In Defense of the Recession Blame Game

In Defense of the Recession Blame Game

Vengeance is mine, saith the Lord, except that right now everyone wants a little piece of it. The mob has been chanting for months, ever since former Treasury Secretary Henry Paulson arrived in late September on Capitol Hill to warn of disaster, pass around his three-page plan and demand $700 billion to fix the problem. Most members of Congress were so spooked they were ready to write a check, until their phone lines started melting with the angry voices of taxpayers demanding details about the likely return on the investment. But even the minimal strings attached did not prevent the first $350 billion from vanishing, with the government overpaying about $78 billion for the assets it bought. The banks told pesky reporters and congressional watchdogs that how they spent the bailout cash was really none of their business. And now, Tim Geithner informs us, the financial system needs $2 trillion more.

The crowd has gotten crankier in the face of the brash indifference to its fury. It seems that the mighty have been hit with some virulent strain of arrogance common to those told that they are Too Big to Fail. First the auto executives swooped into town in their Gulfstream IVs to ask for $25 billion; then Merrill Lynch superman John Thain spent $1,405 on a trash can and suggested he deserved a $40 million bonus for losing $15 billion in the fourth quarter. Even Tom Daschle, whose loyal Senate brethren were set to confirm him to the Cabinet, discovered the radioactivity of the phrase “unpaid taxes on his chauffeured limousine.”

The modern civilized state claims a monopoly on punishment. Mobs with pitchforks, vigilantism, frontier justice — all seem sweaty and coarse compared with the men in powdered wigs duly processing the law. But as this crisis makes clear, we are in a new frontier now, the financial badlands created by technology and globalization, with no maps and few rules, and the law has not caught up to us. Until it does, we are left with the old sanctions: symbols and shame. That still leaves the problem of knowing whom precisely to scorn. “Capitalism,” John Maynard Keynes once argued, “is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” It is tempting to blame the whole political-industrial complex, starting with whoever first had the idea of lending $750,000 to someone making $17,000 a year; the regulators who said that was O.K. and the politicians who encouraged them; the financial geniuses who rolled up all those mistakes into a big ball of bad loans, chopped them up and sold them; and above all, the presiding executives who got performance bonuses whether they performed or not — buying and selling things whose value they could not possibly know, finding ways to reduce risk that instead greatly increased it, unleashing on the markets what Warren Buffett called “financial weapons of mass destruction.”

The problem with smashing the whole system, however, is that it’s a lazy answer to a fierce challenge. Modern capitalism has created unprecedented wealth in our lifetime, shown its power to lift people out of poverty and spread a culture of competitive genius. So in the pages that follow, we make a case for who got us here, and who might have saved us and didn’t. Even faith itself can be faulted when it turns into blind optimism that sees no risk, hears no sirens. There are plenty of prosecutors who will have a chance to make their case against anyone who crossed a line. But there are also culprits who committed no crime, bankers and builders and prophets and Presidents, and the face in the mirror — since many of us in the mob now wish to punish those who gave us just what we asked for.

See the 25 People to Blame for the Financial Crisis.

See Who’s Who in Barack Obama’s White House.

See the top 10 financial collapses of 2008.