Giving the devil his due
In his signature masterpiece Faust, German novelist Johann Wolfgang von Goethe wrote about a man who sold his soul to the devil. All is well – until the devil demands repayment. The CEO’s of several American financial institutions can identify with Faust.
Their devilish transaction took place a few months ago. Banks were in trouble; bad mortgage loans set the ball rolling toward shrinking credit availability. Faced with the potential of widespread collapse, bankers accepted bailout money from the federal government. Minimal strings were attached – they thought.
Thursday those same bankers sat before an indignant US Senate committee. Arrogant senators vented righteous outrage, demanding to know why – why the bankers hadn’t sold their corporate jets, why they hadn’t lowered the interest rates on credit cards, and why they hadn’t given part of their personal paychecks back to the companies they worked for. It was typical political theater, with senators alternating in the role of Goethe’s Mephisto. The bankers came to realize they sold their souls for federal money, and it is time to give the devil his due.
After the hearing, one of the bankers who refused the offer he couldn’t refuse breathed a sigh of relief. In an interview, Steve Buster said 60 million dollars in federal TARP funds had been dangled in front of his Mechanics Bank. In exchange, the bank would have been told how and to whom to lend, would have had to accept oversight in the board room, and would have been prohibited from giving employee bonuses for five years. In Buster’s words, “A lifeline turned into a noose,” and Mechanics Bank turned down the federal money.
While it is outrageous to think that any Senator has the ability or right to tell a banker how to do business, the fact of the matter is that the banks took money from the federal Mephisto. The banking CEO’s violated one of the first rules of business: know who you are doing business with.
