going on and it is so out of whack that it has to stop or that system will destroy us.

Michael Haley is president of the Napa Valley Taxpayers Association. He blogs weekdays at NapaValleyRegister.com on a variety of local, state and national issues. He can be reached at michael@napablogger.com

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