Sunday, 18 October 2009
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Greed: The Dark Side of Abused Capitalism Lures Billionaire into Criminal Act
How much money is enough? How much money do you need to earn to feel satisfied? This answer will vary with individuals, but is there a number that the vast majority of folks would acknowledge as more than enough? I think there is, but there are some people who will never be satisfied no matter how much money they make- these are people infected by greed.
Some may say that "greed" is a necessary part of capitalism. I think that idea is rubbish. At the heart of capitalism, you are providing a product of service that others are willing to pay for, making it a win-win situation for all. Let's say one person is a farmer, and another person works in the city and has no desire to farm. Rather than be forced to grow and raise his/her own food, the city worker now has an option to buy their food from the farmer. There is no greed in this equation.
If capitalism is working correctly, having enough competition will drive out market greed since if someone is charging an excessive price for a product or service, people will bypass that person in favor of someone selling at a lower price- following the classic price/supply/demand curves.
Of course we know that there are many greedy people out there that abuse capitalism, and in the recent case of Wall Street banks - to the point of committing suicide were it not for the intervention of the government. Of course these banks should have been allowed to fail, but that's another blog in itself.
Back to greed - how much is enough? If you were a billionaire and made more money in an hour that what most people make in a year, would that be enough? The majority of us would say heck yeah! Some might say that the more you earn, the more you want, and to that I say only if you are greedy. I know from personal experience that when it comes to income- once enough money is made to pay basic bills and retirement saving, the rest is icing on the cake. If one keeps increasing their "wants" with increasing income, you can run into problems. It seems that a billionaire had this problem and he's about to pay for it.
On Friday, one of the wealthiest men in America was arrested on charges of insider trading.
Raj Rajaratnam, a partner in Galleon Management and a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to trade based on insider information about several publicly traded companies, including Google Inc. He was among six hedge fund managers and corporate executives arrested in a hedge fund insider trading case that prosecutors say generated more than $25 million in illegal profits.
U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted. Joseph Demarest Jr., the head of the New York FBI office, said it was clear that "the 20 million dollars in illicit profits come at the expense of the average public investor."
Rajaratnam was ranked No. 559 by Forbes magazine this year among the world's wealthiest billionaires, with a $1.3 billion net worth. He has been described as a savvy manager of billions of dollars in technology and health-care hedge funds at Galleon, which he started in 1996.
According to a criminal complaint filed in U.S. District Court in Manhattan, Rajaratnam obtained insider information and then caused the Galleon Technology Funds to execute trades that earned a profit of more than $12.7 million between January 2006 and July 2007. Other schemes garnered millions more, authorities said.Robert Khuzami, director of enforcement at the SEC, said the charges show Rajaratnam's "secret of success was not genius trading strategies."
"He is not the master of the universe. He is a master of the Rolodex," Khuzami said.
Here we have a billionaire who has a "legal" yearly income that surpassed what most of us will make in a lifetime COMBINED, and that still apparently wasn't enough for him.
The average public investor is again the victim of unbridled/unrestrained greed driving Wall Street insiders to game the system.
Does this signal a turning point in the SEC enforcement? Will this arrest be a true "Wake up call" to Wall Street's greed and disrespect for the rules?
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- From: SoullFire@xanga
- Name: SoullFire
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- About Me: Investing/Trading info to make $$$. My preeminent goal is to make enough money through investing/trading stocks so my corporate job becomes optional. I figured this would be a good place to write on how I'm doing. How cool would that be- not having to live the grind and go to the office every day! I also discuss the latest news in finance. You can call me a hobby economist.
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Comments (68)
Pure capitalism is driven by pure self interest. There is nothing surprising in the fact that a belief in unencumbered capitalism is accompanied by a lack of a moral compass. Pure capitalism = Social Darwinism. Social Darwinism = Nazi Germany and eugenics.
I would like to see a 90% marginal income tax rate on all income more than $5 million dollars. Multimillion dollar salaries are outrageous, whether given to Wall Street investment bankers, sports players, or movie stars.
@scrambledmegsntoast@xanga - Pure capitalism = Social Darwinism. Social Darwinism = Nazi Germany and eugenics.
NAZI means national socialist. It is socialism, not capitalism that brings about social Darwinism. The greatest mass murders in human history were committed by socialists not capitalists.
The billionaire broke the law, got caught and now will receive punishment for his crime. The system works.
2) Greed is necessary. As I stated before, it's called motivation. Your example of a city worker buying the farmer's food is an example of greed, regardless of what you intended it to mean. A worker doesn't buy a farmer's food because he wants to make the farmer rich. He buys it because he needs to eat. Same with the farmer who sells his food not to make the worker happy but to make money. "Greed" even motivates unpaid volunteers because they benefit from helping others - a feeling of pleasure and self-worth.
