Regrettable but Necessary
There once was a tight-knit community in America where everyone knew everyone else. It was a prosperous place, because people were hard-working, honest folk. A handshake was as good as a contract. Folks looked out for each other. And like in Garrison Keillor's Lake Woebegone, all the children were above average.
But one day people woke up and discovered that something had gone wrong. Hard-won prosperity was no longer valued. Instead, people started looking for a quick buck. Worse, some people were no longer good to their word. Some even sniffed at the rules. What was going on? This was so contrary to the way that they had always looked upon their business affairs and their common community.
Does that community sound familiar to you? Well, it might. It might be your community. But in this case, it's Wall Street.
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In the years following the great Depression and the reforms of the 1930s, Wall Street built a solid reputation among the American public. It was basically run by men and women whose values and business practices were shaped and informed by the Christian ethic.
I can speak from personal experience here, because I practiced securities law 45 years ago. Sure, there were problems on Wall Street, but for the most part, people lived by a code of honor. The sense of fiduciary responsibility-of caring for other people's money-was overpowering.
I remember in those days dealing with a lot of mutual funds that we helped get established. They saw themselves as guarantors of other people's money-of their retirement accounts-and they wanted them only to make prudent investments.
But today, if the charges are true, Wall Street has become more like a casino. Traders have gambled with other people's money on mortgage backed securities, junk bonds, derivatives. Oh sure, as they argue, they warn people about the risks-but so do they in Las Vegas.
The problem is that there is far more concern today with making a quick buck than with a sound investment. And what we see now in the financial world is the law of the jungle-Darwinian biology hitting economic markets with abandon.
So what happens next? Well, as the great theologian Michael Novak has told us, the moment you abandon moral restraints-once people can no longer regulate their own behavior-here come the cops.
So imagine that tight-knit community again. Suddenly everybody is robbing banks, and the place is crawling with police setting up road blocks and checking ID's. Everything begins to look like airport security. This is what happens when people abuse their freedoms.
Now, I am a disciple of Hayek and Friedman, a devoted supporter of the free market. But a truly free market is impossible when ethics are cast aside and doubtful behavior becomes the norm.
It pains me to say this, and I know that I will upset my conservative friends, but regrettably more federal regulation of the financial markets is needed. I believe it's a moral and economic imperative that Congress pass a sensible, effective finance reform bill.
One of the biblically sanctioned roles of government is to restrain evil. And we've reached that point, sadly, with Wall Street and the financial community in general.
But here's a critical question as we consider finance reform. Government must restrain evil, but when it comes to finance reform, can government restrain itself? Or will it be business as usual on Capitol Hill?
I'll talk about that Monday.
