Shovel Ready – Subprime II

The meltdown of financial markets has put us in a deep hole. The “stimulus package” will bury us. This crisis was caused by too much private debt. How can we imagine that public sector debt is the solution? We are literally burdening our children with financial and moral bankruptcy. The antidote for private sector corruption cannot possibly be public sector corruption.

I recently attended a civic meeting where the topic was how to get some of the stimulus money gushing forth from Washington. Public and private sector leaders were being instructed on how to play the part scripted for them. I am sure others realized we will all be paying for this. Perversely, this becomes the reason why we need to make sure we get our share. “Shovel ready” projects will be given priority. It was also abundantly clear that appropriate political connections will be necessary. We have de facto nationalization of the zombie banks. We are now proceeding with the nationalization of local government and commerce. I was literally growing nauseous as I thought of this happening all across the United States. I don’t know what everyone else was feeling. I was thinking of my children.

The cancer of economic irresponsibility, having gripped the financial sector, has now spread to the political organs. This financial collapse started with the collapse of personal responsibility on the part of financial executives. Many business leaders clearly had no sense of civic duty and apparently do not think there is any moral dimension to the work they do. Only people thinking this way could make bad loans into a business line or pay huge bonuses to the executives of bankrupt companies. This betrayal of the public trust which underlies our banking system is the root of the financial collapse. The public policy challenge should be to restore public trust. Unfortunately, our political leaders have concluded that this is their moment to enjoy personal irresponsibility. I can almost imagine the meeting where someone brainstormed “If bankers got to repackage bad loans as promising investments, why can’t we reposition public waste as stimulus?” They have harnessed the fear of the American people to ram through massive debt funded expenditures. This is a monstrous act of political cynicism. When the people wake up to what has happened public trust will have to be restored in the midst of inflation and a collapsed currency. There is nothing inevitable about public trust being restored in either finance or government. It is going to take strong, trustworthy people to earn trust back.

This is not just an economic and political crisis. This is a moral crisis centering on the rights and the responsibilities of the human person within the civil order.

History is full of examples of the madness of the crowd. The finance bubble is just the latest example of the conventional wisdom driving the herd over a cliff. The guys who ran the bankrupt banks were just doing what they thought all the “smart” guys are supposed to do. They followed the logic of the moment. The banking world was full of consultants encouraging the non-participants to enter the Brave New World of modern finance. Yesterday’s “best practices” have been revealed as financial and moral madness. When we look back on such examples of group psychosis, we all secretly imagine that we would have been the one charting a courageous contrarian course. We would have bravely resisted the crowd. The trick isn’t to resist the madness in an imaginary past. Life isn’t lived in the past. The only demon we can actually fight is today’s.

I urge all civic leaders to resist the logic of this moment. Telling the American people that the solution for this pain is actually an orgy of federal spending is just plain wrong and you know it in your bones. This is your sub-prime moment. We were already full throttle on monetary and fiscal stimulus. Another quart of Vodka in the punch won’t restart the party. It will only make the morning more painful. The party is over and it is time to clean up the mess. I dare you to be the dork that just doesn’t seem to get it. Either fight the demon or flee, but do not submit to his charms. Within a few short years today’s pork recipients will make Bernie Madoff, John Thain and Franklin Raines look like boy scouts. Our nation will be in desperate need of leadership unstained by this corruption.

I am often asked when things will turn around. One of the endearing qualities of Americans is our optimistic outlook. We think bad times are always temporary and we assume our country will go on forever as we know it. We think of these events as inevitable cycles. Social trends are neither inevitable nor cyclical. Time does not heal all wounds, but this wound can still heal. It will take a real determination to fight through the pain and live. Corporatism has failed us. Statism will fail us as well. What will not fail us are responsible people working within communities making the tough decisions about community needs and how they should be funded. We need decentralization in both commercial and governmental life. We need to make the tough decisions together and garner the resources at the most decentralized level practical. There are going to be a lot of “investments” made that people would never support if they thought they had to pay. The lie being offered is that someone else will pay. Isn’t this just kind of a giant public sub-prime loan?

Most people believe a cyclical recovery will gradually occur in the coming quarters. I am not sure about the coming quarters but I know that a sustainable turnaround requires that personal responsibility return to the professions of business and government. The human person as a responsible actor is the heart of the matter. People must do right and avoid wrong, regardless of what short term gains and losses present themselves to the senses. When we enter the public arena to do our work in business or in government, we must come to illuminate and serve, not to manipulate and exploit.