Wealth, Lobbying and Distributive Justice in the Wake of the Economic Crisis C.M.A
Total Page：16
File Type：pdf, Size：1020Kb
DIDN'T YOUR MOTHER TEACH YOU TO SHARE?*: WEALTH, LOBBYING AND DISTRIBUTIVE JUSTICE IN THE WAKE OF THE ECONOMIC CRISIS C.M.A. Mc Cauliff* *SELFISH OR SHARING? . .... .. 383 **ACKNOWLEDGMENTS .............................. ...... 383 * Yaron Brook, president of the Ayn Rand Institute, finds problems with what he calls "governmental influence, where 'somebody's need is a claim against our wealth."' As he sees it, "[t]he last 50 years have been an orgy of placing need above wealth creation, above personal pursuit of happiness." Andrew Martin, Give BB&T Liberty, But Not a Bailout, N.Y. TIMES, Aug. 2, 2009, at BU1 (explaining the views of followers of Ayn Rand, a refugee from communist Russia who proclaimed herself a radical for capitalism). Explaining this viewpoint, a speaker at a recent Ayn Rand convention told the story of a boy in the sandbox, who fights with another child who had taken the boy's toy truck. The boy's mother naturally stops him from fighting by telling him to share the use of the toy. The speaker says "that the mother has taught a horrible lesson" by implying that it is "bad to be selfish." Id. He concludes that "[t]o say man is bad because he is selfish is to say it's bad because he's alive." Id. (Presumably, the mother would still be able to stop the child from touching the metal pot on the stove or picking up a shiny knife.) The speaker, John A. Allison IV, is a banker whose bank BB&T, the eleventh largest bank, had problems during the financial crisis, but Allison insists that the government forced BB&T "to accept TARP money to obscure that [the government was] simply trying to save several large banks like Citigroup." Id. Allison did not see the $3.1 billion BB&T was forced to accept as allowing it to pass the stress- test in May. Id. Rather the rescue is "going to cost us about $250 million for money we didn't want." Id. BB&T paid back the loan in June but also had to pay interest. Id. It was not enough, however, to prevent BB&T from buying the assets of Colonial Bank, the sixth largest bank failure in U.S. history. Dan Fitzpatrick, David Enrich & Michael R. Crittenden, Major Bank Fails in South, WALL ST. J., Aug. 15, 2009, at Al (reporting that the FDIC "agreed to share losses with BB&T on $15 billion of the $22 billion in assets included in the deal"). ** Professor of Law Seton Hall University School of Law. This Article is dedicated to Cornelia (Mrs. E.B.O.) Borgerhoff, in her own right formerly an administrative dean at Princeton University, as well as personal assistant to Jacques Maritain while he was a Professor of Philosophy at Princeton. The author wishes to thank Seton Hall University (Dean Patrick Hobbs), for a summer stipend which supported the research for this Article, and for their comments, Michael Ambrosio, Angela Carmella, Dan Morrissey, Stephen Lubben, Jacqueline M. Nolan-Haley, Margaret Gilhooley, Frank Pasquale, Michael Ricciardelli, Rachel Godsil and colleagues at the Seton Hall Faculty Retreat on January 30, 2010, and Kyle Grimm, research assistant par excellence. 383 384 RUTGERS LAW REVIEW [Vol. 62:2 INTRODUCTION: EXTREME WEALTH TODAY .......... ............. 384 I. PRINCIPLES OF DISTRIBUTIVE JUSTICE IN A CAPITALISTIC SOCIETY ............................................... 393 A. Fairness ................................. ..... 394 B. Nozick's Libertarian Critique of Rawls ...... ........ 399 C. Maritain and Nussbaum, Using Neo-Aristotelian Principles, Extend Rawlsian Distributive Justice from the Working Class to All ............... ...... 403 II. GOVERNMENT OVERSIGHT OF FINANCIAL MARKETS IN AN AGE OF LOBBYING ................................. ..... 407 A. The Hard Realities .............................. 411 B. Early Assessment of the Proposed Regulation of Financial Markets and Consumer Financial Affairs ...... 417 C. Lobbying: The Good and Bad Effects on Democracy ..... 422 III. DISTRIBUTIVE JUSTICE, SOCIAL ATTITUDES AND LOBBYING......... 429 A. Wealth and the Political Process..................... 430 B. The Attitudes and Political Positioning of the Wealthy....................................... 432 CONCLUSION: WHAT IS LIKELY FOR DISTRIBUTIVE JUSTICE IN THE CURRENT GOVERNMENTAL CLIMATE? ....... .. 440 INTRODUCTION: EXTREME WEALTH TODAY In the last decade, wealth was repositioned. During the 1990s, computing power and the internet expanded as they became cheaper. In the spring of 2000, however, the "dot-com" bubble exploded without extending the use of computers to the digitizing of public service electricity, computerizing medical records, or aiding in renewable energy or developing facilities for a high-speed broadband network with fiber optic cable.1 After the bubble, venture capital flowed to consumption, including refinancing of retail mortgages and other debt instruments devised by Wall Street to hedge against and spread risk.2 The high visibility of the lifestyles of financial operators, including those who devised the debt instruments and hedge funds, caused some middle-class Americans to focus on wealth and the possibility of participating in the trappings of a showy lifestyle.3 1. Paul Glastris, Next-Stage Capitalism, WASH. MONTHLY, May-June 2009, http://www.washingtongmonthly.com/features/2009/0905.ednote.html (citing a study by the Information Technology and Innovation Foundation (Feb. 2009)). 