The Bailout and Human Nature

Eyes and ears are poor witnesses when the soul is barbarous.      Heraclitus  

Posted mid-Sunday, as bail-out talks continue.    

Pinker complains in The Blank Slate  of the increasing emphasis in the 20th century on  nurture.   This may well have increased  our sympathies for others, but has led us to undervalue human nature and therefore not consider moral hazards that tempt it.    Our experiences are so variable and their impact so ambiguous, we may be quick to assert  effect where none  existed – or emphasize it when  convenient.       Indirectly, we came  to  devalue  that third and most personally consequential component – human agency.     We say, “Officer Krupke, I’m down on my knees” and  grin, but  we  aren’t always  ironic.   Our experience and history, however,  should make  us more optimistic and  also wary:   men can be good (and remarkably so) and men are fallible.   (Sinners some might say, while the Deists find us  prone to errata.)    A culture’s use is in restraining  us from being our worst and encouraging our best; the more those restraints and rewards are internalized  the smoother, more productive, and happier  our lives. Our goal is not too  many laws but good ones, not  many restraints but necessary ones.  

The general consensus is that  increased subprime lending encouraged by Congress led CEOs to make bad loans.   We are selfish, our vision narrowed to our time and our profit:   the home buyers may have been naïve but also wanted a free lunch; the CEOs wanted to please Congress the source of their jobs, power & money; Congress wanted to buy votes, increase campaign contributions, and purchase  their own houses cheaply.    Those least likely to feel the consequences of their follies are in Congress.

Which is a long way around to the point:   What the hell were Dodd and Frank doing writing a version of the bailout?   Why do they think they should?   Why does anyone else listen to them?   Isn’t having a dog in that fight exactly the reason for recusals?   Is there no moment when we say your history has undermined your authority?      

Tapscott contrasts  two bailouts.   Whatever problems there are with Paulson’s system, the Congressional one  seems more likely to obfuscate than clarify.   We suspect  that a bill  with complex oversight  which gives the unspeakable Acorn a place at the trough doesn’t just   present moral hazards but  guarantees they’ll be acted upon.    Not that a moral hazard  eliminates  responsibility.  If responsibility is arbitrary or ignores choices, the effects, too, can be neither sources of real shame nor   real pride.   To be considered without human agency  does no one  good – borrower, CEO, or Congressman.   This  assumes a nature either so corrupt or so infantile standards need not apply.    (It also  encourages bad  behavior.)        Responsibiity enlivens us; avoiding it deadens us.   If we set  moral hazards, we are responsible.  When we  are tempted & give in,  we are  also  responsible.   And we should never assume  some  have reached  a level of purity floating above temptation  nor that others’ possess such a sleepy consciousness that it can never recognize a  conscience.
Tapscott’s assessment:

Oversight/transparency:   Onerous, unworkable and repetitive reporting and oversight requirements, hindering proper implementation of program.  

Bankruptcy “Cramdown” (aka, trial bar give-away):   Included so-called “cramdown” provisions allowing bankruptcy judges to reduce mortgage principal under the guise of helping those at risk of foreclosure.   If enacted into law, the provision would be a bonanza for trial lawyers and undercut the effectiveness of any economic recovery effort by making it even harder to value mortgage-backed securities.

 Affordable Housing Slush Fund (ACORN Fund):   Included a giveaway that would force taxpayers to bankroll a slush fund for ACORN an organization fraught with controversy for, among other scandals, its fraudulent voter registration activities on behalf of Democratic candidates.  

None of us  is immune, but surely extending moral hazards farther – to unions & trial lawyers & Acorn workers – doesn’t ensure virtue.   Nor does their inclusion seem disinterested or  unconnected with benefits that accrue directly to Congressional Democrats charged with oversight.

The tension between the French and the English Enlightenments (so clearly defined by Himmelfarb), that between Adams and Jefferson, underlie  arguments today.    Choosing the wrong model  can lead to partial blames for the mess and therefore encourage partial solutions.   Populism tugs at  our heart strings – we have sympathy for “the folk.”   And  we are drawn  to our  factions.    We assume  some representative or group is virtuous the poor, the intelligentsia, the rich, the agrarian, the urban, the masses, the enlightened despot, the . . . .  Of course, we see ourselves as righteous.   But  the voice in our ear, the voice of history or religion or common sense, should make us hesitate.    Eighteenth century Anglos would observe that an  aristocracy of meritocracy is still made up of humans.   And history should keep us humble.

I often quote Abigail Adams;  she represents our  enlightenment  well:  

I am more and more convinced that man is a dangerous creature; and that power, whether vested in many or a few, is ever grasping, and, like the grave, cries, “Give, give!” The great fish swallow up the small; and he who is most strenuous for the rights of the people, when vested with power, is as eager after the prerogatives of government. You tell me of degrees of perfection to which human nature is capable of arriving, and I believe it, but at the same time lament that our admiration should arise from the scarcity of the instances.

 Letter to John Adams (177511-27)

She warns  but also implies  the grandeur of maturity & responsibiity.    A belief in the universality of human nature assumes  all can  transcend their own interests with remarkable altruism and all are tempted and vulnerable.   We are conscious agents.   Himmelfarb argues that neither the British nor the English placed man’s reason as the ultimate goal of their revolutions, but rather as a means to an end.   The Anglosphere  was always seasoned with a sense of  human fallibility.    Ben Franklin laughed wisely at his own rationalizations:  So convenient a thing it is to be a reasonable creature, since it enables one to find or make a reason for everything one has a mind to do.”      

