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The LIBOR Scandal: A Crisis of Faith

The financial world has been shaken this month with reports that a number of British banks may be guilty of fixing London Interbank Offered Rates (LIBOR) for their own gain. As LIBOR rates are an international benchmark to which hundreds of trillions of dollars in loans are tied, this is a very big deal that may amount to massive fraud affecting the entire international financial system.

The more information that comes out on this story, the worse it looks. Rather than being the actions one rogue bank, the fixing seems to have been conducted across a wide number of British banks. The full extent of the fixing is still unknown. Nor was the rate-fixing simply the actions of a few sneaky traders; the sheer brazenness of the recently-released Barclays emails suggests that such fixing was widespread and at least tacitly accepted. And the scandal doesn’t stop there. Recent emails from company executives suggest that representatives of the British government may have colluded with the banks to keep rates low and project an image of stability.

A new piece in the New York Times worries that the LIBOR scandal and other high-profile cases of corporate corruption are eroding our faith in the honesty of our professional elite:

We should be alarmed that corporate wrongdoing has come to be seen as such a routine occurrence. Capitalism cannot function without trust. As the Nobel laureate Kenneth Arrow observed, “Virtually every commercial transaction has within itself an element of trust.”

The parade of financiers accused of misdeeds, booted from the executive suite and even occasionally jailed, is undermining this essential element. Have corporations lost whatever ethical compass they once had? Or does it just look that way because we are paying more attention than we used to?

On this point, at least, the Times is right. The problems go beyond far beyond LIBOR and seem to affect much of our financial and business elite. The Wall Street Journal reports on the similar but unrelated story of PFGBest, a company whose CEO attempted suicide after reports of his mishandling of client money came to light. Much like former New Jersey Governor Jon Corzine, PFGBest’s Russell Wasendorf, Sr. was unable to account for hundreds of millions of dollars that were likely (and illegally) used to make risky trades. Now the company is headed for bankruptcy, and customers may be out by $200 million:

Regulators said Tuesday Mr. Wasendorf had deceived authorities to hide his misuse of customer money for more than two years before the alleged fraud was exposed. Problems were uncovered only after a regulator moved to start verifying customer assets electronically, rather than relying on paper statements that authorities now believe Mr. Wasendorf used to cover the misappropriation, according to people familiar with details of the investigation.

PFGBest’s main business is a brokerage. Its clients—many of them farmers and other individual investors—place trades through it on the commodities and currency markets. The company also operates an asset-management arm and offers commodity market analysis. Regulators say that more than $200 million that Peregrine Financial should have held on behalf of those clients is missing.

Clearly, these scandals go far beyond London and Wall Street. The decline in the personal morality of America’s elite is a fundamental threat to American freedom and prosperity. Religion is not the only force that can improve the morality of the social class, but few forces are as effective. Top business and institutional leadership in the U.S. and UK cannot long succeed unless there is a revival of serious personal morality among elites.

We need a new generation of religious, spiritual and personal leaders. Otherwise we will see a cycle of decline. Weak, immoral and greedy business leaders will make bad choices. Society will pass stricter and stricter laws in the effort to control this behavior. The laws will become less and less effective as the influence of money grows and people lose self restraint.

This vicious cycle has already begun. The only question is, how far down the spiral will it take us? Much of our national business elite is losing its morality. A generation ago, it lost its faith. Unless something changes, loss of freedom will follow.

[Update: An earlier version of this post incorrectly referred to New Jersey’s former Governor as James Corzine rather than Jon. This error has been corrected.]

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  • Tom Gates

    Hmmmmmmmmm, let’s start with the New York Times Company itself: Two share classes that guarantee that all of the control is held by the Ochs Family insulating the putrid management from being thrown out, building of a new headquarters palace above and beyond its means, $24Million payout to the COO because the CEO’s girlfriend didn’t “like” her while laying off stay, cutting pensions, et al., [removed] to a Mexican billionaire for funds to keep his reputation intact and downplay the immigration issue for which he and his telephone and consumer companies benefit on money sent by illegals in the US to Mexican family members, overpaying by vast multiples for the Boston Globe as well as numerous other business ventures that have failed miserably and had to be written off, suspension of the dividend, failure to take away Walter Duranty’s Pulitizer despite being proven a total Stalin schill, and finally claiming an objectivity of the press powers that no one believes or trusts.

    I don’t think I need to take any lessons by an organ of the NYT on faith in corporations.

  • Jim.

    There’s an early scene in My Fair Lady where Prof. Higgins’ treatment of Eliza (lighthearted haggling in his mind, infuriating abuse in hers) is brought to an end by the sound of church-bells. “A reminder”, Higgins remarks, and hands her what might be the entire contents of his coin purse.

    I’m not sure if that was in the original Shaw, but it points to a core truth: even less-than-pious sorts like Higgins compare themselves against Christian morality from time to time, all for the better.

    What can government do to help, here? Get out of the way. The way the law is currently structured (in California at least) it is illegal for employees, even in personal space like cubicles or offices, to post any reminders of religion.

    Stop removing symbols on public lands just on the basis of their being religious. Stop supporting the supression of religious speech on private lands, or in private businesses.

    This problem will solve itself, if government stops legislating amorality in the name of not legislating morality.

