Good Will

George Will, whose father Frederick was a Professor of Philosophy at the University of Illinois, has many good and intelligent things to say. And I have to admit my past sins: I was swept up by Will's logic and wit when I was in my late teens and early 20's. Now I've seen the error of my ways, and his latest editorial is an example of how I was led astray.

Will, commenting on the current economic crisis, says "The ill wind blowing through that market has blown two goods: The public mind has been refreshed regarding the concept of moral hazard. And the electorate has been reminded of just how reliably liberal Hillary Clinton is."

He explains that "Moral hazard exists when a policy produces incentives for perverse behavior." I like that, and completely agree. What that means is that sometimes a policy produces unexpected behaviors that run contrary to what we desire, or should desire. And that should lead to reform of the policy, unless the goods of the policy outweigh the negatives.

Will has a point when he says that if lenders are bailed out by the federal government at this point, it could send the message to those lenders that they can do whatever they like, and "Big Daddy" will always come to the rescue. That would encourage the negative behavior. But it doesn't have to be that way.

Hopefully, what is happening is the realization that all the heavy-hitters in the financial world are in this together, and they'd better watch each other's backs. That's why banks all around the world are lending money to prop up the collapsing markets.

When I was younger, I guess I would have been persuaded by Will that you need to take all of the "feel-good" sentiment out of your reasoning, and stick to the cold facts that bailing out poor decision-makers only leads to more poor decision-making. But that's not the way the world really works, and we don't have to be so cold. The fact is that we are in this together, and that means all of us and not just the financial heavyweights. If the markets crash, soon the rest of us will be out of work, and losing our homes. And none of us want that. Will wouldn't care, I suppose. Let the chips fall where they may, because he's stuck on the logic of his ideology that is overly simplistic, even if in some ways true.

A better approach, and one that is more likely to be taken, is offered by William Gumede, Associate Editor of Africa Confidential. Gumede isn't even American. He's a scholar in South Africa. But as he says, "The world is indeed very much tied to American financial decisions. Bad or good ones can be felt in faraway markets. This latest round of financial market jitters is mostly the result of bad American investment decisions, yet the spillover effects are felt across the globe."

Gumede makes the commonsense suggestion that "there is an overwhelming case for the U.S. Securities and Exchange Commission to be given additional regulatory powers to police irresponsible financial behavior -- behavior which in our interconnected world with the U.S. at its center has devastating consequences across the globe."

Will wouldn't think of this, because his ideology is dead-set against the government doing anything. But it should be what is done. The government must help the market, or we'll all get hurt... badly. But it shouldn't just be a no-strings-attached bail-out. It must come with regulations that require more responsible lending behavior in the future. There has to be a mechanism for catching lending institutions that lead the market astray through their irresponsible behavior.

Now... on to the other half of the Will comment: the one about Hillary's liberalism. Will explains: "Clinton leapt to explain the subprime problem in the terms of liberalism's master narrative -- the victimization of the many by the few. In a speech favorably contrasting a 'shared responsibility' society with an 'on your own' society, she said, in effect, that distressed subprime borrowers are not responsible for their behavior. 'Unsavory' lenders, she said, had used 'unfair lending practices.'" As someone who was once shamefully swept up by such rhetoric, I understand what he means. Do you want to personally bail out people who make bad decisions in their lives? Most of us would say "no!" to that, based on personal experiences. But it's not so simple.

Many people who got home loans under current lending practices were misled. They can't afford attorneys who can explain to them that they're getting in over their heads. They take the only chance they have to try to get ahead, and the subprime lenders were offering them low-interest rates to get into homes on the gamble that real estate prices would keep skyrocketing, and with the belief that even if their clients couldn't afford the higher payments later on, they'd inherit more valuable real estate.

One of the harsh realities of this country is that we have been too swept up in the rhetoric of being "on your own." Hillary is right to suggest that the humane approach is a "shared responsibility" society. The tendency of conservatives like George Will is to point to the "welfare queen" who gloats at the fact that she's able to sponge off of society, get money on the side, and live the life of Riley at our expense. But for every such bad story, there are many others that reflect simple people in need who can't live decently without our help. They need food, shelter, clothing, and educational opportunities so that they have a chance to become contributing members of society.

Will is suggesting that the sub-prime borrowers need to suffer for their bad decision-making. I don't think anyone's suggesting that we bail out those borrowers. They're losing their homes left and right. But we, as a society, have the shared-responsibility of making sure that such cruel lending practices aren't taken up again. For every person who knew what they were getting into with those low-interest loans, there were many others whose dreams were taken advantage of, and whose lives were destroyed.

For the lenders, it was all in a day's work. And I agree with Hillary that we need to regulate such unfair practices. I now completely repudiate the draconian thread in Will's ideology that suggests that government has no role in the creation and maintenance of a fair and just society.