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Sunday, September 28, 2008

No Free Lunch! Corporations & Banks Must Be Held Accountable

No Free Lunch! Corporations & Banks Must Be Held Accountable
Image © Austin Cline
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Republicans make a lot of noise about holding people "accountable" for their actions, but the only people they seem to want to actually be accountable are the average people who live along Main Street. In contrast, all their rich donors who work or do business along Wall Street are insulated from accountability. This hypocrisy is directly related to the economic problems afflicting America today and is arguably responsible for incidents like the Enron crash and resulting impact as well as the current banking crisis.

There are, of course, a lot of difficult issues involved in the banking crisis and it's doubtful whether anyone fully understands what's going on, how it started, or how to fix it. However, we shouldn't let the complexities of the economic situation blind us to the fact that the real origins lie outside of economics and firmly in the realm of Republican power politics. Regardless of whether a clean economic fix to the economic problems can be found, a political fix to the political problems must be pursued.

But what sort of accountability can be imposed on America's corporate culture? I think that one of the primary targets should be corporate charters themselves. Corporations can act as fictional persons with a lot of the rights of real persons, yet they can "live" a lot longer and can amass a great deal more wealth and power. It's time to stop treating the corporation as though they have a right to exist in perpetuity — corporate charters are privileges, not rights, and they should only exist so long as it's in the public's interest that they do, which is to say only so long as they behave.

We have to remember that the purpose of corporate charters is to shield people from liability — but they are still supposed to have limited liability. When a corporation goes bankrupt, this doesn't necessarily mean that the people who manage are personally liable for all the corporations debts and this is reasonable. What's not reasonable is for managers to direct a corporation in ways that run counter the to well-being of the rest of society — often with shareholders cheering them on because such behavior can boost profits in the short term.

When corporations stop behaving and start acting contrary to the public's interests, the corporate charters should be revoked. Perhaps they can be allowed to submit a new application and charter within a short time period, but if they fail to do so or if it fails to impress regulators, the government should step in to dispose of the assets. Had Enron's charter been revoked instead of simply allowing it to go into bankruptcy, the assets could have been disposed of in a way that allowed the proceeds to flow to the bottom of the food chain first — all the people whose pensions were destroyed by Enron's unethical behavior.

The same can happen with investment banks that prove to have been behaving improperly. Instead of bailing them out, the government should step in and take control of firms that have been playing fast and loose with people's mortgages. Assets should be disposed of or managed in ways the benefit first and foremost the people whose mortgages are in trouble, not the bankers who have been misbehaving. What it all comes down to is what benefits the people and the public, not what benefits Wall Street, banks, bankers, or CEOs.

A bailout that props up misbehaving banks but allows those banks to keep foreclosing on mortgages is immoral. A bailout that keeps people in their homes while foreclosing on bad banks — even if just a few as examples — will be good for everyone in the long term. The people should have confidence that they won't lose their assets due to bankers' misdeeds; bankers should have confidence that their asses are on the line if they don't fly straight.

And the shareholders? Well, caveat emptor — if they won't hold corporate leaders accountable through their own power, they can't complain much about how much they lose when the corporation they have shares in is broken. The people who should have the most sympathy are innocent employees whose jobs will be interrupted or lost — at least until other firms step in and purchase control of the relevant assets — but the disposal of assets should occur with an eye towards ensuring their future as much as possible.

For too long, corporations have been getting a free lunch by having the status of persons, having assets protected from misdeeds of managers, and not being held fully and completely accountable for their behavior. Trickle-down econcomics has means that the people get pissed on while the wealthy are allowed to acquire ever more power, establishing a virtual corporate aristocracy in which the corporations are allowed to write their own laws and decide how the laws are enforced.

Aristocracies of the past were sometimes eliminated by putting the aristocrats up agaisnt the wall and shooting them, or even beheading them in the public square. We can't quite do that to a corporation, but revoking a few charters may be the next best thing. Corporations don't have numbers, guns, or any other base of power besides money, but even that sort of power can be checked with the right laws and strong standards of accountability. So whom do we make an example of first?

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We'll try dumping haloscan and see how it works.