A Glimmer Of Justice

Last week (2.9), we finally got a deal for a few big banks to make a $25 billion down payment on what they owe America. You’ll recall that less than a decade after they conned Congress into dumping the Glass-Steagall Act passed in 1932 to protect Americans from reckless bankers, reckless bankers drove most of the world off a cliff. A cliff created through their relentless efforts to profit from packages of securitized mortgages. They lured naïve folks into mortgages the bankers and their cronies knew they couldn’t afford. When the bottom fell out did the bankers use the money we gave them 2008 to help those they had enticed?

Nope, but the alarm bells were set off by Hank Paulsen, plucked by George Bush from his post as CEO of Goldman Sachs –perhaps the most reckless and devious nest of bankers on the planet– to become Secretary of the Treasury. The Congress passed the $700 Billion TARP Act (largely crafted by Paulson) to save the banks. At the same time – unbeknownst to most of us until earlier this year– the Federal Reserve poured about ten times that much into the banks, interest free. The $25 billion –chump change for these banks– will help a few of the millions who owe more on their mortgages than their homes are worth. Others, pushed out of their homes erroneously may get a few bucks.

The deal, in the works forever, was held up by two State Attorneys General who refused to sign because the banks got protection against future prosecution. California AG Kamala Harris and New York’s Eric Schneiderman booted the get-out-of-jail-free-cards. Housing Secretary Shaun Donovan brokered the deal over Super Bowl week and last Friday (2.10) announced that 49 states, the Justice Department, and other Federal entities had signed onto the deal. Ally Financial (formerly GMAC), Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, the biggest mortgage servicers, are coming up with the$25 billion.

It better be a down payment; the bankers received hundreds of billions from the American taxpayers. Up to now they have used our money mostly to return to the reckless risks that got us into this mess in the first place. An outcome Mr. Paulson could have forestalled, had there been any real conditions attached to the bailout bucks. But why would he? Could it be because Paulson had his hand on the tiller at Goldman while they were raking in billions selling crap (their term), all-the-while betting against their customers with the idiots at AIG? The same AIG we bailed out only to have Goldman suck up a ton of that bailout, collecting on the sure losers they hung on AIG.

Before sundown the day the $25 billion deal went public Schneiderman sued three big banks: Bank of America, JP Morgan Chase, and Wells Fargo, along with the MERS system. The banks set up and control MERS cloaking the foreclosure world. The banking entities and some of the individuals involved left the ethical line far behind in this display of unbridled greed.

The Return of the Robber-Barons

The Return of the Robber-Barons

At the dawn of the 20th century America experienced unprecedented change. The young were moving off the farms into the cities. Steel, rail, and oil giants wrought permanent change; change that created a chasm between the wealthy few and the vast number of Americans struggling far below.

Into this moment stepped Theodore Roosevelt.  A brash young President who recognized that a nation so divided could never achieve the greatness that would allow its people to thrive. His trust-busting crusade initiated a series of legal restraints on the robber-barons culminating in the Glass–Steagall Acts of 1932 and 1933. These boundaries, along with labor laws and a variety of safety nets, allowed our free enterprise system –and our people– to thrive and grow.

The loosening of those restraints as the 20^th century faded into the 21st brought a return of the practices they were designed to control. A study of the effect of wide spread deregulation was ordered several years ago by Senators Max Baucus and Charles Grassley, then ranking members of the Senate Finance Committee. The Congressional Budget Office delivered the study just last week. Its findings paint a bleak picture: the middle class is fast shrinking while those on the bottom are sinking farther away from those on the top of the pile.

Over the last few decades the top 1% of Americans enjoyed a 275% jump in their income. The bottom 20% not so much, they gained 18%. Do the math, 275% is over 15 times greater than 18%. The report points to the move from progressive income taxes to payroll taxes, easing the tax burden on those with the 275% gain while increasing the tax rate of those who have seen a measly 18% improvement.

As the giants of industry are quick to point out, our corporate taxes are among the highest in the world. However, since most of them have successfully lobbied their way out of paying taxes at the local, state and federal level, the federal tax rate has little or no effect on the corporate titans. Our hefty corporate rate does hit small businesses – the folks who are struggling to stay afloat in the aftermath of the collapse triggered by the bankers’ reckless gambling.

Since everyone agrees that small businesses create jobs, we find ourselves taxing these job creators, while the Fortune 500 (who rang up a net job loss over the last twenty years) pay little taxes, if any. The banks we bailed out are swimming in profits generated from the same risky games that got us into this mess. Weren’t they were supposed to help small businesses who want to grow and create jobs? What happened to that?

Meanwhile the top 1% (the 275% folks) are investing overseas or gambling on commodities (like oil – boosting gas prices and adding to the woes of the poor) all the while giving luxury marketers like Tiffany’s a boost. Sales in Tiffany’s New York flagship store increased 41% in the second quarter ending in July, up 33% thus far for the year. Tiffany’s stores worldwide are booming as well, thank you.

If you missed the ethical issues in this scenario, read it again.

W.T.”Bill” McKibben is a Buffalo based author. © 2011 GLG

Unexpected Consequences

Unexpected consequences frequently arise from actions at every level of life. Not in the least when it comes to enacting new legislation. Take the Wall Street Reform & Consumer Protection Act (AKA Dodd–Frank), created in response to the reckless actions of a handful of bankers that triggered the 2008 financial collapse.

(Actually the collapse was triggered by the banking lobbyists’ success in conning a brain dead 1999 Congress into removing one of the last remaining firewalls in the circa 1933 Banking Act (AKA Glass–Steagall). This Act protected us from this kind of nonsense for +/- 70 years; anybody for reinstating Glass–Steagall? Dodd–Frank left the gap opened in 1999 unfilled and the banks are headed full tilt for the same cliff they took us over in 2008. But that’s another subject for another day)

Dodd–Frank will “undermine existing compliance programs” according to its critics–read lobbyists. That pile of bovine excrement has vanished in the light of a study conducted by the SCCE (Society of Corporate Compliance and Ethics).

The SCCE surveyed compliance and ethics professionals on Dodd–Frank. Surprise, they found the exact opposite of the banking lobby fueled fears and expectations. The SCCE found more transparency; companies are making employees more aware of how to react when they come across misdeeds or misbehavior in the workplace, even if it’s your boss. They found compliance programs grown stronger thanks to Dodd–Frank.

The Act has also triggered more ethics training at the management level. Anything that improves ethics in our society is good news. Business ethics is not an oxymoron. Most people strive to do the right thing day in and day out. The impression that nice guys finish last is dead wrong. Study after study shows that –all things being equal– an ethics driven business model will out perform any alternative. Does that mean that dog-eat-dog never wins? Of course not, but even then the good guys will win bigger.

If that’s true, then why do we never hear about it? Simple, good news is no news. We want to hear about the unusual, the dramatic. Same thing with drama, on

stage, television or the movies, if it’s not comedy it’s got to be action. Even in the most famous good guy movie of all time, It’s a Wonderful Life, it took divine intervention to save George Bailey.

Aristotle is quoted* as declaring that Philosophy** led him, “to do without being commanded what others do only from fear of the law” That exactly defines ethics. And while ethics often gets bundled up with compliance, there’s a vast chasm between complying with a rule or law and doing the right thing.

 

* Supposedly uttered by Aristotle according t0 Laërtius Diogenes, who lived six or seven hundred years after Aristotle    (BTW not the lantern dude, Diogenes of Sinope. He also lived six or seven hundred years before Laërtius Diogenes).

** Philosophy, a system of principles for guidance in practical affairs. – Dictionary.com 09.20.11