Bankers' long tradition getting short shrift these days
The ugliest Americans are now the nation's bankers.
Abroad, they have abruptly become living symbols of uncontrollable greed. At home, President Obama publicly mocks them as fat cats to get on the right side of public anger -- even though it was the Treasury Department that put out huge saucers of taxpayer money to keep the cats fat.
This is a policy disconnect that invites a repeat of the financial disasters we have just been through. Rather than insulting American bankers, Obama should be restraining them and reforming their industry. His administration needs to restore not only solvency in a damaged system but also a shared sense of trust and responsibility among depositors, borrowers and bankers that has been shredded in just two years.
And that means recognizing that there is a broad cultural disconnect at work as well: When and how did this socially necessary, once-laudable American profession adopt values of self-dealing and deception, aggrandize them onto a global scale, and then run them into the ground?
True, there have always been usurers and fraud artists hovering around financial institutions. As the bank robber said, that's where the money is. But it is not all that often a profession that should be built on caution, discretion and foresight moves to center stage to represent all that is rotten in a superpower's way of life. Wall Street's Everyman today is Anthony Trollope's avaricious, crooked Augustus Melmotte.
It is an article of faith in Europe that the global recession was triggered by American bankers craftily selling contaminated financial paper to unsuspecting German, French and other purchasers. The flimflam, this narrative holds, was compounded by U.S. official incompetence in letting Lehman Brothers fail. (You can read homegrown variants of this line of attack on bankers and their protectors in Washington in Rolling Stone, right-wing blogs and the mainstream media.)
Unfortunately, it does little to stem this widespread anger at the U.S. system to argue that it is more complicated than that -- for one thing, European banks that bought AIG's toxic credit-default swaps were knowingly acting to artificially inflate their reserves so they could lend more and more in their own shaky deals -- or to recall that the American banking system has played a vital role historically in spreading growth and social opportunity nationally and internationally.
I grew up in a South Carolina mill town that I left for college with the help of the first banker I ever met. He advanced my family the princely sum of $1,000 of his depositors' money to help finance four years of study. In 1957, with some scholarship aid and after-class work, you could get by on that at a Southern public university.
This experience no doubt shaped my sense of a social contract between bankers and their communities. But that contract has long since been modified -- and now perhaps swept away -- by the subjugation of professionalism to entrepreneurship in much of the American marketplace, which has encouraged the exaltation of profit as the ultimate value of work and the short term as the only horizon worth considering.
Verbal jabs by the president at bankers and their bonuses cannot take the place of a concentrated effort by the administration and Congress to get banks to replace the current mismatch of outsized incentives and ignored risks with a new code of financial responsibility based in better supervision and regulation.
The administration appears to have been complicit in the all-out scramble by banks that took taxpayer funds from the Troubled Assets Relief Program (TARP) to escape from government supervision and control over executive pay. The bankers are left to pursue pretty much whatever risks they want in pursuing ever-bigger paydays.
"The banks that turned out to be too big to be allowed to fail are bigger than ever," John Gapper wrote in the Financial Times last week. It is hard to argue with his judgment that the Obama administration has failed to seize this crisis as an opportunity to seek fundamental changes in a financial system that still shows every sign of being unable to police itself.
As an urgent foreign policy priority, the president has invested great energy and a lot of ego in changing the image of America abroad. Much of that admirable effort will be undone if the administration does not also worry about how the image of Americans -- starting now with the bankers -- has to be changed as well.