The Blameless Rich
“… [W}here all, or almost all, are guilty, no one is.”
Hannah Arendt, Eichmann in Jerusalem: A Report on the Banality of Evil.
From the moment it became clear that the rich in their sucking greed had destroyed the economy, there was a chorus from their flacks explaining that everyone was responsible for the Great Crash. We all played a part in the destruction. This became the clear single explanation, despite the volumes of work placing blame squarely on a few thousand people. Preet Bharara, the US Attorney for the Southern District of New York, uses the fact that many people were involved in fraudulent sales of real estate mortgage-backed securities as an excuse for not bothering to investigate.
Here’s a recent example. At a Book Salon last Sunday, I asked the author, Matthew Richardson, several questions about the people who caused the problems he described in his book on the Great Crash. He offered excuses for all of them, and finally offered this quote from his book, attributed to some unknown person: “The shapers of the American mortgage finance system hoped to achieve the security of government ownership, the integrity of local banking and the ingenuity of Wall Street. Instead they got the ingenuity of government, the security of local banking and the integrity of Wall Street” (edited slightly). Heh, heh, everyone had such good intentions, too bad it worked out so badly for everybody else.
We don’t have a lot of experience dealing with massive frauds that can only be perpetrated through large bureaucracies. Most frauds are limited to a single player or a very small group. Bernie Madoff stole billions with just a few employees. Even the S&L crisis was the result of individual frauds at hundreds of institutions.
The Great Crash required the coordination of tens of thousands of people. It required massive changes to the regulatory structure, both in weakening regulation and weakening regulators. It required dozens of economists and think tanks to publicly support the inane ideas that justified this weakening. These things weren’t an accident. They happened because they met the desires of a very small number of people who had the power and the ruthlessness to get those changes. With those changes, the rich picked up the American economy, shook every last penny they could from its pockets into their own, and threw it into the depths of the Lesser Depression. But we didn’t intend to destroy it, they say, so we get to keep all the money and we can’t be punished.
The most notable descriptions of the evils of perverted government comes from Hannah Arendt’s exhaustive discussions of the Nazi killing machine. It is one of the topics of Eichmann in Jerusalem, where Arendt referred to the Holocaust as an “administrative massacre”.
In its judgment [the Eichmann Court] naturally conceded that such a crime could be committed only by a giant bureaucracy using the resources of government. But insofar a it remains a crime … all the cogs in the machinery, no matter how insignificant, are in court forthwith transformed back into perpetrators, that is to say, into human beings.
Part of Eichmann’s defense was his claim that his only motivation was to move up in the bureaucracy; that he was not motivated by an intention to harm anyone. This is somewhat different from the claim that he was only a cog in the machinery of death. It is a claim that society cannot punish people unless they have a specific intention to murder.
From the viewpoint of our legal institutions and of our moral standards of judgment, this normality was much more terrifying than all the atrocities put together, for it implied… that this new type of criminal… commits his crimes under circumstances that make it well-nigh impossible for him to know or to feel that he is doing wrong.
Foremost among the large issues at stake in the Eichmann trial was the assumption current in all modern legal systems that intent to do wrong is necessary for the commission of a crime.
Preet Bharara repeats this thinking in his self-defense for not investigating. George Packer reports for the New Yorker:
Bharara walked me through the decisions of a prosecutor, using the example of a taxpayer filing false returns. “The question then becomes, did you have criminal intent that can be proven beyond a reasonable doubt? Two things, two hurdles, right?”
It is impossible to imagine that these are real hurdles. Who wouldn’t agree that the issuers, the underwriters, the salespeople and the rating agencies intended to sell the securities knowing that they were garbage and that the offering materials didn’t disclose the nature of garbage?
The Great Crash is not like the Holocaust, but the lessons from the creation of a machinery of administrative massacre is instructive. No one should be allowed to evade responsibility on the theory that collective guilt creates individual exoneration.