Rousseau's classic statement of communitarianism might seem an overly strong way to begin a response to Garbo's posting, which, on its face, seems moderate in its advocacy that Americans should not prostrate themselves before the pin maker. Like Lang, I agree that the repeal of Glass-Steagal during the Clinton administration, leading to the fall of the barrier between commercial and investment divisions in financial firms, was problematic. The reason, however, is not only because these firms could now engage in high-risk bets with commercial mortgage backed securities, but also because individual home owners were unresponsive and ignorant to their own financial situations. As a result, individuals were financing property they could not afford and the financial firms were packaging and swapping these bad properties while making them look like attractive investments. These two factors - irresponsible investment by firms and individuals over-extending themselves, have primarily led to the current crisis.
The problem with Garbo's post is that he quickly moves the assignment of responsibility to both parties only to the investors. Though claiming he is attacking the idea that money should come before society, his target is not that notion generally, but rather the leaders of financial firms who share only half the responsibility. For example, he asserts that advocating greater personal responsibility will not do; rather the key is a significant amount of new regulatory legislation. However, regulatory legislation is usually not imposed on individual consumers, such as home owners, but rather on the financial firms that lend to them. Lang is asserting that the way to rectify the problem is to deal with the financial firms party to the current crisis, not by imposing or increasing prudence on the part of the individual home/property owners. A closer look at his language illustrates this focus:
“The leaders in the banking world in the United States have not only been forgetful and neglectful of their responsibility to the public but they have forgotten their own best interests, and many of them are reaping now in the distress that confronts them the legitimate results of their own folly and short-sightedness.”
Though this statement by Representative Henry Steagall (D-AL) is nearly 75 years old, it applies no less today than it did during the Great Depression. The Glass-Steagall Act which bears his name along with that of Senator Carter Glass (D-VA) should never have been repealed. It was a short-sighted plan motivated by unmitigated greed and the desire for “greater efficiency.” Call me crazy, but I don't think he is referring to individual home owners when he condemns unmitigated greed and the desire for 'greater efficiency'. This is why I bring in the quote from the Social Contract - Garbo isn't arguing against money dictating terms to society, he's arguing against the rich dictating terms against the poor (and hence for a shift towards communitarianism). Once we reach this point - the argument becomes something more akin to classic liberalism (e.g. libertarianism) versus modern liberalism, an debate that has been hashed and rehashed in far greater detail and with far more eloquence than I can do here.
Where then does that leave us? How should we go about facilitating a more prudent individual? One could argue that crisis itself right now is its own best future medicine - that overly zealous homeowners who purchased a home with no equity have suffered pain and won't engage in the same behavior again. But that doesn't mean it won't happen in the future when they either forget or are offered an enticing bill of goods. I'm interested to see what ideas you guys have on that question.