  • Everyman

    James Corzine. Whatever happened to him? In the slammer somewhere? Under indictment at least. Shunned by right-thinking people everywhere? Wrongdoing without consequence will be the undoing of any system, turned over to the mischief of the why-not people who are always with us.

  • A

    Unfortunately, the man’s name is Jon Corzine, not ‘James Corzine.’

    Hey, WRM, did you see Tom Ricks’ op-ed in the NYT yesterday?

  • Art King

    Hand wringing about declining morality among the elites is perennial. Generations of pundits have decried the same. Dr. Mead would have more credibility if he could back up his claims with statistics showing that fraud and moral lapses are in fact increasing. Unfortunately for his argument, the available statistics all point in the opposite direction. Fraud as a percentage of GDP has been falling steadily for as long as such things have been measured.

  • James C Brown

    I suppose if one were to look for structural causes at the root of the waywardness, one could point to the system of incentives resulting from the investment banks’ growth in size and sheer numbers. At the TED blog, there’s a good overview of this phenomenon:
    Its as if, inside the banks, the reigning norm is “homo homini lupus”, whereas capitalism and civilization require man to say yes to reason and leave the state of nature for civil society.

    There is one philosopher, much overlooked today, who I think was prescient in her day and whose writings could be of good use for chartering a reasonable course for post-2008 capitalism: Shirley Robin Letwin.

    She wrote two books which stand as bookends to the Reagan/Thatcher period, The Gentleman in Trollope (1982) and the Anatomy of Thatcherism (1993). The latter book defends the victories of free market liberalism which freed the individual of onerous fiscal and legal chains which inhibited personal initiative. But, as we’ve learned since the later aughts, its not enough to have negative liberty inscribed in positive law. For the Victorian gentleman, as Letwin showed in her 1982 study on Trollope, it is unthinkable to exercise liberty without possessing character and (literally) priceless values such as dignity, and honor and a sense of measure that eschews extremism and favors reasonableness.

    The great banking firms of today, like Barclays and JPMorgan were founded in a time when everyone took it for granted that their counterparts would act like gentlemen.
    American (and British?) meritocracy does not groom gentlemen (nor ladies), rather it grooms “successful achievers”. Its a different character type all together.

  • Cynical

    “Fraud as a percentage of GDP has been falling steadily for as long as such things have been measured.”

    Evidence? I wouuld like to share with others if any exists.

  • Anthony

    Here’s the conundrum: cynicism breeds public disengagement (significant in democracy) which then allows corporate abuse (LIBOR, PFGBest, etc.); such abuse deepens cynicism. Human life WRM is less an affair of institutions and systems than of people and an interplay of motivations and abilities (underlying motive of capitalism is to turn a profit – men of business seek to make a profit or turn what they do into a profit making scheme).

    How has the psychology of affluence (essentially the vicious circle) impacted elite choices unmoored from cultural ethics/morality/religion which is implication of your Quick Take?

  • Crocodile Chuck

    “We need a new generation of religious, spiritual and personal leaders. Otherwise we will see a cycle of decline. Weak, immoral and greedy business leaders will make bad choices. Society will pass stricter and stricter laws in the effort to control this behavior. The laws will become less and less effective as the influence of money grows and people lose self restraint.”

    Twaddle and bystander hand wringing.

    What’s needed? Enforce the laws. For example, there has been no, nada, zilch prosecution of trillions of dollars of mortgage fraud from the last bubble.

    Even the Bush II administration went after Enron, WorldCom, Adelphia.

    Orange jumpsuits, please!

  • higgins1990

    Fixing across the board…hmmmm, that COULDN’T HAVE happened in America in 2008, right when Sarah Palin pulled even with the Magic Hope And Change Hype Machine, could it?

  • Eurydice

    I don’t think our business elite are exhibiting some special kind of immorality – it’s just that the failings we’re seeing in general society – lack of personal accountability, lack of shame, narcissism, laziness, denial – those failings translate into money.

    A couple of decades on Wall Street will cure one of any illusions about business ethics, but what we could count on is that people understood they were running a business and that blowing up their business wasn’t a good thing.

  • May 15th Prophecy

    These California Bankruptcy have happen exactly as the May 15th Prophecy have said when it warn to you to watch the Libor rate back in 2008 just see The Defining Moment and The Economic Collapse Prophecy

  • Boritz

    ***The decline in the personal morality of America’s elite is a fundamental threat to American freedom and prosperity. ***

    Other than that are we do’in good?

  • Mick The Reactionary

    @Art King

    “Dr. Mead would have more credibility if he could back up his claims with statistics”

    Dr Mead virtually never backs his assertion with any hard data.

    I don’t really know why this is, in some cases it seems it would be easy to find some supporting data.

    Perhaps Mead thinks that facts and data are not necessary for a blog post. If so, he is wrong. A serious blog will not be widely read or respected if it shows contempt for its readers.

    Even links from Insti will not help, Insti rarely reads articles to which he links beyond their titles.