3) You confuse "market greed" with "market power." Your example of competition proves that capitalism drives out not "market greed" but "market power," a company's dominating influence in a market. Competition prevents monopolies from forming based on greed - the greed of rival companies who want to make more than their competitors by making their products cheaper and better.
4) Government intervention caused the economic downturn. I agree that the banks should have been allowed to fail and I'm glad someone else realizes this too. But government intervention is what caused this mess. The government 1) coerced financial institutions to issue subprime loans and inefficiently low interest rates (which no bank would ever do on its own) and then 2) failed to properly regulate these financial institutions, allowing speculative bubbles to form in several markets.
5) To answer your questions: Since the Justice Department has been asleep at the wheel for over a decade, I hope they begin enforcing the Antitrust act in particular. I'm glad your question involves the phrase "enforcement."
@scrambledmegsntoast@xanga - Self-interest has nothing to do with "a moral compass." As I pointed out, "selfless" volunteers help others because even they benefit from it via feelings of self-worth. And even Mother Teresa who had a strong "moral compass" caused great harm because she believed that suffering brought people "closer to God." She rarely used antiseptics or anesthesia as a result.
@fallingraindrop@xanga - You're trying to make my comment into something it is not. It isn't an issue of socialism vs. capitalism. Whether Nazis were socialists or not is irrelevant, I was merely providing one example. The concept of Social Darwinism can thrive under any economic structure but capitalism, by definition, embraces the "survival of the fittest" motif that underlies Social Darwinism; a belief that those who cannot compete in the marketplace should be left behind.
@scrambledmegsntoast@xanga - You're trying to make my comment into something it is not. It isn't an issue of socialism vs. capitalism.
You wrote an equation. The equation said: Pure capitalism = Social Darwinism. Social Darwinism = Nazi Germany
By the transative property then, Pure capitalism = Nazi Germany. That is your statement, not mine. I merely took the meaning of the statement that you write quite clearly.
And since the Nazi's were socialists they cannot, by definition be capitalists. Your statement is therefore not true.
The concept of Social Darwinism can thrive under any economic structure but capitalism, by definition, embraces the "survival of the fittest" motif that underlies Social Darwinism
That state has it exactly backwards. Social Darwinism is found in the dog eat dog world of socialism. Your statement is socialist propaganda. Adolf Hitler, leader of the German National Socialists (Nazi) said that the bigger the lie the more it will be believed by the public. Evidently you have swallowed the big lie about capitalism.
Capitalism has produced the wealthiest, most generous and just culture in history: America. Socialism has spawned the greatest mass murder, mass misery and mass poverty.
Neither history nor the facts support your statements on capitalism.
@Ex_Adyto_Cordis@xanga - For one, you are greatly misinformed about Mother Teresa, and are buying into the lies spread by the atheist Christopher Hitchens in his claims provided during the process of her beatification. When Mother Teresa spoke about suffering bringing one closer to God, she was speaking of herself and her own, personal suffering. The idea that suffering brings one closer to God is a product of the Catholic belief in Purgatory, where suffering in our Earthly lives can substitute for the cleansing required in Purgatory. That does not translate into causing or prolonging suffering in others under the guise that "I let you suffer because it will save you some time in Purgatory." That is a belief that is not only found nowhere in Church teaching, but is contradictory to every word of the Gospels.
Two, it is ridiculous to think that people only help others due to the desire to feel good about themselves. However, greed is the sole product of self interest. Greed and desire to live, as is the case of the city worker, are not the same thing, you need to look up the definition of the word "greed":
"a selfish and excessive desire for more of something (as money) than is needed"
Finally, do you have any specific evidence to back up your claim that The government 1) coerced financial
institutions to issue subprime loans and inefficiently low interest
rates (which no bank would ever do on its own)? Why wouldn't a bank issue such loans? Banks assume a certain level of bad loans regardless, why wouldn't they be willing to issue these "subprime" loans knowing that maybe even a larger number might go bad, but they can make that money back, plus more, from the higher quantity of good loans. Especially knowing that they will sell the bad loans off as investment packages.
@fallingraindrop@xanga - Of course history backs it up! Have you been paying attention to America for the last, say, two years? Again, you are attempting making this into a political issue. It's not.
@scrambledmegsntoast@xanga - Of course history backs it up! Have you been paying attention to America for the last, say, two years?
Socialism is what has occurred during the last two years. And it's going to get worse.
My intentions is to clarify the difference between capitalism and socialism. Socialism leads to mass poverty. Capitalism leads to mass riches.