And, wasn’t this crisis not unlike 9/11?   Hadn’t voices been raised in the past, hadn’t we seen what we knew was risky (and selfish and disproportionate) behavior?   I know that I was insufficiently engaged, just as I was in that series of attacks prior to 9/11.   Bill O’Reilly asks Karl Rove why didn’t someone tell “the people”; Rove responded he could send O’Reilly the  warnings linked on the post below.   We didn’t want to know we didn’t want to think about it.   Most of us the us who will probably get stuck with the bill and the us who will have trouble running our businesses without those loans that buy supplies that let us grow, the us that will work a few years longer and those that will work a few years harder just didn’t want to think about it.   So, of course, we are responsible, too.  Admitting that should make us sympathetic to the banker, the congressman, the loan recipient.   But  responsibility should be assessed;  transparency (and shame and clarity) instituted. We should be more “awake” and help guard against moral hazards we understand all the more because we, too, are vulnerable.

4 thoughts on “The Bailout and Human Nature”

  1. Human nature of helping each other needs to be setup carefully. Helping and giving are have very different outcomes. The bailout is giving, the sub primes loans were giving, once you start giving and people start depending on it there is no end in sight.

  2. I am not going to say good things for Dodd etc but to blame him and say he ought not be involved and at the same time not ask why the guy (Paulson and gang) are seriously involved and now are the ones to set the terms for the bailout is certainly more mistaken than to merely in a partisan way blame Dodd.

    there has been a relentless setting aside of oversite and restraints and, guess what: the guy and the party in charge for the past 7 years are in some way also at fault. Remove Dodd and what, let Shelby be put in chargwe when in fact he walked away from his committee duties?

  3. The Congressmen that betray American and bailout Wall Street Gamblers.

    Vote in Favour of the $700 Billion Bailout List:
    Ackerman
    Allen
    Andrews
    Arcuri
    Bachus
    Baird
    Baldwin
    Bean
    Berman
    Berry
    Bishop (GA)
    Bishop (NY)
    Blunt
    Boehner
    Bonner
    Bono Mack
    Boozman
    Boren
    Boswell
    Boucher
    Boyd (FL)
    Brady (PA)
    Brady (TX)
    Brown (SC)
    Brown, Corrine
    Calvert
    Camp (MI)
    Campbell (CA)
    Cannon
    Cantor
    Capps
    Capuano
    Cardoza
    Carnahan
    Castle
    Clarke
    Clyburn
    Cohen
    Cole (OK)
    Cooper
    Costa
    Cramer
    Crenshaw
    Crowley
    Cubin
    Davis (AL)
    Davis (CA)
    Davis (IL)
    Davis, Tom
    DeGette
    DeLauro
    Dicks
    Dingell
    Donnelly
    Doyle
    Dreier
    Edwards (TX)
    Ehlers
    Ellison
    Ellsworth
    Emanuel
    Emerson
    Engel
    Eshoo
    Etheridge
    Everett
    Farr
    Fattah
    Ferguson
    Fossella
    Foster
    Frank (MA)
    Gilchrest
    Gonzalez
    Gordon
    Granger
    Gutierrez
    Hall (NY)
    Hare
    Harman
    Hastings (FL)
    Herger
    Higgins
    Hinojosa
    Hobson
    Holt
    Honda
    Hooley
    Hoyer
    Inglis (SC)
    Israel
    Johnson, E. B.
    Kanjorski
    Kennedy
    Kildee
    Kind
    King (NY)
    Kirk
    Klein (FL)
    Kline (MN)
    LaHood
    Langevin
    Larsen (WA)
    Larson (CT)
    Levin
    Lewis (CA)
    Lewis (KY)
    Loebsack
    Lofgren, Zoe
    Lowey
    Lungren, Daniel E.
    Mahoney (FL)
    Maloney (NY)
    Markey
    Marshall
    Matsui
    McCarthy (NY)
    McCollum (MN)
    McCrery
    McDermott
    McGovern
    McHugh
    McKeon
    McNerney
    McNulty
    Meek (FL)
    Meeks (NY)
    Melancon
    Miller (NC)
    Miller, Gary
    Miller, George
    Mollohan
    Moore (KS)
    Moore (WI)
    Moran (VA)
    Murphy (CT)
    Murphy, Patrick
    Murtha
    Nadler
    Neal (MA)
    Oberstar
    Obey
    Olver
    Pallone
    Pelosi
    Perlmutter
    Peterson (PA)
    Pickering
    Pomeroy
    Porter
    Price (NC)
    Pryce (OH)
    Putnam
    Radanovich
    Rahall
    Rangel
    Regula
    Reyes
    Reynolds
    Richardson
    Rogers (AL)
    Rogers (KY)
    Ross
    Ruppersberger
    Ryan (OH)
    Ryan (WI)
    Sarbanes
    Saxton
    Schakowsky
    Schwartz
    Sessions
    Sestak
    Shays
    Simpson
    Sires
    Skelton
    Slaughter
    Smith (TX)
    Smith (WA)
    Snyder
    Souder
    Space
    Speier
    Spratt
    Tancredo
    Tanner
    Tauscher
    Towns
    Tsongas
    Upton
    Van Hollen
    Velázquez
    Walden (OR)
    Walsh (NY)
    Wasserman Schultz
    Waters
    Watt
    Waxman
    Weiner
    Weldon (FL)
    Wexler
    Wilson (NM)
    Wilson (OH)
    Wilson (SC)
    Wolf

    Folks, if your representative IS on the above list, please call, fax or email them and give them hell. Threaten them with campaigning for their political opponents.

    Folks, if your representative is NOT on the above list please call, fax, or e-mail them and show your sincere appreciation! They deserve it!

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