Where Are the Grownups?
March 24, 2009
By Al Kresta
Outrage Is Not An Argument: Where Are the Grownups?
“[S]end us the names of those who received bonuses who have not given them back… release those names without restriction and if you feel unable to do that then I will ask the committee to subpoena them.”
It sounded like Joe McCarthy with a lisp but it was only Barney Frank grilling AIG’s CEO, Edward Liddy, about the 165 million dollars in bonuses just mailed to a few dozen executives and traders. Was Frank looking to create a blacklist?
Indeed, McCarthy- Carolyn of New York- joined in the Congressional noise that sounded more like a fire in a zoo than the sober deliberation of our Representatives. When a tax of 100% was suggested, McCarthy boiled over in disbelief: “A hundred percent…is not even enough! …I would tax them a thousand percent!”
As the flames grew higher, eyes bulged, tongues became unhinged, consciences were seared and necks craned so the cameras could show how many veins were popping. Two congressmen suggested that some AIG execs ought to have the decency to commit hari-kari. I waited for someone to call for the slaughter of the firstborn.
The AP reported that AIG employees had received death threats and that a busload of protesters toured AIG executive homes in Connecticut where they marveled at corporate greed and declared that the wealth be shared…with them. One protestor on the verge of foreclosure said: “I really want people to help us.”
Indignation roiled over both parties although Republicans tended towards adjectives: “It was outrageous (McConnell, Boehner). Democrats, on the other hand, liked the noun: “An outrage” (Obama, Dodd). Larry Summers, Obama’s chief economic advisor, who had served both Reagan and Clinton, refused to settle into either camp even as he tried to outdo both. He pronounced: “Most outrageous.” Outrage was all the rage and, as Horace wrote, “anger is a short madness.” Washington had lost its mental balance.
I don’t know who was feigning outrage and who wasn’t, but I do know that in this fog of war, two facts are still standing and should have guided Congress’ counsel.
1. Congress should not have been surprised or drafted such a reactionary law. The bonuses were promised early in 2008 and in the press since last fall. Even the stimulus plan approved in February made a specific “exception for contractually obligated bonuses agreed on before Feb. 11, 2009.” An amendment co-sponsored by Ron Wyden and Olympia Snowe which required returning bonuses over $100,000 was removed from the bill before passage. CNN caught Chris Dodd in a bald-faced lie when he denied not knowing about the protection of the bonuses.
So Congress was humiliated for approving the very bonuses they were now railing against. Humiliation is fruitful when it gives rise to humility. “In humility”, wrote Augustine in his Sermon on Psalm 130, “is human life perfected.” On the other hand, humiliation, especially among the privileged, frequently leads to fury against the source of one’s disgrace.
So, in retaliation rather than repentance, the House voted last week to tax 90% of the bonuses. In other words, our lawmakers decreed to retroactively punish those who received the very bonuses Congress had agreed to.
Nobody argued that the bonus contracts were in some way fraudulent or that the traders and executives had violated their contracts. Nobody argued that any law had been broken. To the contrary, Larry Summers, the president’s chief economic advisor argued: “We are a country of law. There are contracts. The government cannot just abrogate contracts.” (It’s true that as a condition of receiving government financing Detroit automakers and the UAW arrived at contract concessions. But the conditions were reached mutually and laid down before receiving bailout money, not after.).
It didn’t matter. Congress wanted to deflect criticism and someone had to pay for the grotesque notion that those who had brought us to the brink of bankruptcy should somehow receive a bonus for now trying to save us. We don’t reward arsonists for phoning in the fire. Arson, however is a crime; bonuses, on the other hand, derive from prudent or imprudent contracts.
That distinction was apparently lost in the melee. So Congress, afraid of being thought a collaborator, steeled itself to play the Crusader: Wall Street execs must be taught a lesson! Okay, but even if it further undermines our confidence in the sanctity of contract and the rationality of our legal system?
A TIME columnist went so far as to suggest that Congress “spread the net wider to catch the real culprits.” He wants a 50% retroactive tax on all bonuses over the last four years that exceeded a million dollars paid out by any financial institution that receives a bailout.
Sure “the retroactive tax would hit people who had nothing to do with the bets that pulled their firms under…but that’s not all bad.” Why isn’t it all bad if a just man is penalized for the injustice of another? It is, he said, a lesson to future executives.
This is twisted reasoning. If we want to deter people from bad behavior, we punish the guilty. Of course, we might achieve the same deterrent value if we punish the innocent- the public just needs to think they were guilty. Yikes! Let’s shoot a citizen now and then regardless of guilt or innocence so that the rest of us will stay in line. This is revolting and recalls Jacobins and Stalinists, not lovers of liberty and the rule of law.