  • WigWag

    “Clearly, these scandals go far beyond London and Wall Street. The decline in the personal morality of America’s elite is a fundamental threat to American freedom and prosperity. Religion is not the only force that can improve the morality of the social class, but few forces are as effective.” (Walter Russell Mead)

    Perhaps Professor Mead can explain to us how he discovered that the bankers responsible for the Libor scandal are not deeply religious people. Does Professor Mead know anything about the religious convictions of the cheaters? Of course not. For all he knows the people involved could have been regular church goers with a deep and abiding belief in God. Maybe these people did what devoutly religious people have sometimes done since time immemorial; lost their moral bearings.

    Professor Mead calls for a new generation of moral and spiritual leaders. On what basis does he conclude that this will make things better? Hasn’t history proven that more often than not “religious” and “spiritual” leaders can be counted on to do the most intolerant and morally reprehensible things?

    Wouldn’t he be wiser to admit to himself that religion cannot be counted on to inspire admirable behavior when as often as not it inspires reprehensible behavior?

    Wouldn’t the wiser course be for Professor Mead to call for a new generation of enlightened leaders like America’s founders who had only the vaguest sense of religious beliefs bur believed deeply in the idea of the Enlightenment?

  • WigWag

    “Much of our national business elite is losing its morality. A generation ago, it lost its faith. Unless something changes, loss of freedom will follow.” (Walter Russell Mead)

    Does Professor Mead have any actual evidence that our national business elite is less ethical than it was a generation ago or 50 years ago or a century ago or is he just making it up as he goes along?

    America’s business elite lost it’s faith a generation ago; really? Where did Professor Mead discover this disturbing fact? Was it revealed in an obscure book hidden deep in the stacks in the bowels of the Bard Library? Was it at a conference organized by the Council on Foreign Relations? Did he hear it sitting in the pews of his church or from a neighbor while they were riding down in the elevator in his Jackson Heights home?

    How exactly does he know that a significant portion of America’s business elite has lost it’s faith? Does he really expect us to believe that only a generation ago, America’s business elite was still faithful, moral and upright but that now it has been infiltrated and taken over by atheists, heathens and assorted other scoundrels.

    How do you know, Professor Mead? Did the deity disclose it to you directly by whispering in your ear? Did he relate it to you in a dream?

  • Susan

    “Corzine. Whatever happened to him?”

    Jon is occupied with the task of raising hefty campaign cash for president Obama.

  • Susan

    It is difficult to attack immoral businesses when licing in a culture which has little problem with sticking a tube into a baby’s neck in otder to extract the baby’s brain.

    The Immorality of greedy businessmen?

    That’s chump change compared to the Immorality of Womyn’s Right To Kill their Children.

  • Felipe Pait

    We have a fair number of prominent business leaders who, though certainly none of them perfect people, are nevertheless well respected by their peers and by the public at large, for very good reasons. The names of Steve Jobs, Bill Gates, Warren Buffett, George Soros, Michael Bloomberg, and Steven Spielberg come to mind.

  • thibaud

    “A crisis of faith”

    The strangeness of this blog is once again on display when issues of poor regulation / regulatory capture are treated as evidence of the need for … more faith.

    Imagine how Mr Mead would react if one of his peers at a foreign policy think tank advocated prayer and piety as the solution to, say, the challenge of balancing China or restraining Iran.

    What is it about contemporary US conservatism that causes the Santorums and Meads to ignore the most central tenet of Madison, Hamilton et al?

    The founders knew that men who seek power, including great financial power, are self-seeking creatures of ambition who need to be counterbalanced INSTITUTIONALLY – not by appeals to good behavior or religious faith.

    Today’s banksters need to be reined in with strong regulations, capital requirements, restrictions on size.

    By perpetuating the flapdoodle about how we need faith – not more and better regulation of powerful industries including the rotten TBTF banks and the rest of the banking industry – Mead is blocking reform and progress.

    Other advanced countries have successfully reined in the banksters and reformed their banking sectors. They’re growing now, they have strong safety nets, they protect their people.

    Ah, but those nations can’t be right, dominated as they are by impious “sOCiaLi$$$ts!” who don’t recognize as Socrates Mead does that gods-fearing, honorable men need no laws.

  • WigWag

    I hate to tease our jovial host, but with his constant impulse to rap Americans across the proverbial knuckles for the sin of not being sufficiently devout, Professor Mead is beginning to sound like a dyspeptic old nun.

    My free advice to him (which I realize is worth exactly what he’s paid for it) is to spend less time with his nose in the Bible and far more time with some of the greatest thinkers and philosophers of the Enlightenment.

    If he did, he would learn that (as Blake said) “the road of excess leads to the palace of wisdom.”

    Everywhere he looks Professor Mead sees a religious angle to things. He sees ubiquitous religious references (that aren’t there) when he thinks about opera and he thinks that dishonest business practices are more likely to be abated if human-kind would only harken back to that old-time religion.

    Sure; that would work. History isn’t full of devoutly religious people who have engaged in fraud, sharp business practices and worse. Does he know anything about the history of the Papacy or more generally the history of the Roman Catholic Church? (Not that Protestants, Jews or Muslims have a rich religious history characterized by unfailing adherence to honesty).

    Religion can have a valuable role to play; it may even shed some light on the nature of the universe in a manner that science never can.

