Message to Congress: Skip the Hearings. Get On With the Regulating.

Yesterday Congress heard testimony from the executives at Lehman Brothers, the poor lonely mega corporation that was made an example of last month when the Treasury Department decided not to bail it out. From IHT:

Even as the investment bank Lehman Brothers pleaded for a federal bailout to save it from bankruptcy protection, it approved millions of dollars in bonuses for its departing executives, a congressional committee was told Monday.

The first Congressional hearing into the causes of the financial crisis began with a portrayal of Lehman Brothers as a company run by irresponsible leaders who continued to reward executives and spend billions on stock buybacks and other capital-depleting programs, even as internal documents warned of the impending crisis.

“It was a company in which there was no accountability for failure,” the chairman of the House Oversight and Governmental Reform Committee, Henry Waxman, a Democrat from California, said during his opening statement….”Mr. Fuld takes no responsibility,” Waxman said of Lehman’s chief executive, Richard Fuld Jr. “Instead he cites a litany of destabilizing factors, that led to the company’s collapse.”

“In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation,” Waxman said referring to Henry Paulson Jr., the Treasury secretary.

All of this may be true, and I have no doubt that Richard Fuld Jr. is as spineless and conniving as CEOs come. Nevertheless, what has irritated me from the beginning of this financial crisis (actually since the beginning of corporate scandals altogether) is how outraged we all get when we discover that executives have been…. um, greedy.

Apparently, greed and self interest are no longer inherent human qualities, but rather, especially perverse qualities that uniquely characterize the CEOs of major financial institutions during economic crises. (Actually, if you’re a Republican running for office, then “greedy” also describes low-income people – especially minorities and immigrants — who took out sub-prime mortgages for houses that were significantly beyond their means. Though that’s a different story.)

The hypocrisy in all this is most evident among conservatives. A few weeks ago when the crisis emerged, John McCain offered the highly insightful observation:

Too many people on Wall Street have been recklessly wagering instead of making the sound investments we expect of them.

Then in the first presidential debate two weeks ago, he stated:

…Somehow in Washington today — and I’m afraid on Wall Street — greed is rewarded, excess is rewarded, and corruption — or certainly failure to carry out our responsibility is rewarded.

This whole line of rhetoric is ridiculous. Conservatives pay endless, nauseating homage to the “free market” without paying the slightest regard to the fact that markets, at their most fundamental level, are driven by greed. What, if not greed, does John McCain “expect” of the folks on Wall Street? What does he think the market should “reward” besides greed if it is to take on the level of innovation and productivity of, say, the $75 trillion global banking industry? Perhaps he believes discipline, altruism, or good ol’ fashion generosity of skill, talent, and labor are what bring forth the invisible hand to invent the goods and services we all love to consume.

Informing us that greed caused the financial crisis is like informing us that gasoline fuels our cars. It’s neither insightful, nor particularly demonstrative of competence or leadership. Similarly obvious to anyone with a brain larger than, say, a Skittle, is that greed is the reason we need regulation. As authors on The Seminal have correctly pointed out (among many other progressives) this year’s financial catastrophe has exposed the Right’s obsession with deregulation and fiscal conservatism for the scam that it is. Markets will always fail when predatory business practices are defended against regulation — when, for example, consumers are not protected by laws that promote fair and symmetrical information, or competition isn’t protected by laws that guard against collusion and rampant consolidation. Contrary to our leaders’ seeming outrage, greed is neither the cause nor the effect of this financial crisis. Rather, the failure of our government to adequately regulate greed it is what got us into this situation, and the serious, meaningful introduction of regulation is the only the thing that will get us out.

That all of this is lost on John McCain, a self-admitted ignoramus when it comes to economics, is not particularly surprising. But it would be nice if Rep. Waxman and the rest of the Congress, and Americans in general, could stop acting so shocked when they learn that humans have been greedy. Seriously, now that the bailout has passed we can all look forward to an endless parade of  high-profile Congressional hearings to “investigate” the source of the financial crisis, and they will result in the same earth-shattering revelation: people on Wall Street were greedy. This is a giant waste of our time. Congress has itself to blame far more than Richard Fuld Jr., who was frankly just being what free-marketeers claim he should have been all along: greedy.

Greed is normal. Greed is human. The “solution” to greed will never be to publicly expose it or harshly punish it, but rather, to harness it with sound regulation. As usual, our representatives are too busy engaging in public displays of outrage at the industries they both support and receive supprot from, rather than getting on with the actual business of governing.