By Dr. William Fang, Special to The China Post Sunday, October 5, 2008 10:19 am.
In her only vice presidential debate with Democratic vice presidential nominee Joe Biden; Sara Palin, the Republican nominee, when asked by Gwen Ifill, the moderator, whether it is the greed of the money lenders or the riskiness of house buyers that has caused the current housing debt crisis, replied by pointing out that it was the money lenders because they made Americans believe that it must be an absolutely smart choice to pay only US$100,000 for a house worth US$300,000. Praising the effort made by Sen. John McCain, the Republican presidential nominee, to support the bailout package, Palin attributed the American financial crisis to the avarice of Wall Street.
Of course, it is apparent that both the lender and the borrower should share the blame for the current housing mortgage crisis in America. But, it is also clear that the financiers or the banks that made the loans available should bear the lion’s share of the responsibility.
In fact, the operations of the capitalist system should be given due credit for making the United States the strongest nation in the world economically within a brief span of time since the end of the World War II.
One of the most innovative and striking characteristics of such a mechanism is the so-called “installation plan” which allows an ordinary citizen to pay much less than the market price of a commodity and immediately bring it home for use. The rest of the money owed, plus the interest, will be paid according to an agreed-upon installation plan on a monthly basis over a period of time. In this way all parties involved derive certain benefits. Most important of all, such a method vastly stimulates the flourishing of the economy that has helped make the U.S. the No. 1 economic power of today.
But, the key to the success of this device is the measures taken by those involved, particularly the financiers or banks, who lend the money, to make sure that the borrowers have the ability to pay back the loan along with the interest. The current global financial storm demonstrates that the leaders in the financial sector did not do a good job of checking the background and the qualifications of some of the money borrowers. Moreover, it is safe to assume that to meet the challenge of the ever-growing competition, some financiers or banks even went so as to unjustifiably lower the requirements in order to win customers.
The result of the serious misjudgments of those highly-paid CEOs in the Wall Street over an extended period of time about the U.S. and world economies has led to the current financial storm marked by the bankruptcy of numerous top-notched banking institutions worldwide comparable to the Great Depression of the 1930s. However, in fact, relevant officials of the government of every nation affected by the global economic recession should all be held responsible for their failure to supervise, monitor and deter the undesirable practices of the banking institutions for a long time.
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