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.