A.J. DiCintio
Morality and the banking system
By A.J. DiCintio
Like the other Founders, Ben Franklin was no Pollyanna when it came to acknowledging the realities of human nature and conforming his ideas to them.
That's why he embraced the need for laws and other social strictures, thereby revealing his kinship to the liberty-loving and common sense Roger Williams, who in 1655 found it necessary to forcefully condemn anarchic ideas proposed by fellow Providence colonists whom he characterized as advocating for a society that permits "No Masters, nor Officers, no Laws, nor Orders, no Corrections nor Punishments."
Like Jefferson and other Deists, Franklin was no devotee of traditional religion. Yet his belief in a Creator and his honesty about human nature led him to say this as he urged members of the Constitutional Convention to accept the proposed constitution:
"I believe, further, that [the proposal] is likely to be well administered for a course of years, and can only end in despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic government, being incapable of any other."
The idea that a stable, prosperous democracy absolutely requires wise, effective laws based upon a shared morality comes to mind today as a result of a piece in which business writer David Olive (Toronto's Star) argues that only a "culture change" of improved morality can protect the U.S. from another financial crisis.
In support of his argument, Olive points to the superior behavior of bankers in Canada, where since 1961, five banks have controlled "80%-plus of Canadian banking and investment banking assets" and yet "have [never] required anything remotely like a government bailout, or come close to [insolvency]."
Then, he explains precisely what he means by the moral shortcomings south of the border:
"What ails U.S. financial services and Corporate America generally is lack of a sense of personal responsibility, prudence and patriotism on the part of top management and the directors charged with supervising CEOs."
A desperate need for "personal responsibility, prudence and patriotism" — and not just among corporate VIP's?
A huge swath of the American public will energetically laud that opinion, with the most fervent huzzahs rightly coming from conservatives.
But conservatives, basing their beliefs upon religious teaching, an honest estimate of human nature, or a combination of the two, understand that a fundamentally flawed humanity (or a humanity hard-wired to behave irrationally, as scientists are increasingly discovering) will always be deserving of the mockery inherent in Puck's "Lord, What fools these mortals be!"
And thus they deem it essential for a people to wisely and responsibly enact their moral beliefs into law.
In fact, Olive implicitly supports the notion it is not so much the intrinsic moral superiority of Canadian bankers but the moral and pragmatic goodness of Canadian law that has kept Canada's banks on the straight and narrow when he writes this:
"Canadian bank regulators have about half a dozen phone calls to make in order to get every major bank to rein in lending when there's a bubble on the horizon."
With the idea in mind that various "cops on the beat" are essential for protecting a democratic people's life, liberty, and pursuit of happiness, let's look at the current state of big banking in America amid the continuing pain caused by the immoral behavior exhibited by greedy bankers as well as arrogant politicians and pretentious regulators blinded by a perverse ideology that looks upon merely-human financial bigwigs as angels.
. . . Today, assets of the nation's five largest bank holding companies amount to $8.6 trillion or nearly 60% of the nation's current annual GDP, making them not just "too big to fail" but most likely too big to be denied a bailout at 100 cents on the dollar if their arrogance and stupidity should lead to a significant stumble.
. . . With their deposits insured by the FDIC, those banks (and others) aren't just allowed to sell securities, they are permitted to speculate in the stock, bond, commodities, and currency markets.
. . . Finally, politicians have accorded big bank big shots the status of Very Special Citizens by seeing to it that even the worst of their immoral, irresponsible, unpatriotic behavior is perfectly legal or, being illegal, so difficult to prove that in one of the most oxymoronic acts in American political history, President Obama's DOJ has decided not to waste public money attempting to bring the miscreants to justice.
Actually, things are so rotten in the state of the nation's financial institutions that a report by the Washington Post depicts welfare-dependent American banks as feeble products of a socialist system — in contrast to self-sufficient, healthy, actively lending Swedish banks that have greatly benefitted from the strong capitalist medicine they were forced to take after what Cecilia Hermansson of Swedbank calls "the crisis in the '90s."
