A Collapse of Character

The current meltdown and resulting panic within the U.S. and international financial system have, as their proximate cause, a long slow fuse which was burning for years towards a dynamite charge consisting of bad loans, sliced and diced into mortgage-backed securities whose stability was only as solid as the credit-worthiness of people who could not afford them, and of the banks and bond aggregators who could not have cared less.

The chickens began coming home to roost when institutional holders of these bad debts slowly realized that the stability behind many of these bundled securities – far too many – was, in effect, as secure as a morning fog quickly dissipating under the penetrating light of the sun.

Every American who gives a hoot is now choking, trying to swallow the alphabet soup explanation of high-falutin’ abbreviations and names such as CDO’s, credit default swaps, naked short selling, derivatives, etc., ad nauseam.

It took thousands of very bright people throughout the financial industry, working hand in hand with sharp government administrators and legislators to set up the financial models and to write the rules and legislation which caused this crash. Adequate governmental oversight was either ignored or, worse, was dismantled. We no longer know what is safe and what isn’t.

But a technical understanding of the financially sophisticated way by which mortgages were marketed, securitized, and resold, and the way in which government was complicit does very little in helping to comprehend the underlying causality.

So, if all these people were so bright and intelligent, then what? Not that hard to understand. Ordinary citizens can perceive the answer: There was a collectively massive collapse of character and fiduciary responsibility, leading to a breakdown of institutional and governmental integrity. Our elected and appointed officials gave the store away, while Wall Street wizards thought they could get out before the collapse.

But it was too big, and it came down too fast.