Steven Pearlstein, the Washington Post’s business columnist who doesn’t much like business, makes a case for apology as accountability in today’s column, “The Words Left Unspoken in the Bailout Debate.” Two words have been conspicuously absent in the public and policy debate over the financial crisis, Pearlstein argues.
They are the words that Americans need to hear before they commit $2,300 for every man, woman and child to rescue the financial system.
They are the words we need to hear before taxpayers are put in the position of rescuing arrogant and overpaid financiers from the full consequences of their bad bets and misguided decisions.
Most of all, they are the words that elected senators and representatives need to hear before they entrust the secretary of the Treasury with extraordinary power and discretion to spend public money and actively manage the markets and the economy:
As in, “We’re sorry that those of us who were supposed to be stewards of the world’s deepest and most trusted capital markets have violated that trust by putting our own interests ahead of those of our customers and the country.”
Etc. Nice idea from a newspaper writer who writes about the world of dreams and wishes and Japan.
In Japan, great ritual accompanies such apologies, which are viewed as the first step in fixing a problem and restoring frayed relations. Here, by contrast, corporate apologies are viewed as unnecessary concessions to business and political adversaries and dangerous ammunition in the hands of prosecutors and plaintiffs lawyers.
Pearlstein could have stopped right there. Yes, it would be wonderful if we lived in a country where corporate executives, major employers, or the owners of small businesses across the land could say, “I’m sorry” and apologize for their errors. Pearlstein suggests that the heads of Citigroup, Goldman Sachs, Bank of America and Morgan Stanley stand before the cameras in the Capitol rotunda, apologize for letting down their investors and promise to forego their compensation packages.
And in the real world, as Pearlstein appears to acknowledge, we know what that would get them.
Lawsuits. Litigation. Class-action suits, state attorneys general subpoenas…in short, a legal hell in which they had already conceded their guilt.
“Your honor, I would like to submit as Plaintiff’s Exhibit A the transcript of a news conference, in which the defendant publicly admits his firm’s 10-year series of reckless decisions that could only lead to the financial disaster that had damaged the class I’m representing.”
Navigant Consulting recently released a study on litigaton related just to the subprime mortgage market. The number of suits has already exceeded the high point of the savings and loan crisis of the 1980s, the firm reports.
According to Navigant Consulting’s most recent report on this topic, of the 607 subprime-related cases filed in federal courts over the 18 monthe ended June 30, 2008, 310 were filed in just the first six months of 2008 — more than the 297 filed during all of2007.
“It is perhaps of little surprise that as the current crisis takes on unprecedented scale, the related litigation would as well,” said Jeff Nielsen, who leads Navigant Consulting’s Financial Services Disputes & Investigations group and is actively advising clients in a number of subprime-related matters. “We are now more than a year into the credit crisis, and he litigation continues to pile up.”
Navigant’s statement was released on September 10th, prior to the next, even more elevated stage of the financial crisis, and the firm’s analysis deals only with subprime-related litigation. The storm of litigation is just beginning.
In the abstract, Pearlstein’s argument is a good one. As a public acknowledgement of error, apologies would promote accountability and perhaps a more civil debate instead of the angry accusations that now dominate.
In the real world, Americans sue one another and apologies invite more and more jackpot-seeking lawsuits. And in the real world, Pearlstein’s argument can’t be taken seriously.
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