We read of Goldman Sachs investment bank "giving back" at record levels in philanthropy -- $1.6 billion (that's billion, not million) since 2008 -- and we sigh.
While it is fitting and proper that Goldman does penance for the damage it caused in the '08 financial crash, it'd be infinitely better if Goldman, and every other big bank for that matter, took a vow -- a pro-active vow -- never, ever to destroy the financial system again, so that post-mortem penance for bad acts is never, ever required.
As The New York Times reminds us in a recent article about Goldman's "big splash of philanthropy":
"You may remember Goldman as the bank accused of making billions of dollars while ordinary people were losing their homes during the financial crisis. Or as the firm whose traders were said to have misled investors by selling them, as one memorable internal e-mail described it, 'junk that nobody was dumb enough to take first time around.'"
Not only did Goldman mislead, it engaged in the unconscionable practice of betting against clients -- or, in banker-speak, hedged -- as in the Abacus mortgage loan scandal (also here). No wonder Goldman is looking to "give back." As the Times writes, "Goldman -- for many a symbol of Wall Street greed and excess---wants the world to know it has a charitable side." The article is titled, pointedly, "Goldman Sachs, Buying Redemption."
Note, too, this charitable giving shot up after 2008 -- the year of the crash (see graph). Cause and effect, my dear Watson, is elementary: Redemption is the point. Yet while one expects philanthropy to be practiced with some discretion, Goldman's director of giving, as the Times goes on to report, pulls down a $2 million salary; also, according to an employee, much of the philanthropy is "run as if it's a Broadway show."
But it's not just Goldman giving. Other Wall Street banks -- JPMorgan Chase, Bank of America, Wells Fargo -- are likewise eager to be seen as philanthropists, as their websites proudly proclaim. Yet this pursuit of redemption comes gilded: Some of the big banks' giving is proffered in the form of for-profit loans. (Amazing: Doing even better while "doing good.")
Still, in this quest for redemption, the dog not barking is this: a pledge from the big banks, up front, to cease and desist acting like casinos. To apologize for upending the American economy and the international system. To acknowledge that we are all in the same boat; that they, the big banks, are key to this boat's stability; and that, ethically, it is simply wrong to scuttle the boat and drown the other passengers while making record profits. And, of course, never again to bet against their clients. But scrub a big bank's website (here, here, here, and here) and you will find nothing like this pledge. Maybe reference to "market volatility" (which of course the bank didn't cause), but no "sorry."
What a business model: Ride roughshod over the financial system -- look, almost no regulation! -- then when the system is crashed, organize food baskets and clothing drives for those you've run roughshod over. This is turbo-capitalism in its essence: chew up and spit out, then make nice afterwards. The hypocrisy stuns: Hypocrites know precisely what virtuous thing should be done but, for personal gain, don't do it, yet for their public image they see to the superficial achievement of virtue -- "giving back" -- after they've gotten their gains. It's all backwards -- financially and ethically.
Tragically, this business model remains essentially unchanged, despite Dodd-Frank, known in full as the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010. Dodd-Frank didn't keep JPMorgan Chase from subsequently engaging in massive risk-taking and incurring a $6 billion loss in its London office, finagled by a trader dubbed "the London Whale" because of trades so outsized they could swamp the financial system. This is "reform"?
Five years after the crash they caused, the too-big-to-fail banks are bigger than ever, they continue to pay themselves gargantuan salaries and bonuses, and they're still rogue. Yet they crow about "giving back." This makes Main Street's teeth gnash.
Also making the teeth gnash is this: "Giving back" implies having taken something in the first place, something not yours, then giving back as restoration, as recompense. To be sure, "giving back" is laudable if the giver has gained fame and fortune honestly and then seeks to give back, as thanks, to those formative organizations or causes that paved his or her way to success. But it's a hollow thing when the giver has done major damage -- systemic or individual -- and seeks to "give back" as recompense, yet doesn't pledge never to do such damage again.
This is not to take away from the recipients of the banks' philanthropic largesse: No doubt those recipients are worthy, in need, and grateful, and the big banks should share. But this isn't an either-or proposition: either stop "giving back" or shape up. Rather it's a both-and proposition: The big banks should both do philanthropy and vow to do better as key players in our capitalist system. A George Washington visionary, had Wall Street produced one, would have arrived at this formula by now.
As to the act of giving: Little noted is the fact that what the big banks gave away in the rapacity of their money-delirium was the thing, the asset if you will, most precious of all -- trust. Trust: that which was lost in the '08 crash and hasn't been seen since, despite much hurly-burly over its recovery. We also miss equilibrium.
So, a plea to the banks: Do "give back" in philanthropy. But also, please: Give us back a financial system that we can trust. Less penance after the fact, more virtue before. It will make for better business and for honest philanthropy.
Carla Seaquist's forthcoming book of commentary is titled "Can America Save Itself from Decline?: Politics, Culture, Morality." Her book "Manufacturing Hope: Post-9/11 Notes on Politics, Culture, Torture, and the American Character" came out in 2009. Also a playwright, she published "Two Plays of Life and Death," which include "Who Cares?: The Washington-Sarajevo Talks" and "Kate and Kafka," and is at work on a play titled "Prodigal."