CHAPTER 9
GREED IS NOT A VIRTUE; SHARING IS NOT A SIN

The 2008–2009 economic crisis presents us with an enormous opportunity: to rediscover our values — as people, as families, as communities of faith, and as a nation. It is a moment of decision we dare not pass by.

JIM WALLIS

No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.

JESUS TO HIS DISCIPLES, MATTHEW 6:24

It is really quite simple: Society works better and life is more pleasant for everyone when people share and cooperate. Far from a new discovery, this has been a defining message of religious leaders down through the ages.

Humanity’s most celebrated teachers are those who spoke what others knew in their hearts to be true but were afraid to express because that truth contradicted the practice and often the words of those in positions of power. That is our situation today.

Speaking truth requires more courage than special talent. I find that my message resonates with many people, but not because I am revealing something astonishing or new. To the contrary, it is because I’m speaking what they already know to be true but have dared not express in public because it seems so at odds with conventional wisdom. As we each find the courage to give public voice to our inner truth, we empower others to do the same, and together we can change the world.

We humans are living out an epic morality play of five thousand years’ duration that pits good, that which serves life, against evil, that which destroys life. Good is represented by the forces of mutual caring, cooperation, and responsibility in the service of life. Evil is represented by the forces of domination, unbridled competition, and individual greed in the service of money.

Individual greed will surely be with us so long as there are humans, but if we are to survive and prosper, we must recognize that greed is a sin, not a virtue — a form of addiction and a sign of psychological dysfunction. Any public subsidy for persons so encumbered should be limited to payment for rehabilitation services as part of a national health care program.

Here is a brief review of what events since the crash reveal about the profound moral issues at stake in the work at hand.

WALL STREET WELFARE QUEENS

As of spring 2010, the Wall Street economy was in apparent recovery. The Dow Jones Industrial Average had gained 62 percent from its ten-year low on March 9, 2009, to mid-March 2010. Wall Street bonuses for 2009 were up 17 percent over 2008. Banks too big to be allowed to fail at the time of the September 2008 crash were even bigger and more confident that government would bail them out when their gambling habit got them in trouble.

Bank of America, Wells Fargo, and JPMorgan Chase accounted for 26 percent of U.S. mortgages and 21 percent of U.S. deposits in 2007. Considered too big to fail following the market crash, each received federal bailout funds, which they used in part to fund major acquisitions with government blessing. Bank of American acquired Merrill Lynch, Wells Fargo took over Wachovia, and JPMorgan Chase took over Bear Stearns. In 2009, with their new acquisitions, these three banks accounted for 42 percent of mortgages and 34 percent of deposits.¹

As of March 2009, Bloomberg.com estimated that the federal government bailout commitments and guarantees totaled $12.8 trillion; the 2008 U.S. GDP was $14.2 trillion.² (See chapter 7 for more details.) This, in essence, amounts to committing the nation’s entire economic output to backing Wall Street’s questionable bets. Quite a sum, given that Wall Street arguably serves no useful purpose not better served in other ways — the subject of chapter 14.

The “genius” for financial innovation and risk management that Wall Street regularly touts as its gift to the world consists mainly of finding new ways for an unethical trader to capture the profits from questionable financial transactions and shift the risk to others. The consequences for society are a revealing lesson in the importance of positive moral practice.

Thanks to these generous public subsidies, the Wall Street welfare queens are back to their usual business of speculating on asset bubbles, churning out phantom wealth unrelated to the production of anything of value while driving working people further into debt and rewarding themselves with billion-dollar compensation packages.

In the words of economics Nobel laureate Joseph Stiglitz:

Under the threat of a collapse of the entire system, the safety net — intended to help unfortunate individuals meet the exigencies of life — was generously extended to commercial banks, then to investment banks, insurance firms, auto companies, even car-loan companies. Never has so much money been transferred from so many to so few.

THE UNSPOKEN STORY OF PUBLIC DEBT

It is public knowledge that the Federal Reserve has been extending credit — money it creates with an accounting stroke — to member banks, which now include the infamous Goldman Sachs, at nearly zero percent interest. The reason, we are told, is to help them rebuild their capital and get credit flowing into the real economy.

