The greed critique was voiced not only by the tabloids, but also (in more decorous versions) by public officials. Senator Sherrod Brown (D-Ohio) said that A.I.G.’s behavior “smacks of greed, arrogance, and worse.” President Obama stated that A.I.G. “finds itself in financial distress due to recklessness and greed.”
The problem with the greed critique is that it doesn’t distinguish the rewards bestowed by the bailout after the crash from the rewards bestowed by markets when times were flush. Greed is a vice, a bad attitude, an excessive, single-minded desire for gain. So it’s understandable that people aren’t keen to reward it. But is there any reason to assume that the recipients of bailout bonuses are any greedier now than they were a few years ago, when they were riding high and reaping even greater rewards?
Wall Street traders, bankers, and hedge fund managers are a hardcharging lot. The pursuit of financial gain is what they do for a living. Whether or not their vocation taints their character, their virtue is unlikely to rise or fall with the stock market. So if it’s wrong to reward greed with big bailout bonuses, isn’t it also wrong to reward it with market largess? The public was outraged when, in 2008, Wall Street firms (some on taxpayer-subsidized life support) handed out $16 billion in bonuses. But this figure was less than half the amounts paid out in 2006 ($34 billion) and 2007 ($33 billion). If greed is the reason they don’t deserve the money now, on what basis can it be said they deserved the money then?
One obvious difference is that bailout bonuses come from the taxpayer while the bonuses paid in good times come from company earnings. If the outrage is based on the conviction that the bonuses are undeserved, however, the source of the payment is not morally decisive. But it does provide a clue: the reason the bonuses are coming from the taxpayer is that the companies have failed. This takes us to the heart of the complaint. The American public’s real objection to the bonuses—and the bailout—is not that they reward greed but that they reward failure.
Americans are harder on failure than on greed. In market- driven societies, ambitious people are expected to pursue their interests vigorously, and the line between self-interest and greed often blurs. But the line between success and failure is etched more sharply. And the idea that people deserve the rewards that success bestows is central to the American dream.
Notwithstanding his passing reference to greed, President Obama understood that rewarding failure was the deeper source of dissonance and outrage. In announcing limits on executive pay at companies receiving bailout funds, Obama identified the real source of bailout outrage: This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we certainly believe that success should be rewarded. But what gets people upset—and rightfully so—are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers.
One of the most bizarre statements about bailout ethics came from Senator Charles Grassley (R-Iowa), a fiscal conservative from the heartland. At the height of the bonus furor, Grassley said in an Iowa radio interview that what bothered him most was the refusal of the corporate executives to take any blame for their failures. He would “feel a bit better towards them if they would follow the Japanese example and come before the American people and take that deep bow and say, ‘I’m sorry,’ and then either do one of two things—resign or go commit suicide.”
Grassley later explained that he was not calling on the executives to commit suicide. But he did want them to accept responsibility for their failure, to show contrition, and to offer a public apology. “I haven’t heard this from CEOs, and it just makes it very difficult for the taxpayers of my district to just keep shoveling money out the door.”29 Grassley’s comments support my hunch that the bailout anger was not mainly about greed; what most offended Americans’ sense of justice was that their tax dollars were being used to reward failure.
Excerpted from Justice: Whats the Right Thing to Do by Michael J. Sandel. Published in September 2009 by Farrar, Straus and Giroux, LLC. Copyright © 2009 by Michael J. Sandel. All rights reserved.
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