Most Americans are understandably angry about the current turmoil in financial markets. Most, it is clear, see a financial bail out as unjustifiably rewarding people who have already unjustly rewarded themselves.
But I believe it’s time to stop worrying about virtue and think about what’s important to individual taxpayers—their houses, families, children’s college educations, the ability to pay for health care, their retirement.
Will punishing the guilty protect those things? It’s fairly clear that it will not because our fates are inseparably entwined in the mess the latest crew of financial pirates has created. On the other hand, when things were going well, did those of us who benefited from the house of cards built on subprime mortgages object?
No, we enjoyed our benefits. And whether it’s a big market uptick, a sudden jolt downward or a roller coaster ride, we are part of Wall Street, like it or not.
The good news is that if we had the market that America had in 1929, no unemployment insurance, no Social Security, and the belief government should do not interfere with private business, we'd already be in the middle of a panic. Things have changed. It’s unlikely even those who oppose the $700 billion bail out would want to go back to the pre-Depression state of things.
The piecemeal efforts—bailing out Bear Stearns, taking over Freddie Mac and Fannie Mae and AIG, along with the forced marriage of Merrill Lynch and sale of assets of Washington Mutual and Wachovia—have a benefit. They slow the panic and this is one of those cases where it is necessary to understand the emotional component of economics and get beyond fancy economic formulas. They are not a cure.
But should we stop because some undeserving, already wealthy executive gets a $20 million severance for little of value? I think not. There is no time to stop to punish the guilty. It would be like a ship hitting an iceberg because the captain was incompetent and the passengers demanding a court marital before heading for the life boats.
We are not wise enough and do not have enough time to weigh culpability, and maybe real innocence and guilt. There will be time for indictments later.
The religious minded may remember the Biblical observation that the rain falls on the just and unjust alike and that hasn’t changed. There are just times you’re stuck. Not all the guilty will be punished, ever.
But we can have a government that saves our bank accounts, retirement funds, and children’s future. We have to keep our eyes on the prize, on what is important.
And what’s important is not halting action to punish the guilty and the unworthy. There’s just too much at stake. As the title of this column suggests, I consider that course, punish and perish. We are already at the point we may not be able to buy cars, let alone worry about retirement savings.
It's time to inflate the lifeboats...