    But please, Professor Mead; this is the 21st Century. When it comes to your assertion that the Libor scandal is a metaphor for what happens when people lose their faith, at least a little bit of evidence is required. When it comes to banking scandals, intelligent people just can take your word on this subject by faith alone.

    My advice is simple; the Bible is great, but you should make a little time to go back and re-read Ralph Waldo Emerson’s “Self-Reliance.” After all, Emerson is one of the greatest and most well-respected American intellectuals who has ever lived.

    I know, I know; Professor Mead is probably worried that if he admits to reading Emerson he will sound like an elitist and he will lose all his street cred with the Tea Party set, but I am sure his loyal readers will promise never to tell.

    If he decides to take my advice, I suggest that Professor Mead pause for a second and reflect when he comes across this remark from Emerson,

    “As men’s prayers are a disease of the will, so are their creeds a disease of the soul.”

  • Michael K

    Mr. Brown:

    Thanks for the book blurb. I might try out the “The Gentleman in Trollope” as I fancy myself an amateur “Victorianist”. Just to add to the point, at least Mr. Wasendorf assumed responsibility the old fashioned gentlemanly way which is more than can be said of most of the crooks and cheaters still allowed to live in their plush Manhattan condos and Hampton mansions.

  • thibaud

    #21 WigWag – nothing better shows the confusion of the TP/Mead set than their insistence that the source of our financial mess is due to insufficient religiosity.

    Ironically, we have an almost perfect test case of that relationship, thanks to the strikingly different attitude toward and results obtained by our thoroughly secular, “impious” cousins to the north and northeast.

    Canada, Sweden, Holland, Germany have low to nearly non-existent religioisity + low tolerance for bankster hijinks. For the most part, their commitments and revenues are aligned, and their people step up to higher taxes in order to make good on their promises to each other and to their creditors. They aren’t anywhere near so religious as we are, but they are far more CONSERVATIVE in the true meaning of the word: prudent, careful, frugal.

    US, home of John WInthrop and Rick Santorum, the shining City on a Hill, has the most lax banking regulations of any of the northern advanced democracies.

    US: High religiosity + high tolerance of bankster hijinks.

    Netherlands/Canada/Sweden/Germany: Low religiosity + low/zero tolerance for bankster hikinks.

    Perhaps there’s a correlation with religiosity after all.

  • thibaud

    Looking beyond the banking sector, Mead and the TPers seem to have it half right.

    There is indeed a relationship between faith and corruption, but Mead/TP just need to change their equation’s sign from negative to (slightly) positive.

    According to Transparency International, widely considered the gold standard for international comparisons of corruption, there’s actually a slight positive correlation between religiosity and the degree of corruption in a western advanced nation.

    The US, bastion of protestant Christianity, is per Transparency significantly more corrupt than its formerly-protestant north European cousins.

    The most religious nation in northwestern Europe, Ireland, is also the most corrupt in that part of Europe.

    And the two most corrupt western advanced nations, by a mile, are those bastions of the Judeo-Christian tradition, Israel and Italy.

    Funnily enough, per Transparency, the nations with a “very clean” rating of 9 or better (scale of 1-10) are, every one of them, advanced secular nations that disdain any religious influence on their politics.

    Here are the rankings:

    Global Ranking / Country / Country Score on 1-10 Scale

    1. New Zealand 9.5

    2. Denmark 9.4

    3. Finland 9.4

    4. Sweden 9.3

    6. Norway 9.0

    10. Canada 8.7

    14. Germany 8.0

    19. Ireland 7.5

    24. USA 7.1

    25. France 7.0

    38. Israel 5.8

    69. Italy 3.9

  • Richard Treitel

    As Gillian Tett points out in Foreign Affairs:

    ‘Although Shiller correctly argues that finance needs to become more “moral,” preaching ethics will never change behavior as much as the threat of prison.’

    Then again, when Chuck Prince didn’t even know what his own bank was doing, it’s hard to imagine that the threat would have impressed him.

  • Felipe Pait

    Thibaud has a point in #24. The correlation is pretty obvious, though it does not necessarily imply causation.

  • M. Report

    “Our Constitution was made only
    for a moral and religious people.
    It is wholly inadequate to the
    government of any other.”
    – John Adams

    When the dust of the economic collapse
    and recovery have settled, expect to see
    ‘a moral and religious people’ in control
    of government; Those Other People, those
    who survive, will have no part in that

  • DonM

    Regulation of industry is not a solution. Enron was not regulated out of business, but rather killed by the market.

    Rather than government regulation, which substitutes government corruption (See Holder on voting interference) for private corruption, we need private investigation and assurance, like Underwriters Laboratories or the Council of Rabbis. The party of government thrives on regulation, and has no fear that their corruption will devalue their brand. Brand value is all that a third party quality assurance group has, and so their corruption is suicide.

  • Mick The Reactionary


    “Global Ranking / Country / Country Score on 1-10 Scale

    1. New Zealand 9.5
    2. Denmark 9.4
    3. Finland 9.4
    4. Sweden 9.3
    5. Singapore 9.2
    6. Norway 9.0”

    All top countries have white demographics and ruled by white elites(tiny city-state of Singapore does not count).

    By definition the list is rayssis, invented by white rayssists and does not count.
    Eric Holder has the correct list compiled by Rev Jeremiah Wright .