That isn't politics it's economics.
@fallingraindrop@xanga - Socialism is what has occurred during the last two years.
Well, that is debatable. But we will have to agree to disagree on this.
@scrambledmegsntoast@xanga - Well, that is debatable.
No, it is not debatable. Anyone who knows economics and politics knows that what is going on now is not capitalism, it is socialism.
The economic collapse of the banks was caused by government regulation. Banks were forced to lend money to millions of people who were not able to pay their mortgages. The problems in healthcare are also caused by government regulation of the insurance industry.
If government regulations in these areas were eliminated prices would become rational and affordable.
The big lie is that we need more regulation. It's a lie because it is regulation that is causing the problem. Government intervention into the economy is socialism. Such intervention destroys the checks and balances inherent in capitalism.
Without checks and balances government runs amok and so does the economy. The great mistake is thinking that the government is a check and balance on capitalism. In fact it is the opposite.
My information is not based on Christopher Hitchens, it is based on news articles, studies, and reports. The Lancet and the British Medical Journal both reported the reuse of hypodermic needles, poor living conditions, the use of cold baths for all patients, the use of volunteers without medical knowledge, and not distinguishing from "curable" and "uncurable" patients who risked dying from "infections and lack of treatment." If you consider this massive amount of evidence of substandard and often negligent care, I think you would realize the arrogance of accusing someone else of being "greatly misinformed."
"It is ridiculous to think that people only help others due to the desire to feel good about themselves."
According to a study conducted by the International Journal of Volunteer Administration, motivational factors can include “social obligation” and "career or personal enhancement." Ie. the volunteer's personal enhancement. It is rational for an organism to seek actions that benefit them. If an organism does something that does not benefit itself - even if it only gets comfort - it is irrational. Wives of abusive husbands act on their self-interest because they think the costs of leaving their husbands outweigh the benefits.
"Greed and desire to live, as is the case of the city worker, are not the same thing, you need to look up the definition of the word 'greed.'"
I know the definition of "greed" which is 1) why I used the term "ambition" that lacks the "excessive" part and 2) continued to use the word "greed" when referring to illegal acts motivated by self-interest at the expense of society. And since I can see you did not get that, feel free to reread my original post with that in mind. But I mean basic motivation. Self-interest motivates both greed and the desire to live.
"Finally, do you have any specific evidence to back up your claim that The government 1) coerced financial institutions to issue subprime loans and inefficiently low interest rates?"
Here is one article from the Wall Street Journal. Note the author, an Economics professor at Stanford, notes "The Fed held its target interest rate, especially in 2003-2005, well below known monetary guidelines that say what good policy should be based on historical experience. Keeping interest rates on the track that worked well in the past two decades, rather than keeping rates so low, would have prevented the boom and the bust." He says more about subprime mortgages than I care to post in one comment.
"Why wouldn't a bank issue such loans?"
A subprime loan, by definition, is a loan with a lower interest rate to individuals who do not qualify for prime rate loans. In other words, they are loans to people with the worst credit. They are high-risk because people with terrible credit will probably default and not pay back the loan, hence "subprime." A bank would increase the interest rate to match the risk because interest rates pay for the amount of risk. People with bad credit get high rates because if they don't pay it off, the high interest rate recovers much of what is defaulted. Hence why banks give low interest rates to people with good credit because banks expect them to be able to pay it off. Does that part about interest rates matching risk make sense?
"Why wouldn't [banks] be willing to issue these "subprime" loans knowing that maybe even a larger number might go bad, but they can make that money back, plus more, from the higher quantity of good loans. Especially knowing that they will sell the bad loans off as investment packages."
That's exactly what they did, bundled the subprime loans in with what they considered "good" loans. But a lot of the subprime loans got AAA or A ratings because accountants did not realize the actual level of risk involved, so what people considered "good" loans were really subprime loans. Tons of these "good" loans defaulted along with the subprime loans and investors lost millions. All because the Federal Reserve tried to control the market.
@fallingraindrop@xanga - She's also comparing an economic system (capitalism) with a political one (fascism). Socialism, an economic system, does cause significant economic damage... but the "social Darwinism" she is referring to is the eugenics led by Hitler's dictatorship - which was Fascist and therefore political.
@Ex_Adyto_Cordis@xanga - Those things you described about Mother Theresa are medical issues, they have nothing to do with her religious beliefs. Poor medical care in third world nations cannot be attributed to her beliefs about suffering and faith in God. I will defer on the other matters because, frankly, I couldn't care less. But you are misinformed on this matter. Period.
