Who
should be culpable?
As we read about the latest bank settlement with the
federal government, it may seem that $7 billion is a hefty fine to be paid by
Citigroup. Apparently it’s not. Citigroup’s shares were up 3% on hearing of the
settlement, so someone must be thinking it’s a good deal for the bank.
Some may argue that any settlement is better than ongoing
investigations and the uncertainty that accompanies them, and therefore even $7
billion is a good deal, especially when no officer or director ended up in
jail. These “decision-makers” or better yet “job-creators” are never touched by
the long arm of the law. Are they above the law? Are they too rich to
prosecute?
It’s a given that moral considerations aren’t part of the
algorithm used by Wall Street mavens to make profits. It’s also a given that we
shouldn’t judge banks’ performance by their moral aptitude or social
contributions alone (even though some of them are proud of them). So, if we
simply judge banks by the results of their financial performances, then
Citigroup and its sister banks and hedge-funds are very clever indeed.
Knowingly commit a crime—fraudulently sell collateralized
debt obligations (CDOs) tied to
sub-par mortgages—make a huge profit for years, and then, years later, if and
only if you are caught and convicted (which is possible but highly improbable),
pay a fine. The billions you made along the way (whose value increases over
time as you lend it again and again) remain yours minus the fines to eventually
be paid.
Let’s translate this
Wall-Street speech to a language the rest of us can understand. You and I steal
money from unsuspecting people, make a profit off it, and pay a fine somewhere
down the line if we get caught. If moral principles were invoked ahead of time,
at the very beginning of the process, or better yet, before the crime is even
conceived or committed, none of the awful things that follow would have ever
happened.
The fact that the entire
American economy (and large parts of the global economy) came to a halt because
of such cavalier and criminal behavior may be worth recalling. It’s one thing
to lie to secondary markets about the integrity of CODs, and quite another to
create a financial bubble that is bound to burst. The “economy” isn’t hurt,
it’s people who are hurt, flesh and blood.
The most successful
program that the Bush/Obama Administrations undertook under the TARP initiative
(close to $1 trillion in bailout funding) was in my mind “Cash for Clunkers”
(Car Allowance Rebate System). The program lasted only a few short months in
the summer of 2009, but the eventually allocated $3 billion provided for over
690,000 dealer transactions.
Whether the original
intent was energy-savings, greater fuel-efficiency of trucks, or the
stimulation of the car industry in the midst of the Great Recession remains
unclear. But to actually put in the hands of individuals a credit towards
buying a new car helped get reluctant consumers into car dealerships, 690,000
of them!, and helped car sales.
Just think what would
have been the impact if the same voucher system of $2,500-$4,500 credit was
given to homeowners. What would have happened if not $3 billion but $300
billion (much less than was given to large banks) was allocated to homeowners
with vouchers worth $5,000-$9,000 each? Simple arithmetic would suggest that
34,500,000 transactions could have taken place, enough to avert the housing
collapse, and the suffering of those facing foreclosures.
Instead of celebrating the triumph of the Attorney
General, instead of feeling relief that justice is being exacted on corporate
giants, we should pause and think again: is this the kind of country we want to
live in? Is this the kind of capitalism we are willing to endure? Fines may
assuage our outrage a bit, but justice requires more than a slap on the hand.
To put this $7 billion fine in perspective, Citigroup has
a larger annual profit (on average) than the fine it just agreed to pay. Just
like other costs associated with its operations, paying fines here and there is
just the “cost of doing business.” Can you imagine that someone would routinely
drive recklessly and threaten the lives of pedestrians and other drivers and
agree to pay a fine here and there when caught without ever being threatened
with a driver’s license revocation?
Would we feel sanguine to live in a community where known
criminals like Citigroup’s officers and directors, executives and middle
managers, get a pass no matter what they do? Citigroup’s crime was not
victimless; its profits were at the expense of others; people’s lives were so affected
that houses were lost, savings evaporated, and marriages dissolved. This was a
crime, indeed, just as egregious and heartless as outright theft or burglary.
The idea that we can separate money from morals is false.
The belief that my profits are never at your expense is also not true in all
cases. So, before you decide what to make of Citigroup’s fine, just remember
those you know who suffered in the Great Recession. Their sufferings were real;
Citigroup’s weren’t (no matter what the Supreme Court says about corporations
being citizens). And the culture of calculated fraud shouldn’t be ours.
Raphael
Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See
previous articles at sassower.blogspot.com
