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  • The Bailout and Human Nature

    Posted by Ginny on September 28th, 2008 (All posts by )

    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 Responses to “The Bailout and Human Nature”

    1. Tom Says:

      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. fred lapides Says:

      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. Anonymous Says:

      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!

    4. Vince P Says:

      I believe Nancy Pelosi deliberately sabotaged the Bill today.

      The next time they bring it up, it will have all her goodies in it.