There is rarely public mention of how the banks use this credit to rebuild their capital and the fact that it represents a direct but off-the-books taxpayer subsidy — off the books because it is not identified as a subsidy in public reports. Here is how it works.

The banks use some substantial portion of this money to buy securities issued by the Treasury Department. These securities cover the deficits created by the costs of the Wall Street bailouts and the economic stimulus package made necessary by the failure of Wall Street banks to keep credit flowing in the economy. Because these securities pay a substantially higher interest rate than the rate that the Fed charges the banks, holding Treasury bonds purchased with the Fed’s virtually free money yields the banks a tidy, effortless, and risk-free profit.

As Allan H. Melzer, a Fed historian and professor at Carnegie Mellon University in Pittsburgh, told Business-Week, “You can make three percentage points, which is a lot for a bank, for doing nothing. Why should the banks take risks?”³

What makes this outrageous is that, instead of giving money to the banks, the Fed could just as easily have given it directly to the Treasury Department. The government — and therefore the taxpayers — rather than the banks would have received the free money and saved a bundle.

We are accustomed to thinking of government transferring money from the well off to the poor. Here it was the poor and average transferring money to the rich. Already heavily burdened taxpayers saw their money — intended to help banks lend so that the economy could be revived — go to pay outsized bonuses and dividends. Dividends are supposed to be a share of profits; here it was simply a share of government largesse.⁴

Yet there has been no expression of thanks, humility, remorse, or apology from Wall Street power brokers even as the rest of the country bears the burden of continued record job losses, unemployment, foreclosures, and bankruptcies.

To the contrary, they remain self-righteously defiant even as it becomes ever more evident to the public that their primary occupation is creating pyramids of phantom wealth, shifting the risk to the public, and sucking excessive interest and fees from Main Street.

There is a widespread sense that with Wall Street’s apparent recovery, the window of opportunity for serious structural change has passed. Such a judgment, however, is premature.

THE WINDOW OF OPPORTUNITY

Wall Street’s apparent recovery is largely an illusion created by a combination of public bailouts and deceptive bookkeeping. Even after massive bailout subsidies, Wall Street asset statements include huge sums in overvalued toxic securities and uncollectable receivables.

According to a December 2009 BusinessWeek report, Citibank was holding $182 billion in risky assets. The Fed’s financial stress test of the nineteen biggest banks in May 2009 estimated that their total losses through 2010 might reach $600 billion. Barclays Bank in the U.K. estimated that these banks have so far recognized only 20 percent of these risky assets in their financial statements.⁵

According to the Bank for International Settlements, the total notional amount of over-the-counter derivatives still outstanding totaled an eye-popping $604.6 trillion in June 2009,⁶ compared with an estimated 2009 gross world product of $58 trillion.

These schemes connect the world’s largest financial institutions in a seamless web of systemic risk that continues to present a global security threat that dwarfs that posed by a few hundred terrorists living in remote areas of Pakistan and Afghanistan. The faster the government puts money in to keep their giant Ponzi scheme afloat, the faster the insatiable Wall Street welfare queens transfer it to their private accounts. Eventually, if left unchecked, this process has to reach a point at which all the financial resources of all the world’s governments cannot prevent a collapse.

Meanwhile, people continue to struggle with the realities of their own unemployment, foreclosures, and bankruptcies or those of their relatives, friends, and neighbors; hear daily revelations of scandalous Wall Street bonuses; and get hit with predatory credit card fees.

Until the big banks are broken up and replaced with financial institutions rooted in and accountable to the communities they serve, we can expect Wall Street’s unrepentant misappropriation to repeat endlessly, at enormous cost to society.

Far from closing, the window of opportunity for serious change continues to widen as public awareness of Wall Street corruption grows and outrage builds. The far right has been effective in focusing the outrage on government for funding bailouts with taxpayer money. The counterstrategy is not to defend the indefensible actions of government but rather to focus attention on the life-destroying Wall Street–Washington axis that serves the greed of the few at the expense of the well-being of all.

GLOBALIZING THE SEVEN DEADLY SINS

Capitalism is the institutional embodiment of greed, and Wall Street is its contemporary institutional manifestation. It operates by the moral code of an organized crime syndicate and subverts the values and institutions of both markets and democracy. Far from being ashamed of its ways, it champions them as virtues. What Wall Street considers virtues are actually the seven deadly sins identified by Christian tradition.

