The Morality of the Bailout

I work with a young man on his writing whose goal is to attend Harvard. He has undertaken a project to write a book on the role of morality in economics and society. This has really forced me to focus my thinking so that I can help him focus.

There are some very basic questions that need to be asked today, now that we are more than 5 years past an existential crisis and still mired in economic mediocrity. The first and most important question is not whether we are better off, but what have we learned?

Our standard of living has been extremely adversely affected and yet we have legislative gridlock in Washington and nothing has substantially changed on Wall Street.  We battle over ideologies instead of solutions. We watch people get massacred senselessly and we let the leading advocate of gun violence retard the reform process. With results like these it is hard to remain optimistic.

Just how big was the government bailout in 2008? The number that was tossed around when TARP was created was $500 billion, which is a sizable sum. But according to an article from April 2011 in American Thinker, the actual amount of money provided to financial institutions to keep them afloat was $1.2 trillion.

With all that money being provided and with most of it paid back by this point, and considering the economic situation in which we find ourselves, you again need to ask, what have we learned?

We watched as bailed out companies gave their executives exorbitant bonuses and severance packages. We watched as arrogant chief executives like Jamie Dimon made jokes about being overregulated and we have watched as not one person who perpetrated this crisis has gone to jail.

We have learned nothing. We have sat back and taken it on the chin. So the next question would have to be, where would we be now if we had let those institutions fail and instead used the $1.2 trillion to provide relief to the middle class families whose lives were ruined by the unpunished sins of Wall St. traders?

Yes, I am sure there would have been some major economic fallout if we had let AIG, Standard and Poors, Citigroup and Morgan Stanley, among others,  go under. But would the effect have been as long lasting as it has been if that money had been given to relieve the debt load of middle class families who had gotten in over their heads?

The conservative argument is that people should be responsible for themselves and if they get in trouble then they should get themselves out. That philosophy has largely been applied to the people who lost their homes and their livelihoods but has been ignored when it comes to the big financial institutions who were responsible for the crisis in the first place.

Which is more immoral? To bail out the people who made bad decisions for themselves and their families, or to bail out the big financial companies who pulled the strings that led people to make these bad decisions in the first place? The middle class has been held accountable while the financial institutions have not. Forcing the financial institutions to pay fines without admitting any wrong doing is not justice, is not moral. It’s basically putting a band aid on a bleeding system and ignoring the source of the wound.

We have become desensitized to immorality. We have made heroes out of the superrich without bothering to examine their character. We celebrate them when they devise new ways to make things more opaque and allow them to conceal their activities.

If the $1.2 trillion had been given to families, we might be experiencing greater economic expansion and investment in the kind of job creation we need to keep the middle class stable. You don’t get job creation by keeping big financial institutions in business that fight to keep conducting themselves in the same manner which created the crisis in the first place.

The next time the financial institutions put us in this position will we act the same way? Those institutions operate under the assumption that we will. Maybe if they were held accountable, they might decide to act in a fashion that benefits all of the stakeholders and further intervention would become unnecessary.

In any case, it cannot be said unequivocally that we did the right thing, considering the results we have gotten. It is time to ask whether we would have been better off taking a different course of action so that those responsible for the crisis know that there is no guarantee of reward if they give us a repeat performance. 

The Enormous Opportunity

The news today was good. It turns out that the United States will take over the leadership position in oil production in the next 20 years.

The implications of this opportunity are enormous. Since we have gone from the largest creditor nation to the largest debtor nation, our position as moral leader of the world has been eroded because we don't have the money to back it up. The revenues produced by the increase in oil production will change that dramatically.

But the opportunity must be approached in a different way than in the past. In the past, we stood as the world's police and enforced our will upon the world through military might. It has made us many enemies that are still paying us back as we speak.

Instead, we should use the revenues to lead by example. China and India are rapidly developing Western lifestyles, yet they are following the same path we did a century ago by using dirty fossil fuels to propel their growth. They feel no responsibility because they are following our example. Remember the marathon runners who were hesitant to compete in Beijing? No matter how the Chinese tried, they couldn't hide the pollution produced by the jammed highways that wind through the city.

We need to regain our moral authority by showing the whole world that we will lead the way to a greener future and do our best to mitigate the effects of the impending disaster we helped to create. So far, our apathy and loss of moral authority has shown the Islamic world that we are as bankrupt a culture as they suspected all along. A truly “green” revolution, powered by the profits from fossil fuels, would show Muslims that we are to be taken seriously and would go a long way towards decreasing the radicalization of Muslim youth.

The Larger National Tragedy

So here we are again. Another national tragedy. I hate to say it but I am not surprised. I am saddened but not surprised. I also feel almost prophetic. When I posted two weeks ago on my other blog about Bowling for Columbine, I hesitated to put it up there because the film wasn't actually released until October, but the feeling I had from watching it was so strong.

The movie made such an incredible point about how needlessly bloodthirsty Americans are. The media began talking about the influence of the movie and the character on the 24 year old man who committed this atrocity, James Holmes, almost as soon as it happened. But Michael Moore's film showed that people everywhere watch these movies and almost nowhere else does this kind of aberration occur. The United States is head and shoulders above other countries in the incidence of gun violence.

The gun nuts are already invoking their Second Amendment rights. The New York Times quoted a spokesman for a Colorado gun club as saying that if more people had guns in that theater then less people would be dead. All I can say to that is, I can only imagine the sense of chaos the people in that theater felt. How would it have lessened the chaos to have bullets flying in more than one direction? And would a concerned citizen with a gun have been able to avoid hitting innocent bystanders in a situation like that?

I went to the NRA website last night and today and they had no official statement. I wonder what they would say to the victims? What would they say about the incredible arsenal this young man had accumulated and the amount of ammunition he had? What would they say about his booby trapped apartment that is taking days to disarm?

I would like to say that the time has come for change. I would like to say that we have reached the tipping point and that Americans will finally open their eyes. But it won't happen.

Look what we have become. Our standard of living has fallen. We have lost the battle with global warming. Wall Street has effectively decimated middle class prosperity and anti-intellectualism has flourished to the point that we don't even have the common sense to control the sale of lethal weapons. Ego has completely overtaken enlightenment. We have a dysfunctional, apathetic society and the government we depend upon to defend us operates against our better interests. That is the larger national tragedy. The government depends on our short memories so it can remain incompetent and profit form legislative gridlock.

There is a song from Bob Dylan called Masters of War. One of the lines says, “You've thrown the worst fear that could ever be hurled, the fear to bring children into the world.” For the first time I agree with him. We simply don't want to learn. The only way we have any bliss is by remaining ignorant. Bob Dylan has another song, in my opinion his best, called “Its a Hard Rain's a Gonna Fall.” The storm is coming and your umbrella won't save you.

The only path to salvation is to completely re-examine our core beliefs and make a fundamental change in the philosophy we live by. I am not holding my breath.