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Of Names, Blame and Shame


We need to allow leaders to focus on solutions, not retribution.

The editorial page in this morning's Wilmington, Delaware News Journal (part of the Gannett system) had what I consider a very troubling recommendation regarding the controversial $165 million in AIG (AIG) bonuses:

"We have a different suggestion. Since the bailout made the US government an almost 80%owner of AIG, the government should refuse to pay the bonuses and force the executives to go to court for the compensation. A daily broadcast would make for entertaining television…"

Begging executives: Do they make for entertaining television?

Or maybe we should just consider putting their heads on a stick? Or alternatively, suggest that bonus-receiving executives at Merrill Lynch (BAC) or AIG be forced to wear scarlet dollar-sign lapel pins so we can easily pick them out of a crowd and stone them?

Don't get me wrong, as a taxpayer I'm gravely concerned by the cost of the bailouts, and the behaviors of the many who contributed to the current crisis. But, as Todd likes to say, "The reaction to the news is more important than the news itself." And in that regard, I'm deeply troubled -- both from an economic as well as a societal perspective -- by our collective response.

From an economic perspective, I wouldn't underestimate how tentative the government may now be in rescuing another troubled financial institution, given the Main Street backlash to the AIG bailout. And I worry that "too big to fail" may be replaced with "too politically tenuous to save." That systemic stability -- notwithstanding the obvious lessons from the Lehman Brothers failure -- is once again worth trading.

And from a societal perspective, I increasingly fear a frenzied anger on the horizon – that we won't be satisfied until there are names, blame, and shame.

But Washington blaming Wall Street, and bank executives calling proposals from the regulators "asinine," aren't the answer. Nor, from my perspective is posting a long list of names - whether it be a list of executives or counter parties. And shame, if we must, must be reserved for the truly, truly guilty - and "guilty" as measured by honorable standards of law, not popularity polls or political expedience, let alone mob rule.

Don't get me wrong: I understand the temptation and why we seek names, blame and shame - lessening others to lessen our own pain. But as a civilized society, we must recognize the deteriorating nature of our own actions, as they only tee us up for worse behavior tomorrow.

We need to disperse the crowd and allow our political and business leaders to focus all of their energy on solutions, not retribution. History will provide plenty of time for root cause analysis. Further, we need to recognize that as good as they may feel today, the names, blame, and shame are obstacles to our nation's economic recovery and long-term prosperity. And finally, most of all, we must now demonstrate the courage to stop.
No positions in stocks mentioned.
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