Forgiveness: The Moral Conundrum of the Economic Bailout

Business Ethics and Financial Services

Forgiveness – The Moral Conundrum of the Economic Bailout

Holding the economic bailout of the Wall Street to a higher standard may sound trite, trivial or worse, irrelevant in our age of analysis and analytic antidotes. It takes intellectual courage to suggest that our cure may lie outside the temples of higher education and think tanks. But in time of crisis, we often look to the measure of morality for guidance.

On the marble frieze of the façade of the US Supreme Court is the court’s pantheon of 18 prominent lawgivers of history, from Moses to Muhammad. Concerning the matter of social and monetary debt, only one had more to say then Moses as the great interpreter of the Law of Moses, Jesus Christ. Are there forgotten lessons hidden in the pages of wisdom asking to be told again? Are there obligations and insights for Wall Street? What about Main Street? In our age of financial modernity, can the past offer us anything?

Business Ethics: An Historical Case Study

Two historic stories resonate for today’s financial bailouts and shoring up institutions too big to fail. They are not the narratives of economic due diligence, but of vice and virtue. They are told to confront conventional financial wisdom, yet accessible and intuitive to the listener of any education. Their message is immortalize, not in the text book, but in the language of a parable. For Wall Street, it is the parable of the unforgiving servant. For Main Street, it is the prodigal’s son. Both parables address remedies for large scale debt, social obligations, and our attitudes to the recipients of monetary release. These remedies inform our cultural values and give us different tools to guide our policy decisions. The question remains, do we have the moral sophistication to adopt such truth telling narratives, or will we ignore the tools of inner and outer freedom that could lift us out of our crisis?

Ethical Issues of a Financial Bailout: Suspending Moral Hazard

For Wall Street, the unforgiving servant tells of a king who reconsiders his judgment against a servant. The servant, who owed millions of dollars, lacked the assets on his balance sheet to pay it back. The servant appealed, and the king was moved by compassion. Compassion trumped the servant’s sentence and the mechanics of the servant’s liquidation into slavery. But here’s the rub of the matter. What does the servant do with his new found freedom? Does the servant reciprocate or “pay forward” the same forgiveness and compassion to those who owe him significantly smaller sums of money? As a creditor, the servant sends his debtors into a debtor’s prison, liquidating their assets and personal freedom until the debt is paid. Oddly enough, it was the common folk, who now felt compassion for servant’s debtors in prison. Their appeal to the king results in a reconsideration of his decision. The king reprimands the servant, revokes his debtor’s forgiveness and liquidates the servant’s assets and freedom.

Regrettably, the message of financial forgiveness was not a spiritualize lesson to be conveniently reduced to the realm of private morality. The listeners of the parable recognize what it meant. In a world of debtor and creditors, the values propagated by this parable would directly impact the creditor’s balance sheets. So if, by any standard, we claim that in “God we Trust” or invoke His favor at time of war or claim Him as a “Christian nation,” then we elicit principles by which we will be measured by. Ironically, the actions of the US Government to provide financial aid to the tottering financial giants without oversight could be considered that great act of compassion and forgiveness aimed at mitigating a market disaster.

This is bit to noble for politics, but here is the rub. As the Government pours billions of dollars into these faltering institutions, how do these creditor institutions treat their debtors in financial difficulties? Do they apply the same standards of help, attention, restoration, or even better, forgiveness? Where are the community voices telling the stories of how an AIG or Countrywide extended the same measures of financial freedom they received? To whom have they forgiven, restructure, or restored human flourishing in communities of foreclosures? The parable begs significant questions for the behaviors of our sacred institutions of capitalism, only of course if in “God we Trust.”

An Ethical Example for Main Street

What about Main Street? Should Main Street be bailed out? Is there not explicit resentment by those who managed their money towards those that did not? Are the victims of predatory financing, by their own choosing, reaping the risks they have taken? Why should they be rescued from their mistakes at the expense of the taxpayer? Are we in risk of perpetuating a socialist agenda that devalues our country?

The parable of the prodigal son does not finish the story with a son who returns home to the delight of his father. The prodigal son returns home broke after he exhausted his father’s inheritance on variety of sinful delights.  Is this the kind of son we would want to see returning home?  This situation sets the stage for the message of the parable. The parable ends on the examination of the attitude of responsible bother, a son who remained in the service of his father and his feelings toward the prodigal brother, his father’s forgiveness and extravagance acceptance of this undisciplined family member.

