Today’s Los Angeles Times reports that the incidence and variety of mortgage fraud is increasing as rapidly as insurgencies in Iraq. It’s a good introduction to what happens when an ‘anything goes’ profit motive is given a field day by political forces who claim the ‘only good regulation is no regulation’.
Mid-way through the article, Eric Von der Porten, a Silicon valley mortgage banker laments, “Is it suddenly okay to hoodwink national banks and government-sponsored mortgage companies?”
Memo to Eric: There’s nothing sudden about this at all!
For more than thirty years, our nation has embarked upon an all-or-nothing adventure in hating government. Starting with the Reagan administration, the governing philosophy has assumed that regulation and government are bad. That trend began rationally — for too many decades those in power operated as if Total Regulation was the single answer. Now our dominant single answer is, No Regulation.
There is a lot of possibility, of course, between No Regulation versus Total Regulation. Most markets work best when there are some agreed upon rules. Often, those rules are easiest and most practicable to install and enforce if done by some third party. Sometimes, those third parties can be private sector, non-institutional government organizations (for example, professional sports leagues that set and adjust rules). More often in the history of human beings, though, the third parties have been governments.
When done well, rules and regulations set predictable behaviors — values about fairness and approach — that provide all who participate some predictability they can rely upon. That kind of predictability in values also arise among small numbers of people who persistently interact — say in families or teams. When the context rises to zillions upon zillions of folks interacting over markets and networks, however, a government that sets, enforces and updates rules and regulations can spell the difference between orderly markets and Hobbesian, anything goes markets. (And, again, let’s be clear: a regime of Total Regulation provides order but kills all vitality and innovation while simulataneously increasing costs to unsustainable levels).
So, here we are: We live in a world of markets, networks, organizations, friends and families. We live in a world where the costs of ‘either/or’ approaches — either No Regulation or Total Regulation – become increasingly unsustainable. And, we live in a world where our politics is currently dominated by a discourse of either/or-ism.
That we are experiencing a ‘value’ bubble in real estate is not new news. But, as this artlcle points out, we also are suffering through a ‘values’ bubble — inflationary expectations that somehow, someway individuals and companies left entirely to their own devices will routinely do the ‘right thing’ because — now listen carefully — because it is in their self-interest. This is the governing orthodoxy. Markets are the only solution to every problem. Self-interest is what makes markets work. Therefore, sayeth Socrates, Self-interest is the only solution to every problem.
Evidently, unbridled self-interest is not a full solution to orderly real estate markets that produce the greater good.