The shoe fits both Parties.
The ethics story of week was the dropping of the missing shoe in the “Friends of Angelo” scandal that helped drive Democratic Senator and party leader Chris Dodd into retirement. (More here.) It fell like this:
WASHINGTON (AP) — The former Countrywide Financial Corp., whose subprime loans helped start the nation’s foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report.
What the report indicates is that the bribery of regulators and members of Congress to allow the sub-prime mortgage con-game to continue was far worse and for more widespread than anyone realized. Countrywide offered special loan deals to dozens of influential government officials to stave off regulations that might have avoided or greatly lessened the mortgage collapse that triggered the current long-term economic crisis:
“Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company,” the report said. “In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie” and its rival Freddie Mac, the committee said.“
More: Continue reading
Possible, but expensive.
Though the political implications of this disturbing story, which broke today on NPR, are wide-ranging, this isn’t a political blog. I will avoid the temptation to wade into them. That’s fine: the ethical implications are bad enough.
Freddie Mac, the taxpayer-owned mortgage giant, has been doing a Goldman Sachs, betting against the very homeowners it is pledged to serve by making multi-billion-dollar investments that will profit Freddie Mac only if homeowners can’t get out of expensive mortgages with interest rates well above current rates. Of course, Freddie Mac’s job is supposedly to do the opposite…to help homeowners find cheaper, fairer mortgages. And we were told, by the Obama Administration, that this what it was working to do.
This is called a conflict of interest. And since Freddie Mac, along with its cousin Fannie Mae, is owned by U.S. taxpayers, this is also a massive breach of trust by the Federal government. Freddie and Fannie were bailed out in 2008. The companies insure most home loans in the United States, making banks able to lend at lower risk, and the companies’ rules determine whether homeowners can get refinanced and on what terms. Now we know that Freddie Mac, at least, profits when they fail. Continue reading
I tuned in to Rush Limbaugh this afternoon expecting what I got, but hoping otherwise. Sure enough, Limbaugh spent the first half-hour of his broadcast mocking President Obama for taking “single-handed” credit for Osama bin Laden’s death, counting the number of times the President uttered the words “me,” “I,” “my,” and “mine,” and minimizing any credit due to the Chief Executive and Commander-in-Chief when the nation he leads finally accomplishes something it has been trying to do for a decade.
The President of the United States gets the blame and is held accountable for gas prices he cannot control, international upheavals, incompetent local disaster management after hurricanes, economic meltdowns caused by lazy regulators, irresponsible investors, unqualified homeowners and greedy business executives, the botched clean-up of unprecedented oil spills, the abuse of prisoners by hillbilly soldiers thousands of miles away, and every other social, societal and economic ill imaginable. That’s his job, and he wanted it: fair or not, he has to take it. Continue reading
"Sure, but other than THAT: great night at the theater, right?"
I believe that much of the time the corporate sector is unfairly treated by the media, politicians, and the public. Part of this conviction arises from my experience working at the U.S. Chamber of Commerce, directly under its current president when he was a rising young Turk. I dealt with corporate executives every day, and got to see the challenges of big business from their side. Most of the time, they struck me as genuinely concerned about workers, communities, fairness, while believing, of course, that an unfettered private sector was in the economic interest of everyone.
Increasingly, however, I see corporate behavior that is so arrogant, so transparently greedy, so contemptuous of the public’s intelligence, so blatantly, obnoxiously wrong that I wonder if it was all a dream. There was AIG, accepting billions from American taxpayers to save it from the consequences of its own fiduciary crimes, immediately spending some of it on lush retreats and parties for its executives. There were the leaders of Goldman Sachs, telling gape-jawed U.S. Senators that, no, they didn’t see anything unethical about selling their trusted clients investment products so awful that the company made money betting on their failure. There are the U.S. banks, hoarding their money and refusing to refinance mortgages that were unconscionable to begin with, preferring to make the nation’s economic problems worse by foreclosing on families’ homes rather than making a good faith effort to undo a human and social catastrophe that was substantially of their own making.