The brother’s attitude, characterize by anger and resentment that the father never extended such special favors to him, is contrasted and trumped by the importance of the prodigal son’s restoration. Human flourishing is to be prized, even if the recipients deserve a lesser fate. If a member of the community is lost, compromised, trapped by debt, do we value their restoration even at the expense of the taxpayer? Regardless of how they arrived at their situation, whether by just deserts or by folly, is our hope for their ability to thrive? If my neighbor is threatened by foreclosure and the government by reasonable means funds his or her home (i.e. reduces the debt to a manageable load), what is my attitude? Most American’s would most likely side with the resentment of the responsible brother. The parable poses the question of how really “Christian” a nation America is or if it can be properly said that God is on our side. To be on God’s side, according to the parable, is to celebrate human flourishing.

Redefining Moral Hazard

Moral hazard is the belief that individuals should be punished for financial risk when those risks go bad.  This is the conventional wisdom of the banks as applied to home foreclosures, even when alternate arrangements may keep people in their homes.  The hazard is to those that take risk (i.e. the debt) and punishment maintains the morality or integrity the borrower.  Often, at the event of a home eviction, the quip, “it’s nothing personal, just the market” evokes the principle of moral hazard.  However, maybe it is personal and personal at the most fundamental level, at the level that involves not only our moral relationship of man to man, but man to God.   Perhaps, what trumps moral hazard for the masses is forgiveness for the masses when powerful lenders are forgiven.  What does it mean when the big banks fail to extend the same forgiveness?  Does this double standard make moral hazard morally wrong and carries the penal warning from the parable above for those that enforce such standards?

The “Terrible Petition” is what St. Augustine called the Lord’s Prayer because it evoked the call to forgive debt. With St Augustine’s insight, is it appropriate to publicly recite the prayer when our institutions evoke moral hazard to evict families from their most sacred possession, their home? The Prayers invocation to forgive our monetary debts as we forgive others of monetary debt is a frightening proposition and a uniquely Christian vision. Do we really want to do that? Yet, it was the measure of God’s banking values in community. Perhaps it is just best to leave behind the wisdom of the ages and focus on the benign tools of monetary and fiscal policy and listen to the convention of moral hazard. Morality and money have always been strange bedfellows.

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2 thoughts on “Forgiveness: The Moral Conundrum of the Economic Bailout

  1. Pingback: Business Ethics and Financial Morality | Stock Market News - Business & Tech News

  2. According to Mencius Analects:

    20. Mencius replied, ‘They are only men of education (i.e. monks and sages), who, without a certain livelihood, are able to maintain a fixed heart. As to the people, if they have not a certain livelihood, it follows that they will not have a fixed heart. And if they have not a fixed heart, there is nothing which they will not do, in the way of self-abandonment, of moral deflection, of depravity, and of wild license. When they thus have been involved in crime, to follow them up and punish them;– this is to entrap the people. How can such a thing as entrapping the people be done under the rule of a benevolent man?

    21. ‘Therefore an intelligent ruler will regulate the livelihood of the people, so as to make sure that, for those above them, they shall have sufficient wherewith to serve their parents, and, for those below them, sufficient wherewith to support their wives and children; that in good years they shall always be abundantly satisfied, and that in bad years they shall escape the danger of perishing. After this he may urge them, and they will proceed to what is good, for in this case the people will follow after it with ease.

    22. ‘Now, the livelihood of the people is so regulated, that, above, they have not sufficient wherewith to serve their parents, and, below, they have not sufficient wherewith to support their wives and children. Notwithstanding good years, their lives are continually embittered, and, in bad years, they do not escape perishing. In such circumstances they only try to save themselves from death, and are afraid they will not succeed. What leisure have they to cultivate propriety and righteousness?’

    23. ‘If your Majesty wishes to effect this regulation of the livelihood of the people, why not turn to that which is the essential step to it?

    24. ‘Let mulberry-trees be planted about the homesteads with their five mâu, and persons of fifty years may be clothed with silk. In keeping fowls, pigs, dogs, and swine, let not their times of breeding be neglected, and persons of seventy years may eat flesh. Let there not be taken away the time that is proper for the cultivation of the farm with its hundred mâu, and the family of eight mouths that is supported by it shall not suffer from hunger. Let careful attention be paid to educatlon in schools,– the inculcation in it especially of the filial and fraternal duties, and grey-haired men will not be seen upon the roads, carrying burdens on their backs or on their heads. It never has been that the ruler of a State where such results were seen,– the old wearing silk and eating flesh, and the black-haired people suffering neither from hunger nor cold,– did not attain to the royal dignity.’

    Source: http://www.sacred-texts.com/cfu/menc/menc02.htm

    Thus, debt forgivness is a virtue. Predatory lending and the consumerist society has basically entrapped the people, so to expect them to pay amid hardships would be the same as a ruler enforcing laws while neglecting the welfare of the people.

    Thus, the best way would be to find a system where people will be taught to have only modest desires, which will be fulfilled by clever economic management. The extra time such prosperity yields can be used to pursue art, philosophy and religion.

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