On The Tonight Show, Jay Leno sniffed out the problem when he told President Obama: “[The House of Representatives] just passed this new bill which will tax them [bonus recipients] 90 percent — it was frightening to me as an American that Congress… could decide, ‘I don’t like that group’, let’s pass a law and tax them at 90 percent.” The president agreed. Leno’s fear is normally considered civic common sense– except when we are outraged. Then anybody in the vicinity of the “crime” will do. Throw the net wider. Round up the usual suspects. Just do something so nobody accuses you of inaction. Ugh.
2. The other fact is that Congress’ priorities are distorted. The $165 million in bonuses constitute only 0.1% of the taxpayer dollars AIG received. The big issue is what AIG is doing with the other 99.9%, the 170 billion, of the bailout. Neither Congress nor the media know and that means we don’t know. Apparently, what writer Chris Hayes’ calls “The Law of Small Numbers” is at work: “when it comes to money, trillions of dollars is a statistic, but 165 million is an ‘outrage’.” While we’re swallowing the planet’s bankruptcy, the Congress is straining on the gnat of a few legal bonuses.
But the red flag of the bonuses has blinded Congress to a more threatening problem at AIG. The Center for Security Policy’s Frank Gaffney has pointed out that AIG has a subsidiary specializing in “takaful” – insurance products that are “Shariah-compliant.” “Uncle Sam,” he says, “has become Uncle Shariah.”
By taking a massive stake (79.9%) in a company that promotes Islam’s Shariah law, the U.S. government is unwittingly supporting anti-American, Islamic activities. The Thomas More Law Center has filed suit and the Obama Justice Department is responding. This story is yet to hit the mainstream. I wonder: if “Shariah-compliant” banks can get Federal dollars without violating the First Amendment, can “Torah” or “Gospel” compliant banks get some of the action?
Congress’ loss of dignity and composure lit up the cable channels, the Internet news sources, the blogosphere and my phones. As I listened to the deep disappointment and anger of my listeners and friends, I asked myself, “Where were the grownups?” Where are those men and women who live by the same principles with which they instruct their sons and daughters? “Fix the problem, not the blame.” “Don’t make any decisions when angry.” “Don’t be controlled by impulses but by reason.” “Tell the truth even when embarrassed.” “Don’t whine. Take responsibility for your actions.” “Don’t change the rules in the middle of the game.” “Don’t major on minors. Put first things first.”
If the economic meltdown is traced to the subprime housing crisis, then the psychological meltdown last week must be traced to the subprime emotional immaturity of many members of Congress. Yes, I speak in generalities for certain. But what we witnessed last week as the AIG debacle unfolded was that the world is being run by people not much wiser than your Uncle Bob but a whole lot better dressed.
We were exposed to an orgy of blame shifting, overwrought bombast, hasty decision-making and indulgent finger pointing and when the lights came on we saw the men and women we had elected standing naked… but not yet ashamed.
I prayed that the weekend’s Sabbath and Lord’s Day would bring a fig leaf of sanity, that the name-calling would cease, balance would be restored and when we describe Washington as a place where “the right hand doesn’t know what the left hand is doing” we would not mean mindless, agitated confusion but unself-conscious and faithful pursuit of the common good.
Too idealistic? That’s where men and women of hope begin; it’s not necessarily where they end. As of Monday, 65% of the AIG bonus money paid to American citizens has been voluntarily returned. Moral suasion not coercive and punitive legislation achieved the desired end in a manner more in keeping with the dignity of the human person. Good statecraft can be good soulcraft. Barney, throw away the list. McCarthy, simmer down.
Here’s my next step. Scripture is generally suspicious of heavy concentrations of human wealth and power (E.g., Lev 25; 1 Sam 8:11ff.; Ps 39:6; Is 3:13-15; 5:10-14; Mt 13:22; Jas 2:6; 5:3) so we must always ask, “How much is too much?” Here’s one principle from the current crisis: When the collapse of any one enterprise jeopardizes the entire common good, it is too big. As one pundit has put it, “If it is too big to fail that means it is too big to manage.” Small may or may not be beautiful but, in this case, smaller certainly would be better. Break up AIG.
“We are not meant to remain as children at the mercy of every chance wind of teaching, and of the jockeying of men who are expert in the crafty presentation of lies. But we are meant to speak the truth in love and to grow up in every way into Christ, the head” (Paul’s letter to the Ephesians 4:14ff, Phillips paraphrase).
Al Kresta is President and CEO of Ave Maria Communications.
His afternoon radio program is heard on over 200 stations as well as Sirius satellite radio.