  • ahem

    Organizations model the behavior and values of their leaders. Think of the corporate culture at Motorola or IBM, for example; they’re Class-A organizations. Now think of places like Solyndra or Enron; their executives are in jail.

    That’s why projects that don’t have the support of the upper management almost never succeed—or are mediocre, regardless of how much talent an organization might otherwise have. You can talk about mission statements all you want, but if the guy at the top doesn’t believe in it, neither will anyone else. Ther Message always comes form the top. Organizations are funny that way.

    The US is an organization, too. Its citizens will never be more moral than the people who are at the top. When the guys at the top start breaking the law with impunity, everyone else’s sense of fairness is assaulted, and they start cutting themselves some slack to compensate.

    Bad management is a moral hazard because it leads to irresponsibility, greed, dishonesty and failure. It demoralizes everyone in the organization. While Obama’s in the White House, why the [heck] should anyone have to obey the law? He sure as [heck] doesn’t, and Congress doesn’t make him. Why should they tell the truth? There’s documentary evidence all over the Internet that Obama is a pathological liar. Why should they live within their means? Obama’s regime is throwing their hard-earned tax money around like it’s going out of style and printing more when it runs out. He has no problem turning their children into indentured servants; in fact, it looks like he’s getting a big kick out of it.

    If Mr Obama can be President without having to know economics or history, or show even one freaking credential like the lowliest teen trying to get a job at Home Depot, then why should anyone else have to show any? Why can’t they treat everyone else like he does—with contempt. If Mr. Geithner can become Treasury Secretary without having to pay his income tax, why should anyone else have to pay theirs? If Eric Holder can use the DOJ to deny white people their civil rights, what’s the use of our Constitution and our body of law? If Jon Corzine can steal 2 billion dollars out of his client’s accounts and yet still be a good buddy of the President instead of being thrown in jail— You get the picture.

    The message this thuggish regime is sending is this: hard work, financial prudence, discipline, truth, character, honesty and obeying the law are for losers. That’s the message that the Obama regime is sending. And it’s doing untold damage to our country. Obama and his enitre regime should be thrown into jail. And they can take a goodly number of so-called Republicans with them.

    Expect to see people generally becoming more lawless before this is through. This Presidency has been a thoroughly demoralizing experience for everyone—it’s been a nightmare.

    Yes, America is in need of a moral and ethical renaissance.

  • boqueronman

    “Weak, immoral and greedy business leaders will make bad choices. Society will pass stricter and stricter laws in the effort to control this behavior. The laws will become less and less effective as the influence of money grows and people lose self restraint.”

    Oh, those poor near saints known colloquially as “civil servants” who, just exactly like Sisyphus are condemned to forever push that 50 ton boulder up the side of the hill, only to see it slide back again! Innocent as babes, they are. According to WRM we can only overcome these venal “Capitalist Pigs” by throwing ourselves on the regulatory and rule making wisdom of our political and bureaucratic betters.

    Uhm, no thanks. Get rid of the global banking cartel by eliminating the Fed, ECB and IMF, i.e. the enablers; get rid of the fractional reserve banking systems that allow banks to create money out of thin air and unbacked by real capital, and returning to the Constitution (Article 1, Section 8) which gives Congress – not the Fed or banking buddies – the power to coin money and regulate the value thereof.

    The lack of morality in the nihilist age in which we live is a real issue. But there are already tools short of a religious epiphany to address this issue. Let’s start by calling a spade a spade and recognizing the Keynesianism – as currently interpreted – of solving a debt recession by creating more debt is a bankrupt theory that only provides a direct route to and over the cliff.

  • Stephen

    The financial business elite are simply catching up with the politicians. Somewhere warm, the spirit of Boss Tweed smiles, and nods sagely.

  • Christopher Hagar

    If you believe the solution is more regulations, why is the government failing to enforce its current banking regulations on the most heavily regulated industry?

    These violations are illegal as basic fraud, let alone the regulatory apparatus, but individuals are not even prosecuted.

    Mead’s explanation is the ruling elite lack moral character, in both Wall Street and Washington.

    Is your answer, The regulations should be written and enforced by honest people?

  • koblog

    Hey thibaud: you write “…counterbalanced INSTITUTIONALLY – not by appeals to good behavior or religious faith.”

    You miss Mead’s point exactly: we are failing INSTITUTIONALLY. The institutions we rely upon are corrupt and failing. The core is collapsing.

    And it’s because the basis for liberty is lost: one is either self-controlled or externally controlled. You call for external control. (“More orange jumpsuits.”) That’s not liberty, that’s tyranny.

    The Christian says, “I will do right even if no one is looking” and “My word is my bond.”

    John Adams said, “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.”

    We no longer live under a simple constitution but rather under a million bureaucratic regulations from an ever-growing, hydra-headed federal tyranny…regulations apparently loved by the thibauds of the world, with calls for more as the answer to violating John Adams’ statement.

  • koblog

    You do realize the head of the NY Fed all through 2007, who had to be aware of the LIBOR scandal, was none other than our own little Timmy Geithner?

    Funny how the fox is put in charge of the henhouse.

  • Lee Dodson

    An axiom of business is that the validity of a contract depends on the integrity of the individuals signing such. If the integrity of either is non-existent, then the value of the contract does not exist.

