Dollars and Egos

I have been busy all week so I haven't had the time to write entries. But it was actually a good time to take off because this week has seen unprecedented activity in the financial markets. I will give credit to my older brother for this one because he wrote me a letter months ago, while I was still in prison, saying that we were headed for a major crisis and his reasoning was sound as well: Americans have for too long lived well beyond their means and financed their lifestyle on the assumption that their house would be a perpetually appreciating asset. The mortgage companies played right into this assumption by designing mortgages with incredible risk, but risk that could be handled as long as the assumption held true.
Well, guess what. Markets correct and the housing market is no different. So now, we have a recessionary environment coupled with the highest inflation in more than a decade.
But the overheated dreams of Americans don't entirely explain the events of this week. Ego, throughout history, has been a very destructive force. Read Barbara Tuchman's The March of Folly. In our society, ego and greed have been elevated to admirable virtues. The selfish drive for more dollars has driven executive compensation to obscene levels. Americans have got to learn to say enough is enough. To justify these escalating salaries, profits became the main concentration of business, as they always have been, but normal risk parameters were blindly disregarded for the sake of bloated bonuses.
The living incarnation of this perverse principle is Franklin Raines, who fiddled his way to incredible compensation while cooking the books of what is supposed to be a highly regulated agency. It is not a good thing that he has been working as an advisor to the Obama campaign.
What can be done? The two sides of the argument revolve around the need for more stringent regulation, and I am definitely in favor of greater regulation of markets in order to prevent further convolution of prudent investment.
What is not being discussed is the central issue. Can we reform ourselves? Can we evolve into a society where the national welfare is the highest priority, instead of the source of the next dollar? Can we develop a true, honest sense of morality that is more than lip service? As Nicholas Kristof correctly pointed out in his columnn today, Richard Fuld, the outgoing chairman of Lehman Brothers, earned $17,000 an hour last year while he ran a 150-plus year old firm into the ground. How many different non-profit organizations can you think of in ten seconds flat that could have put that money to better use? Even one or two is enough.
You want to invest in the stock market, you want to earn a decent return on your money. You cannot be blamed for that. But you do share, a least a little bit, in the responsibility for the exorbitant pay packages that undeserving CEO's are awarded by boards who fail to exercise the proper oversight and diligence. The normal excuse given for these pay packages is that they are necessary to hire and retain the best talent for shareholders. On the surface, this is admirable. But the reality is that CEO's are earning three to five hundred times what their average line and staff worker earns and that is completely out of line with what percentage of the total profit they are responsible for.
Until Americans can have a real debate on the subject of morality in this country, there will always be more Franklin Raines. Jeffrey Skillings, and Bernie Ebbers. Even if we have the debate and establish a real sense of morality, those kind of people will still exist, but there would be more public condemnation and more severe penalties. No one, be it in the name of capitalism or pure greed, has the right to lead people into financial ruin. This is what these men have done. Jeff Skilling and Bernie Ebbers are in jail. Franklin Raines is an advisor to the Obama campaign. Something doesn't add up there.
Admitting that greed has always existed and always will exist is no excuse for not fighting it. We cannot make a legitimate claim to being an advanced society capable of moral leadership until we tackle the problem of greed and stop glorifying its excesses.
That is the challenge that should be undertaken in the wake of this weeks' financial turmoil.