In the months since I began this website, I have had some fairly harsh things to say about economic policy in the U.S., the U.K. and elsewhere. I have consistently condemned what I think is a captured government promoting an unstable financial system and a bloated financial sector. But, I have made a conscious effort to not use the word ‘bankster’ because I find it unfair and dehumanizing. Other bloggers may disagree, but allow me to tell you why I have made the choice I have.
I look more to government and its regulators as the problem than the banks. As an example, my post “Forget about Goldman” is about why it is government at fault when Goldman Sachs gets preferential treatment. I make much the same point in my post, “Why is Goldman allowed to game the system?”
Wall Street, indeed the financial services industry globally, employees hundreds of thousands of people. These people do not magically transform into ‘banksters’ looking to steal grandma’s pension when they start working on the Street or the City. They are no different than you or I.
The problem is government. Our policy makers are the ones who allowed easy money and lax regulation to become the status quo. They are also the ones who gain power through the political patronage of special interests as we have seen not only in banking, but in healthcare and oil and gas. Government has created a lawless environment in which far too many individuals have committed fraud and far too few have been prosecuted. But the vast majority of people in the financial services industry are hard-working honest individuals who do not deserve to be labeled banksters.
Take the recent Washington Mutual expose that I linked to in an earlier post. There was a telling few lines involving a veteran WaMu employee that goes to the heart of the problem. It says regarding a predatory loan product at WaMu:
The White House is pushing for a new consumer regulatory agency to end these sorts of abuses, but the banking lobby and even federal banking regulators are opposed. Banks say more regulation would kill innovation.
"I hated that loan," said Mary Kay Morse, a 20-year veteran at WaMu whose job was to persuade independent brokers to make option ARM loans. "It’s just not a good loan. It wasn’t good for the borrower."
That loan affected her opinion of WaMu.
"I always felt like I worked for a really honest industry that cared for the borrowers they dealt with," she said. The corporate culture changed to: "We just want to do the most we can to make money for the bank."
How could she have changed anything when the whole force of the system was working against her instincts? Should she have quit her job, left the industry, or blown the whistle? And to the degree she participated in getting these option ARMs out to consumers, is she complicit in the whole web of deceit?
To me, these are important questions which go to the concept of “collective guilt,” where people go along to get along while crimes are being committed in their midst. What got me to thinking about this issue was a BBC Documentary podcast called “Assignment – Protecting Britain’s Children” which I listened to this morning. The issue was social services in Britain and their complicity in the horrible death of an infant called Baby P at the hands of his parents in Britain. The incident caused shock and outrage, much of which was directed at Britain’s social workers, who were seen as complicit in the death.
Some social workers felt ashamed of who they were. Others left the field. Many more felt besieged by the public as a whole. I listened to all of this thinking of the parallels to the banking industry, which was crystallized for me when I read the Washington Mutual article. I see both episodes as related to some sort of collective guilt.
I have a problem with assigning this collective guilt to so-called ‘banksters.’ Yes, we should want regulators to do their jobs and prosecute people for fraud. We have not seen any prosecutions I know about from the alleged predatory lending at Washington Mutual or Countrywide Financial. This is yet another example of the permissive and destructive regulatory environment which created this mess.
But, we should stop well short of making blanket accusations of blame. The notion that there is collective guilt here is something we need to examine and address. I, for one, do not support it. I see captured and weak government as the problem.
Blame the government for setting up a rigged and corrupt system without adequate checks and balances. Vilify regulators for encouraging fraudulent practices that ripped off and bankrupted ordinary Americans and led to a fantastic crisis. Reserve your enmity for a system which encourages greed and naked self-interest at the expense of the broader economy and financial stability. And demand action.
Don’t hate the player, hate the game.