    When signing a deal with a corporation, i.e., Goldman/Sachs, the integrity is clouded by the distance of the officers from the people in the trenches, hidden. Too many fingers in the pie.

    As to the moral values in business and in this country in general: God is a gentleman, when He is asked to leave (by court order or political correctness), He goes.

  • SukieTawdry

    Human nature hasn’t changed. Our tolerance level for human failings and immoral, unethical behavior does fluctuate, however.

    We’ve been in anything goes, do your own thing mode since the 60’s and its myriad revolutions. Divorce is no fault. Out-of-wedlock birth barely makes a blip on the moral radar screen. Modern birth control and widely available access to abortion have rendered promiscuity a quaint and outdated notion. Modesty is no longer a virtue. Relationships last only as long as it takes to hook up and have sex. Our government actively recruits citizens to become dependent on transfers of assets from their fellow citizens. The good, old-fashioned notion of shame no longer attaches itself to anything except perhaps political incorrectness and intolerance for the other guy’s “thing.”

    Morality and ethics require carrots and sticks. People have to be held responsible for their actions and be made to suffer consequences for their bad behavior. Laws need to be enforced and law breakers punished. Government screw-ups like the fools behind Fast & Furious need to be publicly frog-marched. Members of the clergy need to get back to tending their flocks’ souls. We need to stop championing single motherhood, the leading contributor to poverty, as a life-style choice. There’s lots more, of course, but you get the picture.

    The pendulum will swing back again; it always does. Hopefully, it will do so before we complete this cycle’s descent into financial and societal ruin.

  • Georgiaboy61

    Re: “I hate to tease our jovial host, but with his constant impulse to rap Americans across the proverbial knuckles for the sin of not being sufficiently devout, Professor Mead is beginning to sound like a dyspeptic old nun.” Wigwag, some of us believe that some time with a “dyspeptic old nun” with a stout ruler would do our corrupt and venal ruling classes some good. Organized religion has its flaws – that can certainly be debated – but at least the Catholics, for example, aspire to a standard of behavior and believe in something greater than themselves, a moral order which calls upon humans to live by a specific code of ethics and behavior. Secularism does this poorly, if at all. Once humans crease believing in a moral universe larger than their own lives in which right and wrong matter, then all sorts of savagery and barbarity are unleashed. To paraphrase Dostoevsky, “If there is no God, then all is permitted…”
    Even an atheist or agnostic should be able to realize the value of the link between humans and a code of behavior that makes demands upon them to be good rather than bad — regardless of where such a code originates.

  • Jim.


    New Zealand, where up until recently travelers had very few options to shop or dine on the Sabbath?

    Germany, who continues to elect a no-bailouts-for-slackers pastor’s daughter to its highest office? Where the easiest way to cut your taxes is to declare yourself “Confessionless” (non-religious), and despite that a large percentage of the population (clear majorities, in the states of old West Germany) has not?

    How about the correlation between religion and policy in your favorite state for the prosecution of “banksters”, that hotbed of atheism, Texas? (Maybe Texans just don’t like people who expect others to pay their bills for them.)

    And you still overlook the fact that the rest of the “top” countries are slowly or quickly committing suicide by sacrificing children, with fertility rates at or below 1.7… Except for New Zealand, where a whopping 1 in 3 people do not identify with any religion.

    thibaud, your generalizations just don’t work.

  • Marty

    I don’t think the immediate issue is whether corruption is increasing, it’s whether the financial system is honest enough to trust them with your monye, now. The histoircal issues are importnat and may be the subject of much study and debate, but there’s time for that. What about tomorrow?

    I fear the only answer is what very few want to deal with–govt has to be shrunk to its essential core functions, and we need to develop or rediscover ways to do the other things outside of government’s maw.

    Govt is by its nature corrupt, corrupting, and depends on the use of lethal force to accomplish its purposes. There’s really no getting around all that. A people with strong enough internal controls can make it work, to a degree and for a time, but it looks more and more like whatever may have been the case in the past, the curves have crossed and we now have more government than our level of morality can sustain.

    The connection to LIBOR is, of course, that teh UK govt knew all about it, and if the UK knew, so did the Fed and the SEC, and they let it continue, if not actively encourage and support it, to protect their friends in the mega-banks, with nary a thought for anything else.

    It is still not clear how much “the little guy” may have actually been hurt by all this, but what it reveals about the motives and beliefs of our betters is the real story.

    This will NOT end well.

  • buddy larsen

    oh my goodness Dr. Mead
    tried to read some comment screed
    by detractors you attracted
    who left thread tactlessly tracted
    by attack with words like tractors
    trying to plow up all the seed

    Berm our Saves!

  • Alistair

    In response to thibaud’s post at #24: if one employs a little critical thinking, one realizes that the chart tells us less than thibaud believes it does.

    1. The nations at the top of the list are absolutely miniscule when compared to the U.S. New Zealand’s population is less than 2% as large as the U.S.’s. The same with Denmark and Finland, the next two on the list. The top three combined have a lower population than the Los Angeles metro region. In fact, you have to go the number 10 on the part of the list revealed by thibaud to get to a nation (Canada) that is even 10% the size of the U.S. This is hardly an apples-to-apples comparison. Frankly, compared to other nations of comparable population size, the U.S. blows the rest away.

