Did you ever see the movie "Wall Street" with Michael Douglas? He plays the part of a conniving financial big-wig, Gordon Gekko, whose most famous line is "Greed is good."
Well, looking around at the shambles of America's greed-inspired mortgage mess, you can see the fallacy of that statement. At its core principle, greed is the worst expression of ambition. Unfortunately, some people think greed - at least in small doses - can be helpful for motivating competition. But in the end, isn't greed just destructive?
Look at the greed of homeowners, trying to buy more house than they realistically could afford. Look at the greed of mortgage brokers, glossing over reality to convince customers to assume risky mortgages. Look at the banks, who took all of these risky mortgages, bundled them into securities, lied about their risks, and sold them off to avoid accountability. Look at the investors who salivated over the hollow promises from banks selling mortgage securities, without doing their own due diligence on the risks involved. Greed, greed, all the way around. Now, people who bought a home they realistically could afford and have been dutifully paying their mortgage every month - the bedrock American taxpayer - are bailing out their foolish neighbors.
Consider this anecdotal evidence of the mortgage mess as told by my brother, who lives in suburban Detroit:
- My brother and his wife looked at a house last year that had a $475,000 mortgage on it in 2006 that eventually sold for $225,000.
- Near their current home, there is a street that has several modest, well-tended 1950's-vintage homes for sale at less than $4,000 apiece.
- The foreclosure section in their newspaper's Sunday real estate classifieds is bigger than the rest of the paper combined, including the ads.
- My brother, a helicopter pilot, flew some mortgage representatives last year who desperately offered that for $10,000, he could have his pick from several thousand properties in Wayne County (suburban Detroit) on the spot.
- My brother and his wife personally know of homeowners, too far upside-down on their mortgages, who have simply stopped paying on them. The voluntary default will eventually result in a foreclosure in about a year and a half. During this time, they will continue to live in the house while saving the mortgage and tax payments for a down payment on another home - sometimes just next door or across the street - that’s also in foreclosure. They can buy it for a fraction of it's 2007 value (even in cash - the money they saved by not paying their own mortgage).
If you think greed can still be good, look people like my brother and his wife - who've never missed a mortgage payment - in the face, and tell them so.