Serial Bus

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Holding a Mirror to the American People

with 3 comments

One of the canards used often by politicians in the US is attribution of everything glorious to ‘the American people’. During the run-up to the presidential elections last year, anytime someone stumped, clouds cheered wildly whenever the speaker invoked the ‘American people’. This same set of people appears in many avatars in the speeches – as wronged, as hardworking, as honest, as ¬†‘waiting for change’ and above all, as patriotic. In a democracy, it is a safe bet to start with the axiom that people are virtuous and nice. The anonymous mass of 300 million people is like a massive shock-absorber and it is alright to ignore that the most devious are also part of the same mass. But, what happens when a lot of people err seriously – when they either become ignoramuses or when they put self before country in the most outrageous ways?

A hardworking person, by extension, is intelligent and self-dependent. Yet, in the years leading to the current recession, too many people borrowed beyond their means, too many people placed the wrong bets on their savings, most of these people ended up either delinquent or scammed and they lived to tell the tale. Except that, they did not have to tell the tale they were embarrassed of. On their behalf, their leaders took to the megaphone and cried wolf. Fortunately for the American people, there were several imaginary wolves in the vicinity that could be made to look like the culprits. These were greedy bankers, lax monetary policy and savings-minded Chinese. By looking askance, the current mortgage/credit crisis was turned into one of the greatest hush-acts of all time. Suddenly, the people who exercised their free will and made some really bad decisions are being consoled by the politicians as if they were asked to sign up for that credit card at gunpoint.

Talking of the greedy banker, there are aplenty. They have also appeared bereft of another core American value i.e. honesty. While Bernard Madoff and Allen Stanford are just the most visible dregs, there are scores of people in various companies (from the run-of-the-mill predatory lender to the most sophisticated derivatives trader) who knew they were riding an insane curve with a lot of fine print. Most of them would not be brought to the book ever because they did everything by the book, even if the book was full of byzantine clauses (though with a glossy cover and smileys everywhere).

There is another sub-species of greedy banker that may have never mis-sold anything but revels in holding the nation to ransom. This is typified by Phibro, the commodities trading unit of Citigroup. They have been largely profitable but have come under the pay restrictions that accompanied government bail-out. Now, they are threatening to walk out and Citi has approached the government to allow fat salaries for Phibro on an exceptional basis. Now, if I were Citi, this would be hugely embarrassing – all that fabulous corporate talk about values, integrity and unity has suddenly been jettisoned. But, more than that, at this juncture, isn’t such behavior truly unpatriotic? Phibro knows that their exit could make things worse for Citi and that Citi’s downfall would spell doom for the economy. Yet, they remain true to their conviction in self-interest.

Apart from Citi, there are several other corporates that face internal rebellions – Ed Libby’s appearance before the House Financial Services Committee was very pitiable. Here was the CEO of the embattled AIG which wouldn’t have gone down under but for their Financial Products division. And the FP division wouldn’t have survived (along with the rest of AIG) but for the bail-out money. Despite the chaos the FP division caused, Libby went to Washington hat in hand, seeking the forgiveness of the nation for paying out bonuses to the errants. Why? – To retain them since nobody else could unwind the mess created by them.

I can perhaps still condone Phibro’s demands, since they had no role in bringing the Citi behemoth down. They had continued to deliver for the bank and were perhaps a distinct silver lining in Citi’s cloud. They could be more compassionate towards Citi’s situation but then, with so many undeserving people walking away with millions in yesteryears, they were perhaps struggling to be conscientious. In contrast, executives that work for AIG’s FP division were caught strangling the economy and then, had to be paid handsomely to help unstrangle it.

Such chicanery is outside the definition of a white-collar crime and can not be tried in the court of law. As a result, most people were just appealing to conscience of those people who insisted on pay dirt. Even though their threats to walk out could be directly detrimental to the recovery of the economy of the nation (and the world), there is no way to enforce their accountability. On the contrary, in a battlefield, soldiers are liable to be court-martialled (and executed in some countries) for turning back on the enemy; and if the soldiers were agent provocateurs, nobody would ever relieve them until they put out the fire.

Also, in desperate times, I believe governments in most countries have the right to enforce an ‘Essential Services Maintenance’ kind of law that makes strikes and lock-downs illegal for certain services e.g. transportation, power, law and order. In the current environment, resuscitation of finance has been pronounced as sine qua non by the powers-to-be. It is therefore not totally unreasonable to forbid anyone responsible for causing the chaos to quit until they have unwound their losses. Yet, this is easier said than done.

In this kerfuffle, when American values have been thrown to the wind by so many people, the invocation of the goodness of American people sounds hollow. What I want to see is someone call a spade a spade. If the man on the street is part of the reason things are in such a mess, it’s time representatives of people disclosed this candidly from the stump (or the pulpit or the Daily Show with Jon Stewart, it doesn’t matter!) and in doing so, held a mirror to the American people.


Written by serialbus

May 4, 2009 at 5:42 pm

3 Responses

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  1. If the exit of Phibro would spell doom for Citi and the economy, does that qualify Phibro as “too big to fail”?

    Just some thoughts…


    May 4, 2009 at 6:21 pm

  2. Hi, good post. I have been wondering about this issue,so thanks for writing. I will probably be coming back to your site. Keep up the good work

    • Thanks Joan. Appreciate your remarks.


      May 6, 2009 at 6:38 pm

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