Thanks for the conversation with Parker Palmer.
Mr. Palmer identified two emotions that motivated those who were involved in the real estate bubbble/mortgage securitization scheme to led to the implosion of the credit markets:
(1) Fear (especially potential whistle blowers who suspected something was wrong), and
But Mr. Palmer overlooked a third psychological factor that has been around long enough to qualify as one of the Western world's seven deadly sins:
Knowing quite a few of the finance professionals in the banking and investment world, I can confidently say that many were stunned that their assessment of the risks in residential real estate proved to be so flawed, or that they completely misjudged the pervasive effects of real estate investments. These men and women graduated in the top of their class from some of America's most prestigious business schools... their annual compensation for years had confirmed that they were, in Tom Wolfe's famous phrase, "masters of the universe"... their ascent in the corporate and social worlds was a previously unbroken path. How could they have been so wrong? Simpel: as Proverbs says, "pride goeth before a fall."
Ironically, the same sin of pride now tempts those who would fix things. Politicians, bureaucrats, journalists, and just plain old angry people can easily be blinded by the same old fashioned error... believing in your own infallibility. As a result, I have practically no doubt that the cure for the credit crisis will be every bit as bad as the disease.
Finally, I want to add that I believe Mr. Palmer did not reflect enough on the culpability of the victims (unwise mortgage holders), who were also driven by the same emotion as the perpetrators: greed (as in wanting a bigger or better house than they could afford), and pride (like the pros, the simple homeowners unwisely ignored all the warning signs in the belief that they were too smart to fail).
We can find the perpetrators of the credit crisis by looking in the mirror.
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