Root causes

The problems Wall Street is having right now — problems whose technical aspects I don’t begin to understand fully, since among other things my grasp of economics is pretty weak — has journalists everywhere scrambling for something to say about it. I suspect that many of them (even, or especially, the ones whose job it is to cover investments and such things) don’t really understand the current panic either, but that hasn’t stopped them and our intelligent politicians from agreeing that there are two root causes at work here:

1. The Fed neglecting to exercise proper oversight.
2. Head of firms making flat-out bad/stupid investment decisions.

So that’s it. If we just calm down and let market forces to their work, this will all work out, right? Except that the Fed has been keeping tabs on this situation, thus calling into question the whole purpose of regulatory oversight in the first place. And these stupid investment decisions weren’t made by a few isolated individuals — experienced, senior investors have been making them for a long time, and congratulating each other on making them, and encouraging other investors to make them, too.

So what is the root cause here? Really, it all comes down to greed. That’s the one thing that the Fed is not going to regulate, since after all it’s pretty much the foundation for market capitalism in the first place. And since the root cause of this particular crisis falls within the blind spot of our economic system, it’s unlikely that we’re going to learn anything from it. After all, greed — this base human impulse — lies at the heart of our banking system, and thus our economy, and thus (really) our whole society. $85 billion is a lot for the government to swallow, but it’s small fry compared to changing the underpinnings of our culture.