The Necessity of Blame

The search for someone to blame is always successful -- Robert Half

Blame Game for Financial Crisis

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Blame is EASY. Especially in a situation as grave as our nation is facing right now. I say this because I'm overwhelmed by the pervasiveness of blame in the process. Congressional hearings where the only bipartisan action is finding someone, other than Congress, to blame for our financial crisis. Investment banks crying afoul of short-sellers. Homeowners blaming predatory lenders for making it too easy to overextend themselves. People decrying future tax burdens because their neighbors took out huge mortgages with low teaser rates. Debt holders blaming the ratings agencies for rating things AAA when they were Toxic FFF. And so on and so on...

BUT IS THERE A POINT? Is BLAME productive?

When I was in college, I was involved in a car accident. I was in the back seat of my friend's beaten down clunker; and we were driving on the shoulder with our hazards on trying to get off the turnpike and find a hotel for the night since there were no mechanics open at that hour. It was a cloudy, rainy night and unbeknownst to us there was an 18-wheeler coming up behind us. The driver of that 18-wheeler was dozing off. Long story short, the 18-wheeler slammed into the back of the car and I woke up in an ambulance, unsure of what happened. I learned during that process the concept of COMPARATIVE NEGLIGENCE. Essentially the courts try to determine who to blame, and assign a percentage of blame to each participant. I was apparently 10% to blame; for failing to have a seatbelt on [despite it being legal since I was in the back seat]. The truck driver was 60% to blame; apparently falling asleep at the wheel and slamming into another vehicle works that way. And my buddy, the driver, picked up the rest of the blame for being on the road in a broken down car rather than stopping and awaiting emergency service. The courts used the percentages to determine the amount of damages awarded to the injured parties.

While comparative negligence may work for disability tort litigation, it has absolutely no place in stemming the tide of this financial crisis. If we're really on the precipice, as the Treasury Secretary, Fed Chairman and even the Oracle of Omaha believe, isn't assigning blame right now a suboptimal way of spending our time?

Howard Lindzon said, "I am not a fan of witchhunts, but they generally get shit done." His point is well taken, even if I wish it weren't.

Sometimes there are legitimate reasons for assigning blame, for figuring out WHOSE FAULT IT IS. But there will be time for that later. Our country is facing the most severe financial crisis since the Great Depression and there are no easy answers. Paulson and Bernanke haven't done a credible job of articulating the losers in this crisis. Yes, Wall Street stands to lose jobs and a lot of wealth. But Main Street stands to lose much more. The inability for small businesses to stock shelves and make payroll because lines of credit are drying up. The inability to refinance mortgages. Students unable to pay for tuition because student loan programs have evaporated. Retirees unable to pay their bills because their portfolios are pressured. We are already in recession territory, how many of us truly understand what it would mean to be in a Depression? Are we really prepared for double digit unemployment? Unfunded pensions? Municipal bankruptcies? Further devaluation of our currency? Reflation?

If not, we all need to get past our personal biases, our anger, and our desire for a pound of flesh. Can we do it? Or will we worry about making sure those most culpable aren't disproportionately benefited by a bail out effort? You decide.

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Comments

[Josh Neumann]

I completely agree, just about everybody I know it seems blames their lack of success in life on somebody else, and very few peopele take responsibility for their lives anymore.

We've become a country of whiners, where everything that happens to us is always someobdy else's fault. Thanks for the post, keep bringing these issues to light.

[Jason Wood]

David,

I don't entirely agree. Assigning blame is easy, actually ferreting out those legitimately culpable is entirely another. But when the entirety of the ecosystem has their hands in the proverbial cookie jar, I'm unclear as to how it doesn't become a secondary issue.

[David Merkel, Alephblog.com]

Blame exists to deter repeating the problem. If the problem can't be repeated, blame isn't useful; if the problem can be repeated, it is useful, because you are halfway to a solution.

[Jason Wood]

Vinnie, you're right of course. It's the old 'do as I say, not as I do' and it's become systemic in our country [and others to be fair].

[vinnie mirchandani]

Great analogy about apportioning who's at fault

We have unfortunately created a system where it's ok to negotiate down to 10% of your IRS past due taxes, it's easy to run up credit card balances and negotiate them down, it's easy to buy 2nd and 3rd houses when you can barely afford the first. The penalty of doing so is too light for the borrower and the lender.

The average citizen is upset because they see over and again irresponsible borrowers and lenders get bailed out and they - as taxpayer - picks up the tab.

What's the incentive to staying honest when all around you everyone appears to not be?