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Is it ethical for other industries to lobby for Wall Street bailout funds?
By Lauren | October 30, 2008
Now that the $700 billion that Congress and the White House approved to bail out Wall Street is officially available for distribution, it’s probably not surprising that other industries are coming forward, hat in outstretched hand, to ask for a piece of the pie. Life insurance companies, auto industry representatives, and almost anybody else who can cobble together a marginally credible claim in the wake of the financial meltdown have managed to find the funds to send lobbyists to Washington. These industries lost money on their investments, took bad lending risks, or both, and now they’re looking to the government to cushion the blow.
Not surprising … but is it ethical?
On one hand, there’s something to be said for the “why should our shareholders suffer when Wall Street is getting rescued?” argument. After all, other industries didn’t create the financial crisis, but they got caught in the fallout when the financial markets collapsed. They’re arguably more deserving of help than the financiers who caused the meltdown, and their lobbyists would probably consider it borderline malpractice not to ask for money if they have any chance of getting it.
On the other hand, the $700 billion wasn’t allocated as a “general corporate rescue fund.” It was set aside specifically to shore up the banking industry and (at least some of us hope) help desperate homeowners stay out of foreclosure. There’s already a question about whether $700 billion will be enough to accomplish those goals. If other industries start nibbling away at that money, the answer to that question will almost certainly be no.
Millions of Americans suffered major losses when the financial markets caved in. It wasn’t just wealthy folks with individual stock portfolios - anyone with money invested in a pension or 401(k) plan got clobbered. And most of those Americans are also taxpayers who contributed to the $700 billion bailout fund that corporations are fighting over now. Should they have to pay still more to keep corporate America from suffering the consequences of unfortunate financial decisions?
This isn’t an entirely simple issue. The corporations that are lobbying for bailout money employ millions of people, and if they fail because of the financial crisis it’ll put a lot of people out of work. But I have to question the ethics of industries that ask for money just because it’s there. A basic principle of economics is that investments pay a profit because they also involve a risk of loss. Corporations that choose to take investment risks shouldn’t assume they’re entitled to taxpayer money when those risks don’t pay off.
Topics: Business Ethics, Risk Management, Social Ethics, corporate responsibility, ethics |
November 10th, 2008 at 8:09 pm
I am surprised that you couldn’t come up with a definitive answer to this question, since the answer is quite simple. NO
Any government wealth transfer requires force or the threat of force. Tax money must be extracted from some people and transferred to other people. The force of government is used to take property from the people who have earned it and give it to people who have not earned it. Such an act is inherently unethical. If an individual did it, the act would properly be labeled as theft. But if the government does it, the act is merely called a bailout. The ethics of the matter do not change merely because some industry representatives ask the government to do the stealing for them. Theft is theft. A principal cannot relieve himself of ethical responsibility by asking his agent to do the stealing for him.