My Money or My What?

Strident, moralistic voices are raised everywhere in the country declaiming that it is wrong to give government bailout money to banks whose greed and stupidity got them into trouble (after making them a lot of money), and wrong to take money from taxpayers to give to people whose greed and stupidity (or so it is argued) got them into foreclosure, after living in relative luxury for a few months or years.

The moral rule upon which these voices base their arguments — never reward bad behavior — is well established and widely recognized. It is the reason given for not talking to Iran, or any other country we don’t like, and for not letting prisoners watch TV. Its truth, in most of the applications we imagine, is so obvious as to escape examination. Until and unless it comes in direct conflict with another widely observed moral rule, such as: it is the duty of government to protect its citizens from harm when the scale of the danger is beyond their ability to cope. When morals conflict we must turn to ethics, and to probe the requirements of this situation let us consider a different metaphor.

Suppose you are walking down a dark street. Someone steps out of the shadows and puts a large, loaded gun to your head and says “Give me your money.” If you are a moralist, you might feel obliged to say to your assailant, “Sorry, I cannot reward bad behavior.”


Congratulations. You claimed the high moral ground, and your devotion to principle will no doubt be mentioned in your eulogy.

An ethicist in the same situation is likely to reason as follows: Whoever came up with this rule did not have in mind the kind of stakes that are before me. There are some moral imperatives that in some situations might require the surrender of my life, but this is not one of them. I think I’ll break the moral rule so I can stay alive to ID this guy in a lineup and send his ass to jail.

Likewise, in the current financial situation, it may be prudent to consider whether we want to surrender our financial lives to make a moral point. Remember, however, that the example of the loaded gun is a metaphor. Is it in fact the case that our financial system is on the point of death? Before we buy into that, let’s take a close look at the 90 per cent of people who are fully employed, the 80 per cent of mortgages that are not in trouble, the many local and regional banks that are doing fine, thank you very much, because they never joined the feeding frenzy started by their colleagues.

A further complexity is that “rewarding bad behavior” is not the only thing we are doing, nor principle we are invoking, when we bail out banks and mortgage-holders. We are also socializing losses while profits remain privatized. Do we want it to be assumed that in the future, all a company needs to do to be insured against all misfortune is to get “too big to fail?”

Moral rules that fit on bumper stickers may have worked in the political campaigns of the past several decades. But as Mr. Lincoln said, they are “inadequate to the stormy present.”

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