    2. Let’s not ignore the issue of diversity. It certainly looks like the more homogenous nations score better here than the more diverse ones. Studies show that heterogeneous populations have less trust. If you don’t think that population size and diversity matter, let’s see how, say, Minnesota fares against nations of similar size and diversity.

    3. Following the link to the original source of the list, one sees that the rankings come from polls and opinion surveys, rather than crime statistics or other more objective measurements. Having lived in the Nordic countries, I can tell you that they are very reluctant to report on any wrongdoings among their own government, and people generally have very chauvinistic attitudes toward their government. There’s a saying among European journalists: “If you want to learn about scandals in your government, watch a neighboring country’s news programs.”

    It’s clear from the chart thibaud so helpfully provided that the nations doing best are those with a strong Calvinist tradition. This culture lives on in the peoples of Northern Europe, even if the underlying faith has largely vanished. I fear it will gradually die out, as the forces of globalization, immigration, and yes, secularization grind away at the old cultural norms.

    Pace thibaud’s post at #20, the American Founders firmly believed in the necessity of morality to the success of the American experiment. George Washington said, “Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports.” I could cite dozens of other quotes, but this post is already too long, and I bet 1000 such quotes wouldn’t satiate thibaud, whose anti-religiosity seems to burn with an evangelical fervor.

  • M. Simon


    It is an old heresy. People think if you believe in Jesus anything is permissible.

  • M. Simon

    Or let me put it in another way. Christians think they are exempt from following the teachings of Christ.

  • Jim

    Want data? Read this:

    The fact is we’ve got a massive problem of hyper-entitled, self-serving leadership in both business and government, and burying our heads in the sand only delays the day of reckoning. Pointing out that Mead is a curmudgeon is fiddling while Rome burns.

  • M. Simon

    Alcohol Prohibition taught a lesson that is now forgotten.

    We are learning it again with Drug Prohibition.

    Definition: Anarchy – A government passing laws people will not obey.

    Some interesting comments on that thesis here:

    Every single President since Clinton has violated the Drug Laws. That is 20 years now. And the laws are still on the books. The corrosion didn’t start with Obama and it has been bi-partisan. All Obama has done is to make it blatantly obvious.

    Hopefully we will get a different crook in November.

    So what recent candidate did we have that had a record of cleaning up corruption in her own party? (gave that one away didn’t I?) Palin. And the American people were not interested. I thought that was her most salient feature.

    We get the government we deserve. Good and hard.

  • thibaud

    #42 Alistair – nice try, but you miss the mark.

    Transparency Int’l’s not empirical, sure, but it’s widely accepted as the gold standard. If you dispute its DIRECTIONAL rankings, then sample a few randomly-chosen businessmen with wide experience of dealmaking and investing on multiple continents. They’ll confirm Transparency’s findings.

    As to your other points:

    Country size: weak to no correlation. One of the smallest countries in the western advanced nation cohort, Israel, is the second-most corrupt in that cohort, with a 5.8 score that ranks it #38 on the overall Transparency list. Tiny Ireland is more corrupt than its larger cousins in northern Europe.

    Diversity: slightly higher correlation, but very weak. Italy (3.9 score) is less diverse than France or the USA (7.1 and 7.0). Israel (3.9 score) and Ireland (7.5 score) are far less diverse than Canada (8.7) .

    “Calvinism” [“It’s clear from the chart thibaud so helpfully provided that the nations doing best are those with a strong Calvinist tradition. “]: well, here you’re getting a bit warmer, though your term is misleading. The frugality and emphasis on good works that marked not so much Calvinism but the Protestant work ethic that Weber identified is what remains in those countries – although, to be exact, the work ethic part is no longer so strong.

    The core of the difference between those countries, including Canada, and the USA-Ireland-France-Israel-Italy is their attitudes toward

    1) the political class

    2) financial and industrial elites.

    The clean northerners (or maybe antipodeans would be more accurate) have cultures that do not tolerate or respect “pay to play” politics, piggish CEOs, banksters on the make. They have a strong social ethos marked by mutual provision. And when they make commitments, they fund them through broad-based and progressive taxation.

    We used to have such an ethos of mutual provision in this country. Until and unless we get it back, we will wallow in the lower tier of western nations when it comes to corruption.

    Again, our biggest challenges are cultural.

  • M. Simon

    We need to stop championing single motherhood, the leading contributor to poverty, as a life-style choice.

    Ending Drug Prohibition and its exorbitant incarcerations would go a long way towards solving that problem. But our moralists refuse.

    It is not just those ignoring morality that are causing our problems. A lot of our problems can be laid at the feet of those who shout morality from the roof tops.

    We used to understand the difference between vice and crime. We used to understand that vice – while not a good thing was not a threat to society. Now that we treat them the same way (want a 32 oz soda in NYC ?) crime has become merely a vice.

  • thibaud

    #48 – so just to summarize, the Jacksonian program for financial sector reform, as shown on these threads, is to bring back prayer, end abortion, legalize drugs, and scale back government regulation. Got it.

