The New York Times published on Monday a lengthy look into the innerworkings of Washington Mutual (WaMu), one the the banking institutions at the epicenter of the recent financial earthquake. See
"Saying Yes, WaMu Built Empire on Shaky Loans". It's the most revealing peek I've yet seen into how our current credit crisis came to pass. In it, a number of (mostly former) WaMu employees tell the story, and (assuming the stories and this report are reasonably accurate) it's clear that the excesses at WaMu, anyway, were the result of policy. Wholesale giveaways of loan money to those who could not possibly repay it, and the subsequent sales of those bad loans as "securities" to unsuspecting investors was dictated by those at the top eschelons of the company's management structure. Board Chairman Kerry K. Killinger is credited as the chief culprit, and he alone reportedly took home millions of dollars while his bank careened toward insolvency. The evidence is that management teams at similar banks took a similar path, and pocketed billions.
No doubt there are those who think Killinger and other banking institution top kicks who encouraged (and in the WaMu case, at least, demanded) that underlings flout ethical propriety for pernicious profit should be arrested, tried and jailed. That they certainly might deserve such an end will not be debated here. But I'd like to suggest that there are a couple of things wrong with that scenario from a Christian perspective. First, while their cases are adjudicated, many these execs and ex-execs will almost certainly spend large portions of their ill-gotten fortunes on costly legal defenses (one need only remember that former Qwest CEO Joe Nacchio's case is still in the court system, after years of legal wrangling, while he apparently enjoys life relatively free on bond). Second, Killinger and his ilk could not have plundered the housing market without the aid of the thousands of employees who processed the loans and looked the other way, many collecting bonuses and other albeit lesser financial rewards. Keep in mind, there was not a single whistleblower among them. This debacle is not the fault of a few, but of many — including the house hunters who willing went along with real estate agents and mortgage lenders who fed WaMu and other banks loan applications that were preposterous fabrications. If Killinger is to be tried for a crime, should they not be tried as accomplices?
The Pharisee in me would no doubt be pleased to see all get the penalty for their greed. I can feel that rising tide of self-righteousness every time I think about it. As one of my friends recently remarked, America is getting a spanking which it deserves. And that's quite true.
That said, nothing — least of all, justice — will be served simply by jailing anyone. That returns no money to investors. And it does nothing to remedy the ills the perpetrators have brought on themselves and others throughout the world. No less disconcerting is the fact that imprisoning credit-crisis offenders will swell the ranks of a prison population that already strains impossibly overlarge local, state and federal budgets. Justice, it seems to me, would be better served by something a bit more pragmatic.
The Biblical remedy for theft (and theft is most surely what this is, if we're honest) is restitution. Killinger and his lending institution comrades, should put what remains of their millions in escrow, and that money should be made available to investors who have a claim that is affirmed in a court of law. Why would he want to do that? Maybe he'll need to be offered a choice: restitution or the inevitable loss of your freedom and fortune after a long bout in court. Mr. Killinger and other ex-execs have one thing we need: management acumen. They built illegal edifices, maybe, but they built them, nonetheless. Why should we not reemploy them as carefully supervised advisors, at a reasonable wage (with a large portion garnished to pay what they owe) of the army of people it will take to sort out, reclaim and repay money that belongs to investors, giving priority to those who are least able to recover on their own? And helping to reconfigure bad loans, in hopes of preventing further foreclosures. There's a public works project Mr. Obama could create. They also could provide extremely detailed testimony about how and why the excesses occurred, giving regulators background information as they propose new rules and more potent safeguards to prevent further banking-system breakdowns. (One caveat, however: Congress should pass a law immediately to limit the fees lawyers can collect on such claims. Surely what we've learned about the absolute bankruptcy of greed should now constrain us from encouraging a feeding frenzy by lawyers.)
This idea may seem like a stretch, but it is, instead, a time-honored and very successful strategy for dealing with solcalled "white-collar" crime. The popular movie "Catch Me If You Can" chronicled the criminal exploits of a master forger who later lent his considerable expertise (rather than languish in prison) to the FBI in its efforts to combat check and document forgery. And that company you buy your virus software from to protect your PC? Many of the people who supervise those who write the code that now protects you once wrote the code that crashed your hard drive. (In fact, the police have been known to employ, as "snitches," low-level criminals who aren't in the white-color class, allowing them to continue their relatively modest criminal activities, in order to maintain and information pipeline to the bigger fish who far more seriously threaten society.)
The bank managers (high and low) who got loan applicants, lending institutions and investors into this fix should be offered (and strongly encouraged to take, as noted above) the opportunity to help them get out.
Public policy less concerned about punishment and more concerned about prevention and preservation of proper economic practice could go a long way toward repairing the damage done. And for those who willingly turned their talents from plundering the system to rescuing it, it could be a fitting penance.
No comments:
Post a Comment