Since the financial crisis began in the fall of 2008, bankers have become our new favorite villains. But John Terrill, director for the Center for Integrity in Business at Seattle Pacific University, makes the case that investment bankers can be doing the Lord’s work:
Outrage at investment bankers, with their year-end bonuses and perceived arrogant manner, seems well deserved. Lloyd Blankfein, chairman and chief executive of Goldman Sachs, recently described himself to the Times Online as “just a banker doing God’s work.” Unsurprisingly, he was savaged by the public and the press for his comment. . . .
It’s important to acknowledge that we can’t blame the global recession entirely on investment banking or commercial banking. They contributed to it, but are not the only reason we’re in this mess. Jamie Dimon, Chairman and CEO of JP Morgan Chase, outlined many of the underlying causes in his 2008 Letter to Shareholders. Banks contributed—certainly to the housing bubble—but there were glaring regulatory lapses, especially in the mortgage industry and with Fannie Mae and Freddie Mac. “Pro-cyclical” policies, such as loan loss reserving and mark-to-market accounting, according to Dimon, also played a role, as did the ensuing freeze of credit and financial markets. Consumers are culpable, too. Seduced by artificially low interest rates, they borrowed and consumed at unsustainable levels. In October 2008, credit card debt in the United States reached $1 trillion, a 25% increase in just five years, according to the Federal Reserve.
Furthermore, the work of investment bankers is complex and technical, and many of the products and services don’t seem tangible, which, if you are like me, heightens your suspicion. In general, investment bankers help clients with capital: issuing stocks and bonds; trading securities; identifying and negotiating corporate mergers and acquisitions (M&A); and assisting with myriad other financial advisory services. They’re like the circulatory system in a body, facilitating the flow of capital and other assets to entities that need it most and will put it to best use.
March 9th, 2010 | 8:26 pm
My response to reading this commentary is to have to check myself against crossing the line from faithful skepticism to outright cynicism, anger and pride.
It is true that investment bankers serve a legitimate function within our global economic system, assuming that our system is somehow the best of all possible economic systems (to paraphrase Candide), and it is true that their work is complicated. I am also glad to hear of those within the industry who strive to conform themselves and their industry to a more Christian model of humility, service and recognition of our common humanity with all people, rich and poor. But, after having said that, at a gut level my response is still to say “so what”? (and that’s putting it kindly).
I worked for several years as a legal aid attorney and, in the course of that and other paid and volunteer efforts, I have seen all kinds of scandalous practices perpetrated by the financial services industry and its less reputable cousins. There is an entire industry based on providing deceptive and usurious loans to low-income working people. I stress the “working” part because most of these loans, usually for a car or house, or other credit instruments are directed at people with wages or assets that could be seized. These instruments are quite sophisticated, I would say diabolically so, at hiding their true costs. The laws that make it possible for credit card companies, for example, to charge usurious rates are easy to comply with – just incorporate in South Dakota. Whereas, the laws meant to protect people from predatory financial practices are complicated and difficult to enforce. One, but far from the only, reason this is so is the now well-known practice of selling these loans and bundling them into “complicated” financial instruments. Yes, people need to be responsible and careful, but this system preys on people who often lack the time or the sophistication to shop for better or more fair credit. If your car breaks down you need to get another one in order to take your kid to the sitter and get yourself to work the next day. By all means, feel free to respond with admonitions about the breakdown of the family or the need to have six months savings for emergencies, etc. But, a lot of people live on the economic margins for all sorts of reasons. I also know that the big picture of the financial collapse and the housing market collapse is more vast than the piece I am describing here, and Freddie and Fannie may well share some of the blame – I don’t know. But, I was not surprised to hear that a principle cause of the collapse was the bundling of bad financial instruments by people who had no responsibility or accountability for them.
Investment bankers do all of their hard, complicated work at a far remove from the consequences of their actions. They are richly, obscenely, well rewarded for their work, and if they can’t set aside money for a rainy day they really do have no one to blame but themselves. So what if they work long hours? So do apparel sweatshop workers. So what if they are skilled? A phlebotomist who can stick a hypodermic needle into the arm of a screaming six-year old is also highly skilled.
I might feel better about these people doing “God’s work” if they were all willing to submit themselves to the secular or religious authority of their choice for the imposition of penance. They could start by walking down Wall Street en masse saying prayers (or oaths for the secularists) of contrition while engaging in acts of self mortification. They could all agree to volunteer at least a hundred hours to provide financial advice to low-income people. Then, I might have some hope for the sincerely contrite and religiously motivated among them. As it is, the most that these individuals can probably hope for is some form of martyrdom.
March 24th, 2010 | 1:33 pm
The only thing given honor is the role of investment bankers in moving capital. No defense is made of most or all investment banking practices. In fact, the point of the article to “raise the sights” of the profession.
Biblical prohibitions on charging interest (usury) must be understood in context. At the time, loans were generally made to destitute family members for reasons of survival. Charging them interest would be akin to exploiting them in a moment of need. The Hebrew word used is “neshek” or “to bite.”
While usury certainly exists today (payday lending and in other forms), loans for productive purposes (starting or expanding businesses) are a far cry from the types of practices referred to in the Old Testament.
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