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Soothing the suckers

By Al Schumann on Wednesday January 28, 2009 03:40 PM

Reform is certainly needed, yet, for all the excesses and instability of finance, a complete clampdown would be a mistake. For one thing, remember the remarkable prosperity of the past 25 years. Finance deserves some of the credit for that. Note, too, that finance has always been plagued by crises, whether the system is open or closed, simple or sophisticated. Attempts to regulate finance to make it safe often lead to dangerous distortions as clever financiers work around the rules. If there were a simple way to prevent crises altogether, it would already be the foundation stone of financial regulation.

From the eternally gaseous pages of The Economist, where the geese that steal the golden eggs can count on a sympathetic hearing.

Fortunately, there is a simple way to prevent financial crises. Not all of them, certainly, but quite a few. The most important thing is to stop deliberately creating moral hazard. For example, when policy makers make a policy that turns out to be bad, they shouldn't receive jobs in academia, seats on boards of directors, newspaper columns, awards from think tanks and further opportunities to make bad policy. This sends the wrong message! When clever financiers violate the law, they shouldn't be given even more money, in personal compensation, and even more trust to play with other people's money. It confuses the poor things. They come to believe they're entitled to escape the consequences of their behavior. What's worse, the tender psyches of their admirers become bruised, soft and malleable to point where any con is acceptable to them, as long as it's delivered with the marketing they like most.

There is a real world model for dealing with situations like this. Noted philosopher Margaret Thatcher observed that it is wrong for people to cast their problems at society. They must learn to look after themselves; to take personal responsibility, because there is no such thing as society. I disagree with her on the non-existence of society, but that's a quibble as I'm sure she'd transcend ideology to agree in principle with me as regards the appropriate rewards for criminals. Expropriation of their ill gotten gains, performed as community exercise, by families and neighbors looking out for each other, with government exercising its prerogative for benign neglect, makes for a morally rigorous solution. It sends the correct message.

Comments (11)


I remember a parable Reagan offered when selling his tax cuts. He'd complain that there was no economic incentive to make more than two pictures per year. Any more than that and he would wind up in a higher tax bracket. So, after the second picture wrapped, he and his fellow B-listers would head off to their vacation retreats where they would presumably drink themselves stupid and complain about the confiscatory nature of the tax code.

The lesson he drew from this was that by lowering taxes we could unleash the creative talents of the nation. Ronnie got his wish, but he overlooked the fact that he was, in fact, a pretty crappy actor. Fortunately, the tax code spared us God knows how many more Ronald Reagan movies, but this idea of unleashing the creative talents (i.e., greed) of the American people lives on.

Perhaps it's time to raise the tax rates back to whatever levels it took to keep Ronnie away from the camera a good part of the year.

Peter Ward:

Presumably they are rewarded because their bosses are pleased with what they have done. You and I may consider it rotten policy, but that's only because we haven't the proper enlightenment. The kind that induces respect for the Laws of the Market.

I take issue with MT's argument. Our problems (re: this discussion) are do to the way society is put together--but society society is an organism of which we are a part and that we share in collective responsibility for. When she uses the term 'individual' I suspect she is aiming to imply our circumstances fall totally within our individual as opposed to collective agency to control and thus we are personally to blame for every suffering for which we are afflicted.* If we wish to improve things, our task is to determine how we potentially fit into a decent world and using this understanding work together to fulfill the objective. Otherwise, struggling against reactionary currents will almost certainly be futile.

*In fact, in the case of polity and economy we are responsible in proportion to the amount of power we have. I.e., in a relatively undemocratic society such as the US or UK we relatively little responsibility contra Thatcher's remarks.

Son of Uncle Sam:

But how could moral hazard be stopped, guys like Madoff, Kissel, and a high percentage of mortgage brokers lie and falsify documents for an easy buck, which must feel like your hitting your fourth straight trifecta. And they always play the whole race book until the bar closes. Its got to be about more than just money after a point. Drug dealers and gangsters have their potential worth estimated frequently in the media after they get caught, it always brings the question up how much is enough? The financial cons and screwings are pretty close in moral brackets, Usury. It's even stranger that these guys aren't interested in taking the money and running into early retirement, it becomes a game. More hookers, more blow, more yachts, bigger houses and then after everyones dreams get shattered, the big house.

Al Schumann:

It's not the money so much. Although that plays a role. It's more the power; relative to each other for starters, relative to rich rubes next and relative to the little people for dessert. That's the addiction. The jacquerie and the big house scare these stakhanovite finance manipulators, but the possible dangers, remote though they be, are part of the game too. I doubt there's any way to keep that kind of addict in check, short of nationalizing finance and turning its different aspects into separate utilities.

Son of Uncle Sam:

Yeah I agree. It's funny when you think teachers in school would yell at the lazy kid and say have fun cooking fries. Years later he brings people to question why they cling to ethics at all. The lazy way looks way more fun I have to admit.

Al Schumann:

It may well be more fun, but when I look at all the effort they put into indoctrinating and propagandizing themselves, the substance of it, and the maintenance they put into keeping the necessary mindset fresh, I really begin wonder. I read the same things they do when they're trying to manage their own perceptions. The constant state of panic/paranoia and resentment/triumphalism would kill me if I believed a word of it. The emotional excess is grotesque, and it never lets up. They're so fucking needy and empty and manic. And they don't settle for what they've grabbed until they're physically incapable of playing the game anymore.

Son of Uncle Sam:

I agree with you again Al, and to add if I may it's ironic that by the time the pay days come, it was more cumbersum and work then just putting in an honest forty anyway.
The psyhcy is the most interesting part in its ability to fulfill these grandiose ideas and the dysfunction of its perception toward reality and ethics. And the ability to flush everyone else down the toilet. All in all
I guess this what happens when anti-social types enter the work place.

Al Schumann:

A twenty five hour work week is worth fighting for even if it's just for the sake of giving them the shits. They could eventually find self-actualization as hyperactively fretful goldbrickers in the socialist utopia. I'd like to think they'd be happier, somehow, in a life spent immersed in hysterical, enervating sulking. For relief, they could use their citizen's dividend to publish manifestos from ski resorts, just like they do now, only they'd be harmless.

Al, you should've been here to hold me back. What kind of friend ARE you ?!

Al Schumann:

I'm sorry, Ms. Xeno. I've been taking bagpipe lessons. It's very soothing. I keep a small pig tucked under my arm to build up my strength and technique.

What a thread. Cognitive dissonance is amazingly useful to people who want to try running face first through every shatterproof plate glass window they find. They can break their noses dozens of times without ever coming to the conclusion that running full speed into shatterproof plate glass windows is not a good approach.

My own conclusion is that they're perfectly happy repeating the exercise. The dissonance is actually comforting. They can find the kind social protection they want; it may even be rationally, if narrowly, useful, contingent on their social situations. The aggressive ones compete for degrees of status in maintaining it.

Count me in the camp that thinks they should quit running over my toes every time their urge to smash into glass takes hold.

Feh. So damn sick of bully-boy/girl "progressives."

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