Bank of America diluted their shareholders’ investment by selling stock to repay the TARP in order to avoid having to abide by the Pay Czar’s rules.  Citibank is now desperately trying to do the same when their shares are already trading at a dismal $4 per share.  The Board of Director’s and upper management clearly do not care about their shareholders at all.  They only care about their own compensation.  Any additional revenue should be used to to ensure strong  balance sheets so that banks can make good loans and perhaps even partake in some mortgage modifications to help the economy.  This is the reason the taxpayers bailed them out in the first place, not so that they can continue to pay themselves exorbitant compensation while the destroying the economy.

 Analysts and FDIC Chair Sheila Bair agree that the banks are not really in a sound enough financial position to repay these loans and their shareholders are being hurt by the repayaments – you remember the shareholders – the people you are supposed to be looking out for above anything else.    The only conclusion we can draw from all of this is the bankers continue to place their own greed above everything else, and clearly expect the taxpayer to continue to bail them out when their greed destroys their companies and the economy.

Mr. Greenspan told us for decades that we shouldn’t worry about the loss of manufacturing jobs in the United States.  This was the shift to the “New Economy” where  everyone would work in the service sector.  And everyone was willing to believe his theory until these high paid service sector jobs started being outsourced to other countries along with  manufacturing( i.e. information technology positions being outsourced to India and Eastern Europe).  What the average person failed to understand was that the “service sector” Greenspan really meant was the sale of financial products (i.e. derivatives).  The United States was importing everything it needed and was the only meaningful export was financial derivatives.  The “New Economy” was based on everyone having an MBA and being the world’s stockbroker.  Mr. Greenspan and his Wall Street cronies want the nation to believe that the US dollar must remain high relative to other currencies in order for the US to compete and maintain its standard of living.  In actuality, the US dollar must remain high for Wall Street to maintain its current lifestyle, the rest of the economy could benefit from a lower dollar.  Other countries have a better quality of life with a lesser valued currency.

I must also challenge the timing of Mr. Greenspan’s outcry regarding the deficit.  It is clearly politically motivated.  I did not hear him voice concern when the Bush Administration turned the Clinton budget surplus into a huge deficit by going to war in Iraq and slashing tax rates for the country’s wealthiest citizens.  Now that Democrats control Congress and the White House amid a crisis in which he is complicit, does he raise the specter of deficits? 

Please take Mr. Greenspan’s comments with a grain of salt, he has proven that he does not have the countries best interest in mind!

Judge Rakoff  accused Bank of America executives of failing to take responsibility for their actions in failing to adequately disclose bonuses paid to Merrill executives before the merger as well as evidence of large undisclosed losses at Merrill  to Bank of America  shareholders before their vote on whether to accept the  Merrill Lynch merger. The Judge denounced the deal in his ruling saying “the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger,” he wrote, and “the Bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators.”  

The Judge was also upset over the fact that the fine would be paid by Bank of America shareholders, something the S.E.C.  has been criticized for in the past, whereby corporate executives escape prosecution and their companies are penalized instead of their management.  It is quite something else for the very management that is accused of having lied to its shareholders to determine how much of those victims’ money should be used to make the case against the management go away,” Judge Rakoff wrote.

I believe John C. Coffee, a Columbia Law School professor said it best to the New York Times, “It is really a critique, not just of this case, but of a long-standing practice at the S.E.C., which effectively allowed corporate managers to buy immunity with their shareholders’ money.”

BRAVO, Judge Rakoff.  This sends the much needed signal to Executives of all corporations that they could be held liable for their management decisions.  It is only if these laws are enforced, that corporate decision-makers will begin making decisions based on the long term gain for their companies and not short-term personal gain with no repercussions.

How do the above stories relate to ethics and economics you may ask? The answer is simple. Companies choose to disobey laws or utilize mining and manufacturing processes that pollute, in order to save money and earn higher profits. They do not attach any monetary value to ethics when decision making, they recognize only cold hard cash. Why should the public care if these industries pollute as long as it keeps corporate costs down and thereby, hopefully, keep consumer’s costs down? Because pollution is a government and private citizen subsidy to industry. As long as companies pollute at will in an effort to keep their costs down, either because there is no regulation or regulations are not being enforced, government and private citizens will have to pick up the cost of their pollution. The two stories outlined above are prime examples. In the latter, people have to pay to have water hauled in to their property because their drinking water is not safe. The cost of health care for individuals escalates, and it is impossible to put a price on human life cut short by preventable disease.  In the former, the government (a.k.a. taxpayer) is picking up the tab for re-mediating the sites and relocating residents.
Taxpayerfunded cleanup of toxic industrial sites directly subsidizes the corporation that was allowed to pollute for years because it was cheaper than putting in the controls and looking after the toxic by-products of their industrial process. Regulation and the enforcement of regulation, something that makes breaking the rules more expensive than following them, is the only answer to these problems. Human nature has proven that it cannot be trusted to do the right (ethical) thing on a consistent basis, if it is more profitable not to. 

Taxpayers should be demonstrating in the streets that their hard earned tax dollars are being used to subsidize companies that break the law, render their personal property worthless or cause them physical harm(something that adversely affects the average person), instead of protesting that government should not offer public health-care (something that would  benefit the average person).  I believe that this bears witness to the power that corporate special interests wield in the United States today, as they have convinced the average citizen that their well-beings are completely inter-dependent.