Chuck Grassley's taking a lot of heat for saying something pretty banal:In the case of the Japanese, you know, they do one of two things. They either go commit suicide or they take a deep bow and say apologies and then sometimes resign. But they take full responsibility. And we’re not hearing that.And obviously, I don’t want anyone to kill themselves because I don’t believe in that sort of thing. But I do believe that when you have done bad for your company, for your stockholders, and eventually for the taxpayer…you ought to say I’m sorry.
I've observed the same: It's actually weird that there's been so little high-profile contrition. Every executive at every taxpayer supported firm should be gladly, tearfully, going without pay or bonus. They have brought the world's largest economy to its knees and forced massive subsidies from taxpayers who have far less than they do. Instead, they're invoking legal technicalities to retain their bonuses. The question is "why?" Why so little shame? Matt Yglesias has a provocative thesis, arguing that the virtuous selfishness prized by the market has been absorbed as an ethical philosophy. "We’ve somehow managed to construct something of a post-shame society," he says, "in which elites have convinced themselves that the rational agent model of human behavior is not just a useful modeling tool, but an ethical guidebook. There’s something to be said for the idea of a sense of honor and personal responsibility. "You might see more of that if only a single firm had failed. But when your entire peer group is experiencing the same catastrophe, it's easier to convince yourself that you bear no personal responsibility. Indeed, why would you feel shame? In comparison to whom? Shame is relative. The people whose opinions matter to you, after all, are in no place to condemn. And if no one succeeded then it's hard to say that any individual failed. So that wipes out the prospect for shame to work its magic. But what about fear? The discipline imposed by the threat of the pitchfork wielding mob has salutary effects. Of course, pitchfork wielding mobs also have all manner of unintended consequences (pitchfork shortages, for instance), so you may want to bypass that.You're left, really, with punishment. It's not a question of satisfaction. It's a question of policy: If the broader populace continues feeling like they're the suckers in a massive con, the administration's ability to continue to respond to the financial crisis will be greatly reduced. For some time, we've worried about the market's reaction to a punitive approach. But the danger is increasingly the populist fury that's being fed by continued subsidies and bailouts and bonuses. Nationalization has begun to look like the only viable political option over the long-term. It's also the only approach with a chance of changing the culture of Wall Street. When Reagan fired the striking air traffic controllers, he signaled the coming of a new national culture: One in which dynamism would be prized and taxes would be lower and Labor's power would diminish. This was, in part, the fulfillment of Reagan's mandate. Elections are as much about the values of the country we want as the policies of the administration we choose. But it's hard for a president to change national values. You can't do it through a bill. You need the right moment. And AIG's bonuses may provide that moment.
