1. Religion & Spirituality
Barbara O'Brien

Greed and Delusion on Wall Street

By January 27, 2009

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Dave Krasne in the New York Times and Andrew Leonard in Salon both write about Wall Street executives who continued to reward themselves lavishly while their firms were crumbling. Both writers focus on Merrill Lynch as Exhibit A of bad examples. Krasne writes,

Merrill Lynch lost $27 billion last year, and yet still managed to rush through $4 billion worth of year-end bonuses in the days before it was taken over by Bank of America.

Leonard adds,

And for that extra dash of class-warfare-induced homicidal rage, there is also the tidbit, first revealed by MSNBC's Charles Gasparino, that [Merrill Lynch CEO John] Thain spent $1.2 million remodeling his office in Sistine Chapel-like extravagance last January.

We've read news stories about luxury junkets and extravagant spending that continued even after firms received billions of dollars from government to keep them from folding. Dave Krasne, who is a partner in a private equity firm, writes "This speaks to how completely foolhardy behavior has overtaken our industry."

It's not just the financial industry, of course. In December, the heads of the three big Detroit automakers, in fear of bankruptcy, flew to Washington to ask for federal money. And they flew in three separate corporate jets, at a cost of hundreds of thousands of dollars each.

John Helyar, Katherine Burton and Vernon Silver write for Bloomberg News about associates of Bernard Madoff, who is currently under indictment for defrauding investors of as much as $50 billion. The associates say that, in retrospect, there were many signs that there was something wrong with Madoff's operation, but they chose to ignore the signs. "Fiduciary duty stood no chance against the profit motive," said the Bloomberg reporters.

I assume the chief executive officers of Wall Street and Detroit are not stupid people. I assume also that most of them would not think of stealing cash out of someone else's pocket. What Bernard Madoff thinks of himself I do not know, but I suspect most of his associates and others in the financial industry do not see themselves as thieves, crooks, or profligates. Somewhere along the line, however, their judgments became seriously warped.

The Four Noble Truths tell us that our thirst, greed and grasping are the principal causes of dukkha -- the unsatisfactory nature of life. Our passions cause and are caused by our delusions. And it appears the global financial industry became a thicket of delusions for all who entered it.

At the Guardian, Ed Halliwell (a Buddhist) suggests that religious leaders who speak of the moral implications of the financial crisis would do well to adopt the language of psychology.

In these terms, economic boom and bust is a collective manifestation of bipolar disorder just like a manic depressive, we are trapped in repeating cycles of increasing activity and acquisition, leading to overconfidence and poor decision-making, which then creates the conditions for a painful crash and reactive depression.

The recorded history of human civilization is at least 6,000 years old. Yet every generation has to re-learn the fact that greed makes us crazy.

This habitual pattern will only stop when we understand how and why it works, and take steps, individually and collectively, to break free of our pointless craving for riches. This, incidentally, is the basis of the Buddha's second noble truth the cause of our suffering is attachment.

Buddhist or not, society would do well to recognize that living in a bubble of boundless opulence utterly corrupts objective judgment. For their own protection, shareholders should insist on putting sane limits on executive compensation. This is not just to keep them honest, but to keep them rational.

Update:Arianna Huffington has more on corporate insanity.

Comments
February 8, 2009 at 1:26 am
(1) Bob Mellon says:

Barbara I love your column but as Buddhists we must remember that, even in the enormity of their opulence, these Wall Street CEO’s are suffering. We should show them the compassion that they obviously need. I never thought that I would ever come to defend some Wall Street CEO but when we look honestly at the issue, these CEOs are simply projections of the majority of their corporation’s shareholders. The shareholders vote these top tier executives into power to do one thing and that is one thing is to make them money and lots of it. The shareholders need to take responsibility for their poor judgement, which allowed this outrageous behavior to happen in the first place. Another particularly unskillful behavior that also needs to come to an immediate end are the evil corporate jet bandwagon rants that every blogger and mainstream media reporter feel compelled to use as an example of these greedy CEO’s overindulgence. The bloggers and reporters seem to be VERY ignorant of that fact that the insurance companies that insure these mega-corporations will hardly ever allow more than two executive officers on the same commercial flight because of the possibility of the plane crashing and the effects that will have on the corporation itself and the tens of thousands of people who earn a paycheck from the corporation. The media has never once mentioned the incredible cost, monetary as well as natural resource consuming, involved in having a team of…oh let’s say ten executives travelling individually on different flights trying to make various connections on other various flights in order to arrive at their one single destination for a meeting and then, get them all back to their home office later in the day for another meeting. The costs are simply too expensive when you break it down to what these people are getting paid per hour, a highly unskillful amount of money but I digress. The costs are on a much higher order of magnitude than the feasible alternative which is to just have these executives travel in their private corporate jets for their business trips. People need to know that the insurance companies will rarely ever let these corporations allow their top tier executives to even rent a car because of the risk of someone dying in a car wreck and the implications that could have on the corporation and obviously it’s stock value. As Buddhists reporting on unskillful behaviour, we must constantly seek the truth, as well as execute the necessary required research, and in order to do that we must look deeply and ask ourselves ‘how and why does this happen?’ and if we’re looking deeply enough, the answer might just surprise us (you).

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