We can save some to let our kids screw up.
This is the "Sustainable Business Model"
Excerpted from CNN’s 1/29/09 "How a 'perfect storm' led to the economic crisis"
"The Federal Reserve Board, to combat the recession of 2000-01 and the economic effects of the September 11 terrorist attacks, began drastically slashing interest rates.
Consequently, it was very easy to borrow money, especially if you wanted to buy a home."
This was a part of Bush’s plan to get us ‘over’ 9/11 - in a nutshell, "Go shopping".
"Wall Street firms sought to connect rich investors with the rapidly expanding housing market with the help of complicated financial instruments. These instruments -- such as mortgage-backed securities we've heard so much about -- made it easier to move the investors' funds into the housing market, which fed the extraordinary price spiral".
These "complicated" financial instruments were allowed to metastasize because there was NO oversight. The Republicans under GWB blocked legislation repeatedly that would have created some checks on rapacious capitalism. Instead the cry went up to privatize everything and drastically reduce government oversight.
"Some banks and other institutions were even eager to lend money to prospective homebuyers with poor credit and a spotty financial history who would not typically qualify for loans. These transactions are known as "sub-prime" mortgage loans. They generally have interest rates that are above "prime" interest rates available to borrowers with good credit."
Clearly there are some people who bought real estate with the idea of "flipping" it as soon as possible. But many people bought houses with the idea that it was better to build equity in a home than to pay rent. Loans that were given with variable interest rates, that could and did rise into the double digits caused thousands of homeowners to be unable to meet their mortgage and they lost their house.
But how many foreclosures could have been avoided, had the banks simply not been QUITE so greedy and given loans at reasonable, fixed rates? If nearly half the loans given in 2006 were sub-prime loans, that is a pretty clear indication that the banks were not using good sense, but were simply being greedy. Surely, one-half of all the people who applied for loans in 2006 weren’t dead-beats or bad credit risks.
"And the people who could have put a brake on the increasing amount of risk -- the agencies that regulate the U.S. financial sector -- weren't paying attention."
No kidding. Gee, who was it again who was supposed to be watching that chicken coop?
So my point here is that there are two ways you can do business – I call them Sustainable Model or the Rapacious Model.
The Sustainable (call it the 'Swiss') model is based on the idea that we don’t have to fuck everything up now, we can save some and let our kids and grandkids fuck it up later. This model implies that companies should not just look at the maximizing stockholder profits for the next quarter, but should focus on long term growth and being around in a hundred years. This means accommodations must be made to change and evolve as the times demand, not to shit where you eat, and to take care of the little people who work for you.
The Rapacious (or Psychopathic) model maintains that it is the next quarter’s profits that are all that matters, and we won’t be here in the future anyway, so who cares whether we destroy the environment, exploit our fellow human beings and leave our conscience at the door.
President Obama needs to encourage business to focus on the Sustainable model. Where possible use the bailout money to reward companies that follow it. He has the Bully Pulpit and the people are listening.