2. Id. 3. This culture sometimes resulted in people stretching to buy houses that they could not afford on the ground that it was an investment. See generally City Life in the Second Gilded Age, N.Y. TIMES, Oct. 14, 2007, (Magazine) (devoting a whole issue to the very wealthy, including multi-page advertisements of new condominium buildings, 2010] DIDN'T YOUR MOTHER 385 The visibility of this new wealth engendered a mix of reactions that included envy, moral disgust, jealousy, ripping off people, and living beyond one's means in order to participate in the high-flying lifestyle.4 This, however, was not to last. Starting in September 2008, the financial community crashed, leading a downturn into the economic crisis and panic of the last quarter of 2008 and the beginning of 2009 ("the Panic of 2008"),5 thereby impoverishing many people who never enjoyed the upside of the bubble.6 During the last thirty years, growing disparity in wealth among the various economic classes has been a troubling characteristic of many societies from Russia to Ireland and from the United States to Latin America. In the recent crisis, anger at favored treatment for the "haves" (bonuses for failing bankers from the public treasury) in the face of "give backs" in less glamorous fields (in health coverage, salaries and numbers of workers in the airlines and automobile industry) has been deep and widespread.7 This anger may be well grounded due to the short-term risks that large bonuses encourage.8 In Greece and France, the anger has been more physical as large demonstrations threaten the peace with burning automobiles and rioting, to say nothing of holding managers hostage in their own offices.9 The inequality of wealth has spawned resentment and vengeance, perhaps to the point of cutting off one's nose to spite one's credit cards, banks and automobiles, and articles entitled, among others, The Measures of Wealth, At Their Service, and Where the Haves Live). 4. See, e.g., Pablo Andreu, Wake Up and Steal the Coffee, N.Y. TIMES, Apr. 26, 2009, at CY3. (encapsulating the attitude of the new gilded age, the author describes how he casually fell into the "addiction" of swiping another office's coffee selections). 5. See The Money Issue: Dilemmas of Debt, N.Y. TIMES, May 17, 2009, (Magazine) (devoting an entire issue to the current recessionary economy). 6. See Kurt Andersen, The End of Excess: Is This Crisis Good for America?, TIME MAG., Mar. 26, 2009, at 32. 7. Morgan Stanley Raises Senior Officers' Salaries, N.Y. TIMES, May 23, 2009, at B2 (describing how Morgan Stanley raised the salaries of its senior officers "to avoid political criticism over bonuses."). Not all bankers have disregarded banks' "fundamental societal duty," by increasing systemic risk to achieve "distorted" pay structures. See generally STEPHEN GREEN, GooD VALUE: REFLECTIONS ON MONEY, MORALITY AND AN UNCERTAIN WORLD (2010) (offering an explanation by the CEO of HSBC that a robust and healthy banking system is in the public interest while avarice is not). 8. See Louise Story & Eric Dash, U.S. To Propose Wider Oversight of Compensation, N.Y. TIMES, June 8, 2009, at Al, A3 (explaining that bonuses encourage executives to take excessive risks since bonuses are focused on short-term results). 9. Anthee Carassava, Athens Struck by Firebomb Attacks, N.Y. TIMES, Apr. 1, 2009; see also David Jolly, French Workers Escalate Threats Over Severance Pay, N.Y. TIMES, July 16, 2009, at B9 (explaining that "after a spring wave of 'bossnapping' situations, in which workers took their bosses hostage," workers have now threatened to use bombs). 386 RUTGERS LAW REVIEW [Vol. 62:2 own face. Specifically, the taxpayers' outrage against bonuses paid to those who would not have received them without public funds has led to the possible devaluation of the warrants the taxpayers received from the companies in return for the government loans.1o The preoccupation with wealth has ironically given way in some instances to a strain of vengeance and punitive reprisal as the dream not only of wealth, but also of financial stability, disappeared."1 Relatively few people actually participated in the extraordinary growth in personal wealth. Certainly more than the famed "Fortunate 400" (0.0003 percent of the approximately 134,400,000 tax returns filed), but probably fewer than 13,440,000 (10 percent of the returns filed) and possibly fewer than 1,344,000 (1 percent of the returns filed) have enjoyed extraordinary gains. 12 10. See Subsidy Scope, Monitoring the Volume of the TARP-Funded Warrants, http://subsidyscope.combailout/tarp/warrants (last visited Mar.