Questions
It has been a week of questions.
In Washington, the Financial Crisis Inquiry Commission or FCIC for CSPAN geeks, held its first public hearing by asking the heads of the top four banks in America how the global economy came so close to the brink. The New York Times beat the Commission to the punch with some questions of their own in Wednesday’s op-ed section.
“Is there any way in which a synthetic debt obligation adds value to the real economy?”
“What short positions did Wall Street firms have in one another’s shares, and were they also betting against each other using credit default swaps?”
“All deposits insured by the Federal Deposit Insurance Corporation that were held by Wall Street financial conglomerates should have been insulated in separate bank subsidiaries that were prohibited from trading, holding derivative securities and investing in risky assets like equities or bonds with less than a AAA rating. Wouldn’t such safeguards have reduced excess banker risk-taking, thereby reducing the need for taxpayer bailouts?”
These are technical questions (most are arguments, really) with technical answers. They are all important and go to the heart of what happened and how we prevent it from happening again.
But there are better questions being asked this week. More important than even who is to blame are the questions that ask how this crisis can change us for the better.
Such as:
What do we believe in?
What do we value?
Who are we responsible to?
What is the common good?
The global financial crisis was the spectacular grand finale of a political philosophy that allowed individual actors to mostly do what they wanted in the certain faith that the market would correct any misjudgments in the long run. At its core, globalization has allowed the risks and costs of our economy to be passed off to those least able to complain.
If the market was let to die by its own hand, many predicted the end of the economy itself. Untold suffering would have occurred and there is no knowing just how society would have recovered.
So government stepped in and in an abomination to the market, saved the global economy.
A year later the big banks that were surviving on government credit are now posting record profits. It is bonus season on Wall Street and those profits are expected to be passed out as huge payouts to individual bankers.
Not everyone was made whole.
The family who lost their house when their Adjustable Rate Mortgage blew up in their faces; The couple nearing retirement who has watched their 401k sink by 40%; the worker who lost his job, his health insurance.
That is not right.
America is where the world sees everyone as rich. In parts of sub-Sahara Africa, access to clean water is the difference between disease or health, education or illiteracy, food or hunger. In Ireland, some rode the housing bubble out of poverty and religious conflict. China struggles with its success in lifting millions out of poverty; taking advantage of global connections while fearing them all the same.
This is their global economy too. Yet the urge to connect humanity continues to grow, despite the problems.
In his prepared testimony Wednesday Lloyd Blankfein, head of Goldman Sachs, urged, “We should resist a response … that is solely designed around protecting us from the 100-year storm.”
This was not an act of nature. The crisis is the result of a philosphy run amok and unchecked by a vigilant regulator.
Now Blankfein and his cronies are pressing to return us to the time before the fall. It is an appealing argument; many of us just want to go back to the good old days.
But we can build something better if we ask the right questions.
How do we build a vibrant, free market that serves the common good? What policies ensure that, in the words of Cardinal Dionigi Tettamanzi of Genoa, “[M]an does not exist for globalization,” but “globalization for man.”
Capitalism is not a part of nature. It was built by men and can be mastered by mankind for the common good.
What are we afraid of?
The wreckage of Globalization 1.0 is scattered throughout the planet for everyone to see. What awaits is a transformation to a better way of connecting the world. A way that respects human rights; a way that secures justice; a way that does more than shrug its shoulders at the real costs of prosperity.