If you are as shocked and embarrassed by that assessment as I am, you will be extremely interested to hear what Thomas M. Hoenig has to say about our financial institutions.
And, yes, that's Thomas M. Hoenig, the President and CEO of the Federal Reserve Bank of Kansas City, a man before whose name no sane person on the planet would place the word "liberal."
Like Republican politicians, Hoenig criticizes Dodd-Frank for superficially "[adding] new layers of [the] same tools" financial institutions have previously "skirted."
(Who should be surprised that Democrats would "reform" banking by further bloating an obese, ineffectual bureaucracy as well as forcing small banks that played by the rules to pay for the sins of their porcine brethren?)
But unlike many Republican politicians, Hoenig proposes to get banks "back to the business of banking" by restoring the principles of Glass-Steagall.
To use his words, "Institutions that have access to the safety net [the FDIC] should be restricted to certain core activities that the safety net was intended to protect — making loans and taking deposits."
He proposes eliminating de facto welfare for banks, thereby eliminating a powerful disincentive to responsible behavior.
Moreover, he dismisses as "nonsense" the idea that only dangerously gigantic monster banks can compete in the global marketplace.
In fact, he bravely and wisely asserts that mega-banks (or "SIFI's" for "Systemically Important Financial Institutions") are fundamentally inconsistent with capitalism and inherently destabilizing to global markets and detrimental to world growth [emphasis added].
To borrow from a phrase mightily abused of late — The kind of reform proposed by Thomas Hoenig represents change the American people can believe in.
Let's hope Republican leaders get behind it; for when they argue that Dodd-Frank ought to be repealed, fine.
But when they do so without vigorously promoting honest, common sense, desperately necessary alternatives, they place the entire nation at risk of terrible injury, leaving the public to draw two possible conclusions:
. . . They are selling out their country for a very big bag of very dirty political dollars.
. . . They are committing the same betrayal because they are dogmatically committed to a mindless, immoral ideology that preaches the joyous goodness which lies ahead when financial institutions and the people who run them answer to "No Masters, nor Officers, no Laws, nor Orders" and fear "no Corrections nor Punishments."
© A.J. DiCintio
July 2, 2011
Like the other Founders, Ben Franklin was no Pollyanna when it came to acknowledging the realities of human nature and conforming his ideas to them.
That's why he embraced the need for laws and other social strictures, thereby revealing his kinship to the liberty-loving and common sense Roger Williams, who in 1655 found it necessary to forcefully condemn anarchic ideas proposed by fellow Providence colonists whom he characterized as advocating for a society that permits "No Masters, nor Officers, no Laws, nor Orders, no Corrections nor Punishments."
Like Jefferson and other Deists, Franklin was no devotee of traditional religion. Yet his belief in a Creator and his honesty about human nature led him to say this as he urged members of the Constitutional Convention to accept the proposed constitution:
"I believe, further, that [the proposal] is likely to be well administered for a course of years, and can only end in despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic government, being incapable of any other."
The idea that a stable, prosperous democracy absolutely requires wise, effective laws based upon a shared morality comes to mind today as a result of a piece in which business writer David Olive (Toronto's Star) argues that only a "culture change" of improved morality can protect the U.S. from another financial crisis.
In support of his argument, Olive points to the superior behavior of bankers in Canada, where since 1961, five banks have controlled "80%-plus of Canadian banking and investment banking assets" and yet "have [never] required anything remotely like a government bailout, or come close to [insolvency]."
Then, he explains precisely what he means by the moral shortcomings south of the border:
"What ails U.S. financial services and Corporate America generally is lack of a sense of personal responsibility, prudence and patriotism on the part of top management and the directors charged with supervising CEOs."
A desperate need for "personal responsibility, prudence and patriotism" — and not just among corporate VIP's?
A huge swath of the American public will energetically laud that opinion, with the most fervent huzzahs rightly coming from conservatives.
But conservatives, basing their beliefs upon religious teaching, an honest estimate of human nature, or a combination of the two, understand that a fundamentally flawed humanity (or a humanity hard-wired to behave irrationally, as scientists are increasingly discovering) will always be deserving of the mockery inherent in Puck's "Lord, What fools these mortals be!"
