Nobody saw it coming. That’s what they say. Except now it’s coming out that the folks at Goldman Sachs knew what was happening and were minting money by betting on the mortgage blowout. They did not warn us, and they didn’t just stand by and watch it happen, rather they actively worked both ends against the middle to their own gain.
There are a few people who have been identified as having spotted the mortgage free for all for what it was and who took some action. Either they curtailed their own investments in the real estate arena or they issued some sort of caution to the rest of us, but we apparently weren’t listening hard enough. Why not?
One view is that we did not heed the warnings because we were all caught up in the frenzy of easy mortgage money and rapidly appreciating real estate values. It’s not like the people doing the warning were unrelated to the problem at hand, but we just didn’t listen. Remember when Alan Greenspan characterized the tech bubble of ten years ago as “irrational exuberance”? Who listened? And this from a guy that is put into a position specifically to watch for problems in the economy and deal with them or at least let us know what to expect. So, the tech bubble popped and lots of folks were surprised and lost money.
Of course, where was Mr. Greenspan seven years later – subprime mortgages, no verification mortgages, credit default swaps and derivatives of all sorts of exotic flavors. He didn’t see that one coming he says.
It’s become pretty clear that it’s unlikely that any one person or group of persons is going to get it right every time or maybe not even most of the time. Or if they are, they are not telling us. Or if they are telling us we are not listening or believing them. It’s a credibility thing. We are looking for an established track record that keeps reminding us that the guy doing the yelling was right the last time…and the time before that….and the time before that. Maybe he’s right again and maybe we should do something about it.
Not that long ago we had someone who could always pick up the warning signs of danger. This was way before the Internet’s ability to disseminate news instantly and before bloggers were able to expound to worldwide audiences on whatever moved them. In spite of that, this beacon of reason was able to inform millions of citizens of the benefits of looking before leaping. That seer was Lassie.
Sure, you’re going to say that Lassie was a dog. Yeah, so? She still knew what was up. When that mangy stranger came into the farmyard, allegedly looking for work, Lassie always gave a warning growl. When Timmy got too close to the edge of the quarry, Lassie tried to pull him back. The problem then, as now, is that those being warned did not listen. Mom told Lassie to quit growling – the stranger just needed a good meal and some honest labor. Timmy said quit barking, I’m just trying to reach my kite that went over the edge. I mean, who had a better track record than Lassie and whose warnings got ignored until it was too late, week after week for years on end? Millions were out there in the audience trying to tell them to listen to Lassie.
Lassie would have seen the subprime crisis coming (I’m sure of it) and would have barked her head off. Lassie would have spotted the duplicity inherent in the overheated derivative market and would have parked herself outside the investment banking houses and nipped at the heels of every trader going by. That would have told us something.
We’ve had others who have tried, valiantly at times, to sound the alarm only to be ignored until it was too late. The Robot on Lost in Space, for example. How many times did we hear “Danger Will Robinson” only to see it go unheeded. It’s like the Robot is there for us, but (insert name of your investment banker here) is Dr. Smith and convinces too many of those who should know better (just as Will Robinson should have known better) to just keep on buying what they’re pushing. Now we’re living with the results.
So, the next time you get a warning from Lassie, or the Robot, or maybe when the Beav tries to tell you what a sneak Eddie Haskell is (well, OK, maybe the Beav wasn’t the most reliable one of the bunch), consider your source’s track record. Maybe it’s time to listen.
Interesting post. It’s true that we hear warnings all the time and I personally usually fail to listen to them. I especially enjoyed your comments about Greenspan warning us before the Tech bubble. Man he was definitely right about that one. I hope to be a little bit more alert to warnings from people who know what they are talking about. The lassie’s of the world if you will.