Now comes the news that Transocean Ltd., owner of the Deepwater Horizon oil rig, has announced that it is giving millions of dollars in bonuses to its executives after “the best year in safety performance in our company’s history.” Which seems perfectly reasonable, unless you want to make a big deal over that one little Gulf oil spill incident last April…you know, the one that began when a Transocean oil rig exploded, killing eleven people including nine Transocean employees. Continue reading
Vincent Cardinalli had been running a remarkably lucrative and heartless scam for years in Santa Clara, California, filing phony lawsuits against innocent citizens for towing and storage fees on vehicles they no longer owned or, in some cases, never owned. He was aided by a commissioner who routinely sided with him in the suits while ignoring obvious signs of a swindle. Cardinalli’s salad days ended, however, because a young lawyer decided to do his own investigation, on his own time, and uncovered enough to send the crook and his crooked son to jail. Continue reading
In “Terminator II,” there is a scene in which young John Connor–desperately trying, along with his mother and the android killing machine sent from the future to protect the boy, to prevent the apocalyptic future that waits for him—sees young children gleefully pretending to murder each other with toy guns. “We’re not going to make it, are we?” he asks the Terminator. “People, I mean.” The fact that a bank has chosen the Trashy Kardashian Sisters to promote a credit card aimed at teenagers prompts approximately the same sense of futility. At a time of crisis in which our culture that desperately needs to encourage responsible fiscal conduct led by financial institutions we can trust, this is what we get.
We’re doomed. Continue reading
For several years, I have been using a hypothetical in my business ethics courses involving the head of a non-profit who brings in a fundraising whiz to help the organization survive. While he is settling in and before he has had time to rescue the organization with his fundraising wizardry, she has asked the staff to accept a freeze on raises and hiring, and has cut other expenses, and even some staff. She asks the new fundraiser to live with his dilapidated office, though she had promised him a redecoration while recruiting him. But he objects: Continue reading
Sometimes the biggest ethics stories are the easiest. I haven’t written much about Enron, for example. When a company uses deceptive, shell corporations to hide its liabilities so profit reports look artificially rosy and investors keep buying company stock, it is obviously unethical. Even the ethics-challenged management of Enron could figure that out. The Goldman Sachs scandal, once one clears away the static and spin, is almost as straight-forward.
Are the Democrats seizing upon Goldman Sachs as a scapegoat for the financial meltdown they, like the Republicans, were complicit in as well? Obviously. That doesn’t mean that the firm doesn’t deserve all the abuse that is being heaped on it. Did the S.E.C., supposedly an apolitical and independent agency, time the announcement of its suit against Goldman Sachs to help rally public opinion behind the Obama Administration’s proposed Wall Street reforms? It wouldn’t surprise me. We have seen previous Justice Departments, the C.I.A., the F.B.I. and other supposedly “non-political” entities act blatantly partisan over and over again. The S.E.C. trying to give Obama’s reforms a boost would be one of the least dastardly of these breaches, especially since the public should be informed about the kind of conduct the culture of Wall Street permits. G.O.P. complaints about the timing of the announcement are, to say the least, strange. Would it be better to hide this story from the public? What matters is whether the S.E.C. has a legitimate case. It is clear that it has. It may not turn out to be a winning case, but it is legitimate. [Note: Personally, I think it is more likely that the S.E.C. announced the law suit to counter the embarrassing revelation that so many of its regulators spent endless hours on the job surfing and downloading pornography off the internet.]
The legal issues will probably be settled in court; the topic now is ethics. After watching the testimony of various Goldman Sachs officials before the Senate, I find it hard to see a credible argument that what the firm did—selling what its own employees referred to as “crappy” investment products to firm clients, and then betting its own funds that those products would end up losers—could be called anything but unethical. Continue reading