The Ethic of Greed and the Spirit of Capitalism
May 3rd, 2009 by Rick Arms
Washington Post article on the hedge fund holdouts who forced Chrysler into bankruptcy is headlined: “In Chrysler Saga, Hedge Funds Cast As Prime Villain: Firms Say They Were Right to Hold Out”.
I was interested to see what kind of argument the firms would be able to mount for the proposition that their actions were “right,” which I take to be a term connoting something like “ethical” or “morally justified.” It turns out, however, that they mean something rather different:
“Some of the characterizations that were used today to refer to us as speculators or to say we’re looking for a bailout is really unfair,” said one executive who spoke on condition of anonymity because of the sensitivity of the matter. “What we’re looking for is a reasonable payout on the value of the debt . . . more in line with what unions and Fiat were getting.”
George Schultze, the managing member of the hedge fund Schultze Asset Management, a Chrysler bondholder, said, “We are simply seeking to enforce our bargained-for rights under well-settled law.”
They’re not actually saying that what they did was right. Rather, they’re saying that it was selfish but also legal. Which is fair enough. People aren’t allowed to just do any old selfish and greedy thing they like. You can’t break into my house and steal my TV. But the law does afford wide latitude for the impulses of selfishness and greed. So one is within one’s rights, under certain circumstances, to insist on one’s ability to inflict suffering on vast numbers of people in order to make more money for your rich self and your rich clients. But it seems very odd to characterize it as “unfair” to be subjected to moral criticism for one’s conduct.
This, however, is one of the signal properties of our age. It’s one thing to model human activity as driven solely by the relentless pursuit of money. Such models can enlighten various situations. But it’s another thing entirely to actually recommend such a lifestyle as optimal or moral, or to make the claim that any conduct that rationally serves the goal of increased personal wealth is therefore “right” or that to criticize self-interested and socially destructive behavior is “unfair.” I think Obama is to be congratulated for his handling of the situation. He didn’t have the FBI storm in, guns blazing, and take these people’s money. He respects the law. He respects property rights. He’s going to go through the bankruptcy process. But he also didn’t respect the ethic of greed that’s come to dominate American public life. He reserved the notion that some conduct is wrong and worthy of criticism and held out the ideal that selfish people might someday be motivated not only by acquisitiveness but by some kind of shame and a desire to behave—or, at a minimum, be seen as behaving—in a public spirited manner.
Reclaiming the idea that there are ethical issues in life that don’t relate to gay marriage or abortion will be an uphill struggle, but it’s an important one.
Its possible that they hold CDS against default so that they would rather that Chrysler default.
i must point out that if you read the article there is a great qoute from a man named Ron Geffner. It appears half way through the article..he defends the hedge funds ,and says that we live in a capitailistic society and if a company does not have a good business plan than it should be allowed to fail.He is refering to Chrysler
i nearly chocked on my breakfast.For anyone remotely connected to Wall Street to say that, with a straight face , is unbelievable.
NOTE TO WALL STREET : If you believe in capitailism and the free market so much, STOP TAKING OUR TAX MONEY!!!!!
I don’t think that Matthew understands the concept of fiduciary duty.
I believe that one of the forces driving the idea that anything legal is ethically OK is corporate personhood and concomittant “business ethics”, which lead to exactly this position.
In fact, it is the fiduciary responsibility of the directors to employ any and all legal methods to increase shareholder value, and “business unethical” for them to do otherwise.
This is how predatory lending, environmental destruction, and exploitation of the workforce is justified in the corporate world in which most of us spend most of our productive hours. Little wonder it has permeated our culture.
By the way ,for those that read the washington post.Steven Pearlstein has a good opinion [ as usual] on the issue, on page 14 of todays washington post .
I don’t think you understand the concept of fiduciary duty.
I don’t think Al understands that fiduciary duty and ethical/moral behavior are not the same thing. Which is Matt’s point. The fact that you don’t get it is not a devastating counterpoint, Al.
Duh. The hedge funds are insisting on their rights under the “rule of law”. Yglesias are you calling that immoral? You’d rather Obama stiff the widows and orphans these funds represent, to make the unions a big fat gift? This is just another example of how coveting another person’s earnings is true greed.
Perhaps you’d like to explain to the rest of us how Obama’s plan of bypassing the rule of law, giving controlling interest of Chrysler to the union pension fund, is moral. God, we are on the path to becoming another Argentina, and you are that path’s apologist.
Hey I have an idea, let’s all go over to Yglesias’ house and see what we think he doesn’t deserve.
I hate it when I have to agree with Al, but I had the same thought in reading this: the hedge fund managers are undoubtedly operating under a fiduciary duty to be “selfish” in this particular way.
By the same token, though, I think they are being crybabies for complaining about what Obama said. Obama, like them, is just doing his duty with respect to the people he represents, and they should suck it up.
As others have noted, it is a legal requirement that public companies strive to maximize returns to shareholders.
Expecting business people to have a “social conscious” is silly and hinders good lawmaking.
NOTE TO WALL STREET : If you believe in capitailism and the free market so much, STOP TAKING OUR TAX MONEY!!!!!
NOTE TO PETE FROM BALTIMORE : Barack Obama is the one who’s GIVING THEM OUR TAX MONEY!!!!! If you believe in the feds so much, than show me they can act ethically.
Perhaps you’d like to explain to the rest of us how Obama’s plan of bypassing the rule of law . . .
Say what? Obama tried to negotiate a settlement: that isn’t “bypassing the rule of law”. And now that such a settlement couldn’t be reached, they are going to court, which will presumably apply the law. So I see no basis for your claim.
Hi, cool post. I have been wondering about this issue,so thanks for posting. I’ll probably be coming back to your blog. Keep up great writing