The real  axis of evil is not a highly complex and surprising house of financial cards — when you realize the current financial crisis is a symptom of one ultimate cause —  personal greed.

I was going to focus on short selling and naked short selling in this blog.  As this crisis continues to unwind it’s becoming apparent that the greater cause of the problem we find our economy faced with falls on individual morality shrouded in corporate culture.

I had no idea how extreme the leveraging of financial instruments has become.

Did you know, that as of this writing, purchasing all of the “bad” mortgages would cost a little over 100 billion dollars.  So why is the “initial” cost of the proposed bail-out 700 billion?

It’s because of the financial products which were created using those bad mortgages as the basis of the leverage.  Remember I said — in my last blog — that the actual value of the collateral used to create new financial products/investments may represent only 1/12 or less of the value of the “financial products”.  One dollar of real collateral is inflated 1100 percent and then resold as a derivative financial product. 

So a few bad mortgages — losing value because of falling house prices and loan defaults — which probably represent less than five percent of all mortgages  – has turned the financial world upside down.

You can’t build a foundation if one out of every twelve bricks is made out of concrete while the other 11 are made out of paper — and if the one solid brick cracks?  Cracking of the collateral is what has happened.

Where does personal greed come in?

Because there is no regulation over the levels of leverage that have taken place,  does it make it right to still engage in the leveraging?  This is an important question.

Just because something isn’t against the law — but has the potential of creating substantial profit regardless of problems it may create later — should you engage in that activity?

Unfortunately, unregulated short-term greed without personal moral accountability and consideration for the long-term consequences of those actions — has resulted in the problem we are now facing.  

There was a time in our country when people would not engage in activities because it was considered not to be in the best interest of the country.  It had nothing to do with that activity being lawful or unlawful — it just wasn’t done.

Somewhere in time, we lost a sense of morality and personal accountability.  Taking advantage of any situation which created profit became an acceptable way of doing business.  If a regulation was lifted or none existed — any activity that created profit was fair game.

This is the real cause of the financial crisis — the axis of evil which absolves personal responsibility in the pursuit of profit. Doing the wrong thing because there is no law telling you not too.

Just because it’s not illegal to do something doesn’t mean it’s okay to do it.

What happened to individual honor? — and the respect we as a society used to pay to those who had power and chose to do the right thing?

Have those generations passed on? 

What would they think about their children and grandchildren?

-Bob Baran