At the end of the movie, “King Kong,” one of the key characters utters one of the most famous lines in movie history. As King Kong lies dead in the street after being shot from the Empire State Building, one observer says, “The airplanes got him.” Main character Carl Denham replies that it wasn’t the airplanes.
“’Twas beauty killed the beast,” an allusion to Kong’s affection for the character of Ann Darrow whom he had tried to protect.
That classic line came to mind this week as I read through a fascinating three part series in the Washington Post about the rise and fall of the housing bubble. The articles are an insider’s look at the “wave of easy money” that fueled the explosion in mortgage loans and then how it all came crashing down.
It wasn’t bad loans that killed the housing boom.
‘Twas greed that burst the bubble.
Like the allure of beauty, greed is one of life’s most powerful forces. And it was greed that drove the mortgage crisis over the cliff, leaving behind the economic debris of foreclosed homes, failed financial institutions and a real estate market that is but a shadow of its former self.
While some of the fault lies with people who took on mortgages they couldn’t afford, more of the blame lies with greedy lenders who did 100 percent subprime loans with little verification of income to people they should have known couldn’t pay. They were aided in that by greedy real estate sellers and developers who helped push people into homes they couldn’t afford.
All of that money appeared easy pickings and gave rise to neophyte real estate brokers and developers who jumped into the market with little background about what they were getting into. Greedy for a quick buck, they took on projects they couldn’t afford.
All of which brings to mind another famous movie, “Wall Street” from 1987. In his famous speech to stockholders in the movie, Gordon Gekko (Michael Douglas) says, “Greed is good. Greed is right. Greed works.”
That line came to personify the 1980s and indeed, it has been the tone of the last quarter century.
But tell the 478 homeowners in Jackson County who’ve lost their homes due to foreclosure since January 1 that “greed is good.”
Tell that to those in the financial and real estate businesses who’ve lost their jobs over the last year as the housing bubble popped.
Tell that to underfunded developers who have gone bust in the housing crunch and to the hundreds of people formerly employed in the construction and landscaping businesses.
Tell that to local government officials who built budgets based on the bubble’s growth curve and who now face major revenue shortages.
Greed is not good. Greed muddles the thought process and leads otherwise intelligent people into making stupid decisions. Greed is contagious in business and fogs financial planning. It distorts markets. It makes government officials stupid.
Nobody knows where the current economic crisis will go over the next 12-18 months. The fear is that we’ve not yet hit bottom and that there will be additional pain in the markets as falling housing values ripple through the financial sectors.
And while Jackson County has escaped some of the decline seen in other states, we have not totally weathered this storm. Just this week I heard that one of the county’s premiere real estate developments is facing a shortage of homeowner dues so severe that it may have to close its community pool early.
But what is really outrageous in this mess is how so many in the financial and real estate sectors have attempted to shift the blame. According to their spin, the economy really wasn’t hurt by the real estate bust, it’s all “the media’s fault.”
Funny how the messenger gets the blame when things go bad. Back when the real estate market was booming and newspapers were doing story after story about the rapid rise in housing values and construction, nobody in the real estate or financial business complained that the media had exaggerated the boom. In fact, many top guns relished all the media attention during the housing upswing.
Now in the bust, those same people attempt to deny any fundamental problems and blame the media for the economic downturn. If only the newspapers would stop writing about it, they moan.
Let’s be clear, the media didn’t cause this economic downturn and housing bust; it was the greed of insiders who drove the market over the cliff with practices that should never have been allowed in the first place. The housing boom was largely a false economy created by greed and a get-rich-quick mentality.
‘Twas greed, not the media, that killed the housing beast.
Mike Buffington is editor of The Jackson Herald. He can be reached at firstname.lastname@example.org.