I wasn't talking about medical issues or religious beliefs. I was talking about how self-interest does not necessarily lead to suffering and how what appears to be altruism can sometimes be more harmful. Yes, Mother Teresa worked in third world nations but she also received millions of dollars from charities and donations. Poor medical care in this situation is inexcusable. Furthermore, why else would she deny proper medical care despite the means to provide it unless she did not oppose their needless suffering?
"I will defer on the other matters because, frankly, I couldn't care less. But you are misinformed on this matter. Period."
If you don't care about the other matters, why did you ask questions that clearly indicated your interest? And hearing evidence of my claim and then completely ignoring it while trying to end a conversation with "Period" is pretty petty. I would expect that outright denial and avoidance from further discussion from someone who is insecure about what she believes.
@Ex_Adyto_Cordis@xanga - Your initial statement was this:
And even Mother Teresa who had a strong
"moral compass" caused great harm because she believed that suffering
brought people "closer to God." She rarely used antiseptics or
anesthesia as a result.
That is a cause and effect statement. You made a statement regarding her religious beliefs then attempted to support it with details regarding medical conditions. Mother Theresa believed this, therefore she did this. Your position is incorrect. No matter what conditions existed, you cannot state that it was due to her beliefs because you are completely incapable of making such a determination, and you clearly do not understand the beliefs of the Catholic Church regarding suffering. If you want to go back and clarify your initial statement, then fine, go ahead.
As far as my "insecurity", I would appreciate it if you try to avoid ad hominem assumptions about what you think my motives to be. It is, in itself, a petty manner of debate. I simply don't wish to engage in continued discussion of matter of socialism, fascism, etc. I have a right to discontinue the conversation without my personal motives being questioned. You need to learn how to debate without attempting to make the person with whom you are debating the issue as opposed to the issues at hand.
@Ex_Adyto_Cordis@xanga - "social Darwinism" she is referring to is the eugenics led by Hitler's dictatorship - which was Fascist and therefore political.
My objection is about associating German National Socialist facism with American capitalism. There simply is no connection whatsoever.
@Ex_Adyto_Cordis@xanga - Actually, "Social Darwinism" is not in and in itself connected to Hitler. The term and ideas first came about in the 1880s. It is a philosophy that can be applied to any economic or political model. It does, however, apply to pure capitalism. Which is what I said first off.
Yes, that was my initial statement. Yes, Mother Teresa's harm was caused because she thought that suffered brought people closer to God. And if you were following any of the previous argument, my point was not about religion but about - again - how self-interest doesn't always lead to suffering. This was an example of how the opposite can actually be true, that so-called altruism can lead to suffering. And yes, I am capable of making that claim because she did believe suffering brought a person closer to God. But if you don't want to believe the Mother Teresa bit, don't. Especially since the main point is so-called "greed."
"As far as my "insecurity", I would appreciate it if you try to avoid ad hominem assumptions about what you think my motives to be."
This is a very hypocritical demand, considering that you are asking me to not make assumptions when you have clearly made assumptions about me: "("You are buying into the lies spread by the atheist Christopher Hitchens...")... and telling me what to do: ("You need to look up the definition of the word "greed")... and making accusations: ("You are greatly misinformed...").
"I have a right to discontinue the conversation without my personal motives being questioned."
You have a preference, not a "right." On the other hand, I do have a right (freedom of speech) to question your motives for discontinuing a conversation that showed evidence contrary to your argument. But if you want to suddenly drop it with no explanation other than a contradictory "I don't care," go right ahead.
"You need to learn how to debate without attempting to make the person with whom you are debating the issue as opposed to the issues at hand."
Again, this is the exact same thing you are criticizing me of doing. "You need to learn how..." Accusations and demands. I never made you the issue, I made your actions the issue because when you dismiss the issue, your actions become the issue.
"Actually, "Social Darwinism" is not in and in itself connected to Hitler."
You directly connected it to Hitler, remember? "Pure capitalism = Social Darwinism. Social Darwinism = Nazi Germany." Hitler created Nazi Germany and helped direct the Holocaust, aka social Darwinism. Which actually isn't at all Darwinism and I'll show you why. The Nazis wanted to exterminate or enslave just about every race except the Nordic/Germanic race, which would drastically recude the gene pool. Darwinism states that evolution hinges on individual variation aka a lot of genetic material. By reducing mankind's genetic material, Hitler would have actually reduced our species' probability of survival.
"[Social Darwinism] does, however, apply to pure capitalism. Which is what I said first off."
Social Darwinism states that competition in society causes civilizations to evolve. What's terrible about that? Capitalism is based on economic freedom, and reports show that the more economic freedom a nation allows, the higher the standard of living and the GDP per capita. Both of which are often used by economists to determine the well-being of society. That's not a bad thing.
