News & Views from 465 California Street

Capitalism Without Values

Clint Reilly

Are the barons of high finance ever called to account for their avarice, or for the billions squandered by their schemes?

A culture has evolved which allows the corporate executives of public companies to achieve monumental pay packages without investing a dime of their own money. I recently talked to the 45-year-old retired CFO of a famous Silicon Valley company who justified his $250 million stock package by saying that he had worked six days a week for five years. I thought of my father, who worked six- and seven-day weeks for 40 years as a deliveryman for Berkeley Farms and Dreyer’s Ice Cream.

Business leaders are portrayed as omnipotent gurus who blame the ills of society on a recalcitrant government bureaucracy and a self-dealing political class. The myth of the meritocracy of financial genius is perpetuated by horserace coverage of wealth, such as the Forbes 400 list. Here the accumulation of money is more than lauded; it is mythologized. Success has become so equated with money that critical professions such as teaching, journalism, medicine, public health and government service, which require a spirit of sacrifice, are made to seem less important than pure capitalistic endeavors.

But current events are challenging the myth of the omnipotent businessman.

Brand names in finance are reporting catastrophic losses. Homebuilder stocks have plummeted. The paper value of loans is evaporating like water in the hot sun, while an epidemic of foreclosures spreads through middle class communities from coast to coast. “For Sale” signs sprout like trees in Bay Area cities like Pinole, Vacaville, Hayward, Dublin and Fremont. Behind most of these signs, a family agonizes over the loss of their property and the embarrassment of returning a home to the lender. Real pain – emotional and financial – plagues many households as a direct result of predatory lending. Although borrowers must bear responsibility for their loans, there is a larger story.

The credit crisis has revealed the dark side of a system in which incomes are fabricated not by borrowers, but by lenders. Anxious to earn fees, these lenders avoided responsibility for their own lax lending procedures by selling off the newly processed loans as bonds. It is a meritocracy of greed rather than brains.

The blood on Main Street foreshadowed a massacre on Wall Street. The boards of Merrill Lynch, Bear Stearns and Citibank have fired their CEOs. But unlike borrowers, who have often seen their net worth wiped out, these executives left with severance packages valued from $41 to $160 million.

I am reminded of rebukes to business elites delivered by two great Democratic Presidents: Franklin D. Roosevelt and John F. Kennedy. When he assumed the presidency in 1932 in the midst of the Great Depression, Roosevelt condemned the sordid results of capitalism without values:

“The rulers of the exchange of mankind’s goods have failed through their own stubbornness and their own incompetence, have admitted their failure and have abdicated…they have no vision and where there is no vision the people perish. The moneychangers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of that restoration lies in the extent to which we apply social values more noble than mere monetary profit.”

Thirty years later, President John F. Kennedy slammed the country’s steel barons who violated a public agreement not to raise prices. “The American people will find it hard as I do to accept a situation where a tiny handful of steel executives – whose pursuit of private power and profit exceeds their sense of public responsibility – can show such utter contempt for the interests of 185 million Americans.”

The most powerful lesson to be taken from today’s massive financial losses might be to teach us once again that making money does not necessarily equate with achievement, wisdom or virtue.

Comments (7)

  • true

    Posted by: mike hardeman | February 5th, 2008 at 3:37 pm

  • I work for a financial institution and all the management “execs” support Hillary Clinton, yet they do not follow the ideals presented here. The Democratic Party is not the party of Kennedy. It has come full circle, they all equate success with financial success, not with “service” of any kind. I
    understand your father worked very hard and you probably did too,
    but I don’t think you have to worry about getting in your car and hoping that it starts every morning or wondering if you can make the rent. Most of us do and we still have to worry about oppressive taxes. My husband is a civil servant with advanced degrees. We do sacrifice, we rent and will probably never own unless we move out of the area. These are the realities of those of us that do sacrifce and don’t go around preaching like most Dems do. Just a thought. . . . I do value your vision but it not shared by most of the Dems I know.

    Posted by: Matty | February 6th, 2008 at 2:30 pm

  • we are the greed generation. FDR & JFK would be ashamed of us.

    Posted by: mike hardeman | February 8th, 2008 at 6:47 pm

  • For those like me on the absolute bottom of the economic scale, who are blue-collar Working Class, or who live on ‘government handouts’ as federal or state disability support is so scornfully labeled, who are one step up from the street–who work damn hard for damn little, or WANT to work, but know we will be refused even a glance at the numberless job application forms we fill out, time after time…
    I ask only “Why?”
    The people on the bottom are actively hated, belittled, and blamed here.
    In the aftermath of Hurricane Katrina, it was said that most of the suffering of the poor people could be laid at the feet of the poor themselves, simply because they had voted for Democrats.
    And what about this idiotic and demoralizing “Gospel of Wealth” I keep hearing the millionaire TV preachers talk about?
    I thought this ‘God’ punished those who stole from poor people.
    “If you are poor, it’s because God is punishing you for your sins!” ??
    “God loves and blesses the rich because they can do more for Him!” ??
    Why is a waste of mentality like Paris Hilton fawned over and worshipped
    when she never did a day’s worth of work in her pampered spoiled life?
    Why are the blue-collar workers spat on when they HAVE TO protect themselves by joining a union??
    I will tell the financial barons this: There are a lot more of us blue-collar types here at the bottom where YOU have thrown us, than there are of you fat-cats at the top. You had better start paying your rent-a-cops one hell of a lot more than 12 bucks an hour soon…and you had better not scrimp on the ammunition either.
    Most of all, you barons had better pray hard to your Money God that
    the rent-a-cops do NOT wake up and switch sides to join us blue-collar folks.

    Posted by: Julian the Apostate | May 21st, 2008 at 9:59 am

  • My entry in a development oriented financial institution has given me the opportunity to see the ugly side of finance and in as much as we will like to see predatory lending practices reversed, you realize the bane of mankind is the love of money. That is what we should learn to change in b-schools. Till then, the more money the better rules even when you are taking it from your friends or your family

    Posted by: hollatainment | July 30th, 2008 at 3:09 am

  • “Excessive wealth is a great travesty masquerading as a great good.” (Dr.Mardy Grothe)

    “Capital is reckless of the health or length of life of the laborer, unless under compulsion from society.” (Karl Marx)

    Posted by: Jon Pear (a.k.a. NeuroAster) | September 28th, 2008 at 4:39 am

  • It’s our choice!

    Capitalism is freedom for individuals to reap rewards of their work, and to spend and invest as they wish. Values of capitalism are our values, whatever they may be, not for somebody else to decide or impose.

    Posted by: Philip Clock | September 28th, 2009 at 3:38 am

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