Pain and suffering created by the greed and reckless lending of this business cycle will plague us for some time to come.
Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Financial analysts warn that state and local governments will soon feel the pinch of sharply reduced property tax revenue. And counsellors say divorces and reports of abuse are rising as families burdened by impending foreclosure take their stress out on one another. See Mortgage crisis inflicts collateral damage.
This is the full cost accounting of greed and reckless lending over the past few years. It is not just the staggering financial losses, and the widespread contraction that this is bringing to the global economy. It is the emotional and psychological carnage this crisis is inflicting on real life families and our society as a whole. It is a systemic malaise that will over-burden already stretched social agencies and public services for months and years to come, precisely as tax revenues fall off.
It is for exactly this reason that governments must take a more paternalistic role in over-seeing the financial services industry and controlling reckless practices in the first place. Financial firms have been the free-wielding drug dealers of credit and risk assets enjoying largely unfettered access to a naive and unsuspecting public. For more on this see my article in The Corporate Ethics Monitor, back in March 2007.
The effect of this brave new world is that we will now all pay, in one way or another, for reckless profiteering. To survive, even capitalism must restrict self-destructive behaviours through government policy and regulation. We do this around drugs, alcohol, prostitution, and gambling, but have evidently failed completely around financial product trafficking over the past few years. Each generation seems to learn this lesson the hard way. At this point, we can only hope to learn from the experience and push for wiser policies ahead.
Cory’s Chart Corner
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