@fallingraindrop@xanga - I agree.
@Ex_Adyto_Cordis@xanga - Yes, that was my initial statement. Yes,
Mother Teresa's harm was caused because she thought that suffered
brought people closer to God. And if you were following any of the
previous argument, my point was not about religion but about - again -
how self-interest doesn't always lead to suffering. This was an example
of how the opposite can actually be true, that so-called altruism can
lead to suffering. And yes, I am capable of making that claim because
she did believe suffering brought a person closer to God. But if you
don't want to believe the Mother Teresa bit, don't. Especially since
the main point is so-called "greed."
It's not a matter of what I want to believe. There are facts and there are falsities. Yes, she believed that suffering brings us closer to God. That is accurate, all Catholics believe the same thing. Again, what you seem to be either not understanding, deflecting, or ignoring is that belief was not the reason for the conditions you describe. This was/still is a third world nation with unbelievably sub-standard conditions. Despite billions more from sources other than Mother Teresa's missions, the same conditions still exist to this day. The exact same things are done that were done at Mother Teresa's missions and you cannot possibly to claim that the beliefs of all other benefactors are the reasons. If you want to claim this is not important because the point is greed, then why do you keep defending the claim? Just admit that you are wrong and move on. I conceded every single other point to you. Do you feel the need to be correct on every single point and win every single argument? "Greatly misinformed", in regard to this matter, is not an accusation. It is a provable fact. You are, in fact, greatly misinformed.
As far as Social Darwinism is concerned, I disagree. For one, you are greatly simplifying the philosophy and using only one tenet in order to make SD sound as innocuous as possible. But I also believe that I look at the world through a different perspective than you. Have a nice night.
Unfortunately greed is the "essential" idea to capitalism. The federalist papers explains the philosophy behind factions. Impossible to remove yet manageable to an extent. I think just making people aware of how lucrative the business is will counteract with the greed before anything gets out of hand. For every reaction there is an equal and opposite reaction. Reasons for for protest/war is to counteract the invariably differences between two parties. Too bad the stronger party always win. Lets hope Newton's law of motion will apply and the opposite party reacts before the other one gets out of hand.
It is up to the majority of us to protest against this. If everbody really wanted change why have I not seen everyone stand up.
@fallingraindrop@xanga - good point on the "need for more regulation" train of thought. I wonder how much regulation is too much. People rely on the government for too much. It is like a safety net.
This is a great reason why Texas is doing so well in this ression is that it is very pro business and does not offer a safety net as big as other states and the nation does. Less regulation seems like a better approach. Also texas does not ever spend more than the allotted budget.
Yes it was the reason, plain and simple. If you don't believe me, you can look it up for yourself. It you don't want to, that's fine. And you revert back to saying it was a third-world nation after I already told you she received millions of dollars in donations that she could have invested in improving the conditions. She did not.
"If you want to claim this is not important because the point is greed, then why do you keep defending the claim?"
Because it is a fact supported by evidence and you insist on telling me it is false when there are numerous reports verifying it.
"Just admit that you are wrong and move on."
See above. I would say the same to you.
"I conceded every single other point to you."
And I respect you for that, but are you saying that because you conceded to my other claims, I am obligated to reciprocate?
"Do you feel the need to be correct on every single point and win every single argument?"
If I see a false claim, I try to show the person facts that contradict their claim so they can realize it. That's like criticizing scientists for testing claims to see if they have evidence.
"'Greatly misinformed', in regard to this matter, is not an accusation. It is a provable fact. You are, in fact, greatly misinformed."
As are you, in regard to this matter. Because what I claim about Mother Teresa is a provable fact.
"For one, you are greatly simplifying the philosophy and using only one tenet in order to make SD sound as innocuous as possible."
I took the definition of social Darwinism straight out of the dictionary. Criticize it for "greatly simplifying the philosophy." I am pointing out that barbaric policies people claim to be a product of social Darwinism actually go against evolution by reducing the likelihood of our survival.
@Ex_Adyto_Cordis@xanga -
"'Greatly misinformed', in regard to this
matter, is not an accusation. It is a provable fact. You are, in fact,
greatly misinformed."
As are you, in regard to this matter. Because what I claim about Mother Teresa is a provable fact.
Show the proof to back up your statement, then. The medical reports do not count because the question is DID HER BELIEFS CAUSE THOSE CONDITIONS. Show the proof. You're so smart, and you always have to be right, then back up your claims. Back up the claim that she didn't invest the money. Go ahead, prove this is just not bigotry.