Greed Reclaims Its Due

This past week we have watched the virtual collapse of our American financial industry. At least a significant component of it in the investment banking and mortgage guaranty segments. Cumulative wide-spread greed once again has asserted its ultimate consequences, and those consequences will affect all of us in some manner.

In such times, it is awfully tempting to look directly at those industry CEOs who led these companies that are now going under. Tempting because it is so easy to do, and it is so accurate. Marginal leaders reaped the benefit of profits virtually pushed to them by the herd mentality of mass consumers who followed an expectation of guaranteed can’t-lose financial success. Then, when the shallowness of that business leadership and decision-making surfaced, these CEOs were sent packing. Unfortunately, those CEOs have packed a lot of cash into their exit suitcases from the wealth that they have fraudulently taken, with no accountability to their firms or the taxpayers now rescuing them. The issue of excessive executive compensation has been talked about for years, with nothing done to arrest it. It seems to be a nice, albeit somewhat exclusive, club to belong to.

As right as it is to castigate these CEOs for taking their ill-gotten gains and running, their bigger failure is that their actions and greed invariably helped to promote a broader such environment within their mega-companies. If the CEO is paid that much without accountability for company success, then it leads many on the corporate ladder expecting their pro rata share. At any cost, from any action that will achieve it. Except that the big bucks still only go to the top folks, they have never filtered down proportionally. (So much for the now discredited Reagan-era “trickle down” tax cut theories.) So in airline companies, automobile companies, and so on, worker-bees who are in fact critical to the CEO’s success are laid off or receive less-than-inflationary raises while simultaneously executive compensation continues to grow. The corporate resentment and “who cares” attitudes understandably increase across the organization.

The loss of caring and professional integrity can also grow in direct proportion to the growth in company size. As we continue these mega-mergers, operating decisions get made further and further away. Local ownership and oversight diminish. Despite reams of government regulations and published corporate policies, increasing anarchy grows in these increasingly distant everyday operational offices. In pursuit of sharing in the apparent expanding financial bubble, increasing numbers of lone rangers start making up their own rules, out of sight. Bad credit decisions get made; mortgage sellers and loan officers detached themselves from their outcomes since that mortgage is just going to be sold off to another company; your “local lender” has almost no control over lending decisions made about you as your loan passes from desk-to-desk, company-to-company, individual loan into a bundled security package. It is all detached, faceless, nameless, and conveniently hidden from visible guilt. And inappropriate consumers are taken into the wolf’s den of sleaze, enticed by a vision of a better status in their lives. As an economic commentator recently said, “bad capitalism drives out good capitalism in everyone’s rush to keep up [with each other’s income statement].”

Yes, it is easy to point fingers, because there are so many worthwhile targets to point to. But are we prepared to point one of those fingers into our own mirror? Not all of us outraged, innocent-bystander taxpayers are quite so innocent. Collectively, we have been willing to stick our heads into the sand and ignore the reality that we have helped to perpetuate, if not cause, this financial breakup. We continue to demand credit to buy what we cannot legitimately afford. We are willing to vote into office politicians who give out money to us that they do not have through ill-thought tax refunds and stimulus packages, special grants, and giving specialized allotment supports and tax loopholes to selected business / industries / agricultural operations. We do not protest too loudly when our president asks us to pay for the mega-billions being spent for the Iraq war by “going out and shopping” (no sacrifices), when we should have been asked to cut back our buying and instead invest in our own country (instead of leaving the war to the rest of the world to finance for us). As stockholders in these big corporations, we have endorsed the big CEO salaries and golden severance packages as long as we have seen our stock investments rise. As our fear of financial consequences grows, we have increasingly demanded guaranteed protection and safety from the consequences of our financial decisions.

Sooner or later, fast-rising economic booms always burst. We’ll demonize financial leaders because they deserve it. We will watch political leaders gyrate to the music of shifting public opinion while they try to look like they know what to do on our behalf. But will we also look in our own mirror and acknowledge our culpability in not first putting our own house in financial order, and in not demanding that our business and governmental leaders (of all parties) do the same for our collective “we”? Are we capable and willing to reject our own personal “bridge to nowhere” but reject it meaningfully, honestly and from the get-go instead of making it a meaningless after-the-fact sound-bite?

The financial bottom line of all of this is that we have collectively been living beyond our means for 8 years or more, and we have lied about it to each other and ignored it to ourselves. At our peril. Our peril has now come due. In abrogating our own sense of self-responsibility, my 5 grandchildren will have to help pay off the bills we have so foolishly created.