And thus they deem it essential for a people to wisely and responsibly enact their moral beliefs into law.
In fact, Olive implicitly supports the notion it is not so much the intrinsic moral superiority of Canadian bankers but the moral and pragmatic goodness of Canadian law that has kept Canada's banks on the straight and narrow when he writes this:
"Canadian bank regulators have about half a dozen phone calls to make in order to get every major bank to rein in lending when there's a bubble on the horizon."
With the idea in mind that various "cops on the beat" are essential for protecting a democratic people's life, liberty, and pursuit of happiness, let's look at the current state of big banking in America amid the continuing pain caused by the immoral behavior exhibited by greedy bankers as well as arrogant politicians and pretentious regulators blinded by a perverse ideology that looks upon merely-human financial bigwigs as angels.
. . . Today, assets of the nation's five largest bank holding companies amount to $8.6 trillion or nearly 60% of the nation's current annual GDP, making them not just "too big to fail" but most likely too big to be denied a bailout at 100 cents on the dollar if their arrogance and stupidity should lead to a significant stumble.
. . . With their deposits insured by the FDIC, those banks (and others) aren't just allowed to sell securities, they are permitted to speculate in the stock, bond, commodities, and currency markets.
. . . Finally, politicians have accorded big bank big shots the status of Very Special Citizens by seeing to it that even the worst of their immoral, irresponsible, unpatriotic behavior is perfectly legal or, being illegal, so difficult to prove that in one of the most oxymoronic acts in American political history, President Obama's DOJ has decided not to waste public money attempting to bring the miscreants to justice.
Actually, things are so rotten in the state of the nation's financial institutions that a report by the Washington Post depicts welfare-dependent American banks as feeble products of a socialist system — in contrast to self-sufficient, healthy, actively lending Swedish banks that have greatly benefitted from the strong capitalist medicine they were forced to take after what Cecilia Hermansson of Swedbank calls "the crisis in the '90s."
If you are as shocked and embarrassed by that assessment as I am, you will be extremely interested to hear what Thomas M. Hoenig has to say about our financial institutions.
And, yes, that's Thomas M. Hoenig, the President and CEO of the Federal Reserve Bank of Kansas City, a man before whose name no sane person on the planet would place the word "liberal."
Like Republican politicians, Hoenig criticizes Dodd-Frank for superficially "[adding] new layers of [the] same tools" financial institutions have previously "skirted."
(Who should be surprised that Democrats would "reform" banking by further bloating an obese, ineffectual bureaucracy as well as forcing small banks that played by the rules to pay for the sins of their porcine brethren?)
But unlike many Republican politicians, Hoenig proposes to get banks "back to the business of banking" by restoring the principles of Glass-Steagall.
To use his words, "Institutions that have access to the safety net [the FDIC] should be restricted to certain core activities that the safety net was intended to protect — making loans and taking deposits."
He proposes eliminating de facto welfare for banks, thereby eliminating a powerful disincentive to responsible behavior.
Moreover, he dismisses as "nonsense" the idea that only dangerously gigantic monster banks can compete in the global marketplace.
In fact, he bravely and wisely asserts that mega-banks (or "SIFI's" for "Systemically Important Financial Institutions") are fundamentally inconsistent with capitalism and inherently destabilizing to global markets and detrimental to world growth [emphasis added].
To borrow from a phrase mightily abused of late — The kind of reform proposed by Thomas Hoenig represents change the American people can believe in.
Let's hope Republican leaders get behind it; for when they argue that Dodd-Frank ought to be repealed, fine.
But when they do so without vigorously promoting honest, common sense, desperately necessary alternatives, they place the entire nation at risk of terrible injury, leaving the public to draw two possible conclusions:
. . . They are selling out their country for a very big bag of very dirty political dollars.
. . . They are committing the same betrayal because they are dogmatically committed to a mindless, immoral ideology that preaches the joyous goodness which lies ahead when financial institutions and the people who run them answer to "No Masters, nor Officers, no Laws, nor Orders" and fear "no Corrections nor Punishments."
© A.J. DiCintio
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