Last spring my friend Ira Goldman, inventor of the KneeDefender and other interesting gadgets (I wrote about the KneeDefender here) wrote me a note about a personal quandary, a momentary “crisis of conservatism” brought on by some particularly noxious behavior on the part of people exercising their “free market” right to gull the innocent:
I’ve been hearing radio ads by Quicken for mortgages “that let you cut your payments”, or some such. It seems that they are not even interest-only loans — they must be negative-amortization loans. “A normal $300,000 mortgage at 7% costs you [let’s say] $2,000 per month, but at Quicken Loan that same mortgage costs only $435 per month. That means you’ll have more than $1500 extra each month in cash to spend any way you want! …” I’ve not even heard the radio equivalent of the small-print disclaimer.Should I feel political guilt for thinking this is wrong?
I think these loans should be illegal. OR, so regulated that in a 30 second ad it would take 25 seconds to provide required disclaimers.
The subtext was, of course, “As a conservative and a believer in the free market I should accept this as unfortunate but legitimate. It is the market being the market and the price we pay for freedom and prosperity. And yet my conscience tells me, against the judgment of my reason, that the government should intervene!”
This, in two parts, was my answer to him and to this type of problem generally.
24 March 2008
I think that, 90% of the time, business (and I use the term loosely here) brings regulation upon itself by tolerating and even embracing sleazy practices. If we want less government regulation, we need a lot more ethical sense among the business community in particular and among the public generally.
It’s not that, if we could just reinstill moral values, then every businessman would behave ethically — not every anything, including liberal activists with the best interest of society at heart, will behave ethically. But unethical people get away with things not only because they are good at deception but because everyone else looks the other way. When so-called ‘conservatives’ decry the loss of moral values, that’s a lot of what they’re talking about: our ability as a community to identify and condemn — and thereby to control — bad behavior socially rather than legally.
So no, there is no political guilt you should be feeling. ‘Conservatives’ have always offered a different compact than ‘liberals’. ‘Liberals’ say:
Cede some of your political and economic liberty to us; in return we will protect you, both from bad guys and from yourselves, and grant you all the cultural liberty and irresponsibility you can stomach.
We offer you political and economic liberty, but in return you must agree to take responsibility for your own well-being and everyone else’s; and, in particular, you must agree to exercise cultural restraint, both by controlling your own base impulses and by being willing to judge others’ indulgences of theirs.
If such companies are purposely taking advantage of the ignorant and the stupid they are behaving unethically — they are breaking the ‘conservative’ compact; and, if the rest of us see that and, yet, let it pass without raising a stink, then we are failing in our duty to judge — we are breaking the compact as well. In that case we all deserve regulation.
But I also find great inconsistency in how the ‘left’ treats the whole concept of credit. If those extending credit are risk-averse and make only robust loans then they are accused of shutting “the poor” and “the disadvantaged” out of the system. Further, those accusations are correct, although misdirected: people who can’t get credit are at a distinct disadvantage in trying to improve their financial lot because they can’t leverage someone else’s resources to build equity and they can’t get anyone else to take part of the risk.
On the other hand, if those extending credit are lax about risk and make credit available to “the poor” and “the disadvantaged” some proportion of those people will default and lose whatever it is — their home, their business, their car, whatever — that they used the money to acquire. Then the lenders are accused of being too lax, of allowing those innocents to harm themselves when they (the lenders) could have prevented it.
The problem is that opportunity and risk go together. If you want opportunity, you must be allowed to take risks; if you don’t allow people to take risks, you deny them opportunity.
And then again, this is about the woeful state of education in America with respect to finance in general. As with knowing anything about business, knowing anything about money in 21st century America is considered somehow unclean and unworthy of a civilized person. There are certainly stupid people out there, and there are certainly those who are ignorant because some system has failed them and through no fault of their own. But I would argue that those natural constituencies for shysters are augmented by a vast horde of people who are susceptible to financial scams because our culture has taught them that learning anything about managing their money is not only unimportant but, somehow, undignified.
The ‘conservative’ answer to all this is a return to a more self-reliant and more moral social code. But even the staunchest ‘conservative’ — if he is also a realist — must recognize that it took generations to get to where we are and will take yet more generations to get back to something better, even under the best of political circumstances. In the meantime, we have a ‘liberal’ society and must use some ‘liberal’ remedies to deal with the problems that creates.
25 March 2008
Following on to what I said yesterday, how refreshing would it be to have a candidate — for President or for Congress or Senate or for Governor or whatever — who could be honest and say:
“I strive for conservative ideals, but I recognize we no longer live in a conservative society and that’s not going to change during any tenure you choose to grant me. What I will seek out is necessary compromise: policies which meet short-term political or social needs using the tools available but which embody the ideal of long-term cultural change to render those tools unnecessary.
“I may propose policies of spending to support compassion, but I would couple it with other policies intended to render that compassionate spending irrelevant in the future. I may propose regulation, but with an eye toward changing the culture of the regulated so that in ten years or twenty such regulation will seem a quaint anachronism of an uglier time.
“What I offer is not rigid adherence to some idealized moral program but what small steps we can take now to move us in the right direction without inviting failure and backsliding.”
What do you think? Does any such exist? And would we elect him/her?
End Note: Yes, they exist but they are both precious and rare. And no. I don’t think we would elect them. Most of the time we won’t even listen to them.
(C) Copyright 2008, Augustus P. Lowell