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CAN OBAMA DO TO WALL STREET WHAT REAGAN DID TO THE AIR TRAFFIC CONTROLLERS?
Chuck Grassley's taking a lot of heat for saying something pretty banal:
In the case of the Japanese, you know, they do one of two things. They either go commit suicide or they take a deep bow and say apologies and then sometimes resign. But they take full responsibility. And we’re not hearing that.
And obviously, I don’t want anyone to kill themselves because I don’t believe in that sort of thing. But I do believe that when you have done bad for your company, for your stockholders, and eventually for the taxpayer…you ought to say I’m sorry.
I've observed the same: It's actually weird that there's been so little high-profile contrition. Every executive at every taxpayer supported firm should be gladly, tearfully, going without pay or bonus. They have brought the world's largest economy to its knees and forced massive subsidies from taxpayers who have far less than they do. Instead, they're invoking legal technicalities to retain their bonuses.
The question is "why?" Why so little shame? Matt Yglesias has a provocative thesis, arguing that the virtuous selfishness prized by the market has been absorbed as an ethical philosophy. "We’ve somehow managed to construct something of a post-shame society," he says, "in which elites have convinced themselves that the rational agent model of human behavior is not just a useful modeling tool, but an ethical guidebook. There’s something to be said for the idea of a sense of honor and personal responsibility. "
You might see more of that if only a single firm had failed. But when your entire peer group is experiencing the same catastrophe, it's easier to convince yourself that you bear no personal responsibility. Indeed, why would you feel shame? In comparison to whom? Shame is relative. The people whose opinions matter to you, after all, are in no place to condemn. And if no one succeeded then it's hard to say that any individual failed.
So that wipes out the prospect for shame to work its magic. But what about fear? The discipline imposed by the threat of the pitchfork wielding mob has salutary effects. Of course, pitchfork wielding mobs also have all manner of unintended consequences (pitchfork shortages, for instance), so you may want to bypass that.
You're left, really, with punishment. It's not a question of satisfaction. It's a question of policy: If the broader populace continues feeling like they're the suckers in a massive con, the administration's ability to continue to respond to the financial crisis will be greatly reduced. For some time, we've worried about the market's reaction to a punitive approach. But the danger is increasingly the populist fury that's being fed by continued subsidies and bailouts and bonuses. Nationalization has begun to look like the only viable political option over the long-term.
It's also the only approach with a chance of changing the culture of Wall Street. When Reagan fired the striking air traffic controllers, he signaled the coming of a new national culture: One in which dynamism would be prized and taxes would be lower and Labor's power would diminish. This was, in part, the fulfillment of Reagan's mandate. Elections are as much about the values of the country we want as the policies of the administration we choose. But it's hard for a president to change national values. You can't do it through a bill. You need the right moment. And AIG's bonuses may provide that moment.
COMMENTS (19)
Dunno... I've come to think that these people honestly believe in their inherent superiority, and therefore can't be shamed. The self-justifications of adolescent Rand obsession and the endless tribal flattery of the right-- and do the GOP really do anything but flatter their various factions about how they deserve to dominate liberals at home and everyone else in the world?-- seem to have created a bunch of weirdly Calvinist sociopaths.
This has really been weighing on my mind a lot lately, although it dates back to my rather disappointed post-college realization that the upper classes (when I worked my way up enough to associate with them regularly) weren't necessarily all that bright or interesting. They aren't really producing much of value, at least insofar as their spreadsheets don't actually improve life for others, yet so many seem convinced that they're absolutely indispensable gifts to society.
Posted by: latts | March 17, 2009 1:21 PM
The AIG executives deserve no blame at all for this mess. It was brought upon us by the ruthless actions of Democrats in Congress who are now out to expropriate the money of regular middle class Americans.
Posted by: Anonymous | March 17, 2009 1:37 PM
It's not just the lack of contrition, it's the sense of entitlement. They felt taxpayers owed them a bailout and that their compensation should be unchanged. The federal government's been only too happy to oblige.
Josh Marshall's right, it's time to use the the threat of criminal investigation and prosecution. The carrot failed because the hubris on the street is mammoth. Populist wrath, while an important political consideration, isn't even the most compelling argument for punishment.
It's becoming clear that the moral hazard is real.
After they're caught, even blue chip NCAA programs know when to be contrite. They implement their own sanctions lest the regulatory body come down even harder.
Wall Street needs to lose some scholarships and championship eligibility for awhile. While some traders may have learned a lesson, it doesn't seem to have been imprinted on the cultural memory.
We don't want our finance sector thinking "bubbles come, bubbles go, taxpayers keep us solvent" is an acceptable model.
Posted by: Andrew | March 17, 2009 1:38 PM
"so many seem convinced that they're absolutely indispensable gifts to society."
You only have to look at Rick Santelli's comments, or those of many others who have argued that they "work harder" than others and therefor deserve every penny of every bonus "owed" them, to see the truth in this. They honestly seem to believe they work harder, and contribute more to society, than anyone else. As though if they disappeared, life as we know it would suddenly stop.
It would be pathetic if it wasn't so maddening.
Posted by: mensch | March 17, 2009 1:39 PM
Ezra,
Could you please whisper this into President Obama's ear?
