Why are bankers making such risky loans? One reason is that they're a little desperate; profitability is down sharply in the industry, and there's tremendous overcapacity. Another reason is that banks themselves rarely hold onto the loans; they're packaged into bonds and sold in large chunks to institutional investors. And the investors may assume that Alan Greenspan will save them should things go sour. Why not? He's done it many times in the past.Emphasis mine, of course. (Remember, this was written in 2005. Most of the seriously dumb irresponsibility really got going in 2006 and early 2007.)
When risk can be passed along like that, there's an incentive to overlook it. It used to be said of Soviet-style economies that they were systems of "generalized irresponsibility." We've got the capitalist version of that going in the USA.
I'll venture a little further. It isn't just our banking system that's a system of generalized irresponsibility. How the fnork do you think we ended up reelecting the bozo who took the country to war on false pretenses and made us into a nation of torturers? Our whole political, philosophical and economic system has degenerated into a system of generalized irresponsibility.
Talk about your ownership society... does anybody in this country want to own our collective failures anymore? Not when you can keep passing along the