Table 9.1 lists the seven deadly sins, along with a note on how each is manifested by capitalism, contrasted with the corresponding seven life-serving virtues of New Economy institutions and practice.

By capitalism’s perverse moral logic, if you buy toxic assets from me based on my assurance that they are sound, even if I know they are not, the fault resides not in my lie but rather in your trust in my word. When the assets prove worthless and threaten both your solvency and mine, it leaves no mark on my conscience to warn government in effect, If you don’t buy up my toxic assets and make me whole so that I can return to my trade in toxic assets, I will stop lending and crash the economy.

In recent years, capitalism has acted through its Wall Street institutional missionaries to take its campaign of moral perversion global. For example, in the international forums in which trade agreements are negotiated, its representatives have succeeded in winning provisions that say in effect, If a country introduces regulations to prevent a foreign corporation from harming or killing people with its toxic products or discharges, the country’s government must compensate the corporation for the profits it estimates it will lose.

Table 9.1 From Sins to Virtues

The following are other examples of Wall Street’s global campaign of moral perversion.

• It uses its control of media outlets, advertising, and politicians to shape and spread a global culture of greed, materialism, ruthless competition, individualism, and moral irresponsibility.

• Through the pursuit and celebration of financial gain at any cost, it provides role models for immoral behavior.

• It undermines democracy and the legitimacy of government by buying politicians to do its bidding.

• It uses student loan programs to get the best and brightest youth mired in debt that can be repaid only by selling themselves to jobs that serve Wall Street interests.

• It buys up and monopolizes control of the world’s land and water resources in anticipation of extracting monopoly profits by charging what the market will bear as scarcity increases.

• It uses its financial power and creative accounting skills⁷ to manipulate markets and obscure market signals, as when helping the Greek government hide its debt⁸ or helping corporate CEOs hide their insider bets against the future of their own companies.⁹

• It buys the deeply discounted debt obligations of hapless underwater homeowners and countries on the open market and then demands full-value payment from governments or philanthropists who step in to lend a helping hand to the afflicted.

When governments seek real solutions to high-priority problems, Wall Street uses its lobbying power to block action on all solutions except those that contribute to its own bottom line. We see that in the United States in President Obama’s initiatives on:

• Health insurance reform, where Wall Street forced off the table the public nonprofit single-payer health insurance option that is the only way to truly assure everyone access to adequate health care at a bearable cost. It allowed consideration only of a limited, expensive, government-subsidized private insurance program.

• Climate change, where Wall Street forced off the table the option of taxing carbon energy at the source and distributing the proceeds equally on a per person basis, which would have been simple, effective, and equitable. It allowed consideration only of an ineffective cap-and-trade system that offers countless opportunities for profitable fraud and speculation.

• The financial crisis, where Wall Street demanded and received expensive public bailouts for failed banks but recoiled in horror at “socialist” plots to regulate Wall Street or spend public money on direct economic stimulus programs that fund real-wealth local economies to create jobs and rebuild the nation’s physical, social, and natural capital.

These and other capitalist attacks on human interests and the natural world are playing out around the world. We look to government to defend the public interest, but we allow government to be taken over by institutions of greed for whom the only interest worthy of government action is their own private financial interest.

It need be so no longer. Change is possible, and it is our right and responsibility as citizens to make it happen.

The apparent Wall Street recovery is solely the product of a combination of public guarantees, public bailout money, and deceptive accounting entries that place much of the nation’s economic output for years to come in hock to predatory Wall Street welfare queens and missionaries of greed. Such actions have continued to raise public awareness that the Wall Street–Washington axis is the institutional embodiment of evil in our time and a mortal threat to human security and viability.

The actions of Wall Street’s most powerful players and their Washington accomplices have been so extreme, so shameless, and so contrary to public well-being that it is almost as if they wanted to keep the window of opportunity for transformative change open by making sure that no one could fail to recognize the depths of the system’s moral corruption.

Let us rise to the occasion. We must now move forward with a New Economy agenda to dismantle and replace Wall Street institutions that champion the seven deadly sins of pride, greed, envy, anger, lust, gluttony, and sloth with New Economy institutions that champion the life-affirming virtues of humility, sharing, love, compassion, self-control, moderation, and passion.