He likes the idea of changing things through cultural processes rather than legislative/executive/judicial triumph.
Posted by: Hobbes | March 17, 2009 1:46 PM
While you wish to focus on the executives that clearly don't deserve these bonuses, the real problem is a president that has totally mismanaged this givaway.
Obama comes off looking like a dufus. This is not George Bush's leftover problem. It's Obama's and on these bailouts.....he screwed the pooch and the public knows it.
Obama, the Dufus.
Posted by: El Viajero | March 17, 2009 1:55 PM
Right, NOW El Viagra decides to pretend that he doesn't like handouts to rich people. You're not fooling anybody, dude.
Posted by: Steve LaBonne | March 17, 2009 2:04 PM
The moral hazard comes home to roost, or some such tangled metaphor.
Posted by: zyxw | March 17, 2009 2:25 PM
Our culture of apology (as in, whe we want or expect apologies) (and when we concede mistakes) is definitely f'ed up.
One is more likely to get an apology from an individual who is confronted by Chris Matthews (or the late Tim Russert) over "do you now regret making [X gaffe]?" than if that same individual is questioned by Congress, shareholders, or the public.
But how often in Western Society have leaders or elites gone before the public to concede systemic mistakes? Sure you might get a "limited" or "couched" apology for a discrete failing, such as Tim Geithner's or Tom Daschle's tax problems --- but, as in Daschles' case, not an apology for the revolving door of lobbying and pedaling money and influence.
But then, did Louis XVI and Marie Antoinette apologize to all of France for centuries of high taxes and imposed serfdom before they were beheaded? Did George Bush apologize for the legacy he's left the country after 8 years? And, I'm still waiting for Roseanne to apologize for the last two seasons of ... "Roseanne."
Posted by: Peter A. Basso | March 17, 2009 2:25 PM
Who felt shame about 9/11?
Who felt shame about going into a useless war?
Who felt shame about Katrina?
Nobody does shame any more.
Posted by: grat | March 17, 2009 2:53 PM
Who felt shame about 9/11?
Who felt shame about going into a useless war?
Who felt shame about Katrina?
Nobody does shame any more.
Posted by: grat | March 17, 2009 2:54 PM
Senator Grassley's comments, as reported by Reuters, were much less banal than your version:
"The first thing that would make me feel a little bit better toward them (is) if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide," Grassley said.
"And in the case of the Japanese," he added, "they usually commit suicide before they make any apology."
So is he saying the Japanese usually apologize AFTER they commit suicide, or that they don't apologize at all? what a stupid and offensive statement by a U.S. Senator.
Posted by: Felix | March 17, 2009 3:08 PM
AIG bail out was handed out last autumn.
Posted by: Hairy Reed | March 17, 2009 3:16 PM
AIG bail out was handed out last autumn.
Exactly. So Obama's fault.
GWBush was only responsible for good things that happened between 9/12/01 and 1/5/07. Everything before then was Clinton's fault. Everything bad between those dates was Obstuctionist Democrats' and/or bloggers' fault; from 1/5/07 until about July of 2008, it was all Nancy Pelosi's fault. Since July, it's all been on Obama*.
Your inability to understand this careful arrangement of Personal Responsibility is why Democrats Are Always Wrong.
Duh.
* It's actually a bit more complicated than that. For instance, Phelps winning gold was Bush, but the pot was Obama. Rodriguez taking steroids in 2003 was also Obama's fault, since he was Pres when it was announced. I'm sure the RNC website has some sort of app if you're uncertain whose fault something was.
Posted by: JRoth | March 17, 2009 4:28 PM
I fully expect Obama to have Geitner disemboweled right after Labor Day 2012 if the economy is still in the dumps.
The job will probably fall to Axe since Obama likes to keep his hands clean.
Posted by: daiymo | March 18, 2009 6:02 AM
Sorry about going off topic, but who is the artist of the woodblock print and what is it called? Thanks.
Posted by: sjelly | March 18, 2009 7:36 AM
sjelly: http://en.wikipedia.org/wiki/File:Seppuku-2.jpg
Posted by: Brock | March 18, 2009 9:58 AM
Right, NOW El Viagra decides to pretend that he doesn't like handouts to rich people.
Steve, you don't understand me at all!
I *don't* like government handouts of any type, rich people, poor people, and corporations. I would like to see the goverment stop all subsidies to corporations as well as individuals.
Steve, this has always been my position and to say otherwise is simply being dishonest or ignorant.
I make my arguments in good faith.
Posted by: El Viajero | March 18, 2009 11:17 AM
Perhaps the executives are arrogant enough to believe that they deserve the money. But who can blame them? When even (especially!) Democrats are telling everyone how our country will be saved, only when we infuse billions of dollars of cash into these companies, it is only natural that some of the blowhard recipients will think of themselves as "part of the solution." When we stop rewarding and honoring failure, then the hotshots who fail will finally realize that they're like emperors with no clothes. Until then, in my "centrist" opinion, Democrats have lost all credibility in claiming to be the party that favors the disadvantaged. If it were so, they could have given the bailout money directly to the poor, instead of to their donors and corporate friends.
Posted by: anon | March 18, 2009 11:37 AM