  • buddy larsen

    M. Simon, not sure that moralists are the main problem. Tea party has shifted toward you. The adaments now are the strangely hyper liberal on all other personal behaviors but not drugs or grass. In most cases, these are pols with mob ties, like doughty drug warriors Pelosi and Biden, friends with the Genovese and Gambinos respectively. Could the War on Drugs be a War to maintain retail price points?

  • Jim.

    @M Simon-

    Actually, the belief that followers of Christ are exempt from the Law is an old heresy, known as the Adamite heresy. Such heretics believed they were also exempt from wearing clothes (problematic in the mountains of Bohemia) and they were allowed to “hold wives in common”.

    This was one of the less-successful heresies in the decades before the Reformation, though its teachings (aside from the existence of God) seem to be very popular among the non-religious of today.

  • Jim.


    While income taxes in some Scandinavian countries are certainly progressive (over 100%, in some cases) most countries that support a Eurosocialist agenda with a Value-Added Tax have remarably regressive tax receipts.

    Make you a deal… if you can, in the US, pass a tax on highest-bracket earners (like yourself) of 100%, I’ll drop my objections to the onerous financial burden of ObamaCare.

  • M. Simon

    When you make vice a crime, crime becomes merely a vice.

  • M. Simon


    Uh. I’m a libertarian not a socon. Evidently you are not up on the nuances of American politics.

    Short version:

    Socially liberal, fiscally conservative, strong supporter of property rights. And the last is because it doesn’t matter who the thief is: organized crime – government, or disorganized crime – street thugs.

  • M. Simon


    Haven’t seen you much since I was a regular at Belmont club. Good to see you again.

    I think you have hit the nail on at least one of its heads.

    BTW could you point me to the anti-prohibitionist TEAs. Haven’t run into them myself.

  • thibaud

    JIm – to paraphrase that scene from Gore Vidal’s “Lincoln” where the great emancipator offers to “shake the hand” of any Confederate wounded prisoner who will deign to accept his hand, “We shall all come to the same VAT, son.”

    VAT will come to the US, in due course.

    It’s not progressive, sure, but it’s a good corrective to a country that needs to be weaned off its habit of consuming cheap Chinese-made junk it doesn’t need with money it doesn’t have.

    And that money will fund universal health care. As Mr Mead is wont to say, “Change will come.”

    Have a great weekend,

  • Alistair

    thibaud – Your counterarguments fail to convince. Sure, you can find an exception to every rule, but in general my points remain valid.

    – Israel is nearly double the size of four of the top five nations you listed on your corruption scale.

    – “Israel and Ireland are far less diverse than Canada.” Really? Canada is 87% white. The most populous “visible minority” (as Canada calls it) is Chinese at 4.3%.

    Israel is 75% Jewish. Within that group, there are significant cultural and even physical-appearance differences between, say, Ashkenazi and Sephardic Jews. Leaving that aside, over 20% are Arab Muslims. No minority group in Canada is comparable in either proportion or level of violence toward the majority as the Arabs are toward the Jews (and, some would argue, the other way around). Or would you say that there is greater harmony between the different Israeli ethnic groups than there is in Canada?

    When it comes to Ireland, sure it’s not so diverse when it comes to race, but there is the little issue of Catholic vs. Protestant, and the bloody conflict on its doorstep which drew much of its attention over the past century or so.

    Decades of violent conflict between, in the case of Ireland, Catholics and Protestants, and in the case of Israel, Jews and Muslims, rendered those regions far from harmonious.

    And yet, Ireland’s ranking on the Transparency scale isn’t bad — 7.5, placing it in the top 20.

    – The US is far more diverse than any of the nations you listed above it, and vastly more populous as well.

    – Of course I was referencing Max Weber’s work on the Protestant work ethic when I referred to Calvinism as a short-hand for the confluence of capitalism and a stern morality. Weber himself cited Calvinism as one of the main wellsprings of this cultural outlook. The Puritans who settled New England were Calvinists, as were the Scots-Irish, and the Dutch settlers of both New York and South Africa. Calvinists were very influential in Scotland, the Netherlands, parts of Germany, and Sweden.

    We can find common ground on the notion that culture is the key. However, you seem to think that a more communitarian, “we’re all in it together” attitude will solve our problems. While this can work well in small groups (and even in small, more homogenous nations), it’s an impossible goal in a vast, diverse nation like the US. It’s more likely to lead to more free-riding, more tragedies of the commons, and hence more resentment, than it is to a more harmonious, honorable society.

    I’m surprised nobody has brought up the WASP culture that was prevalent among American elites until the ’60s. For all of their faults, WASPs at least paid great heed to principles of honor, which included keeping your word and doing the right thing. Sure, it didn’t always work, but couldn’t we use a little more emphasis on honor in our culture these days?

  • M. Simon


    Haven’t seen you much since I was a regular at Belmont club. Good to see you again.

    I think you have hit the nail on at least one of its heads.

    BTW could you point me to the anti-prohibitionist TEAs. Haven’t run into them myself.

  • thibaud

    57 Alastair – ever been to Quebec? They speak a different language there. And, yeah, their separatists have been known to use violence.

    You might also visit Ireland while you’re at it. There’s something called the south, which is dominated by the Catholic Church, and the north, which is part of a different nation altogether.

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