We don’t need a financial bailout; we need an ethical bailout.
The stranger, a Western businessman, slipped into the chair next tome at an Asia Society lunch here in Hong Kong and asked me a questionthat I can honestly say I’ve never been asked before: “So, just howcorrupt is America?”
His question was occasioned by the arrest of the Wall Street moneymanager Bernard Madoff on charges of running a Ponzi scheme that bilkedinvestors out of billions of dollars, but it wasn’t only that. It’s thewhole bloody mess coming out of Wall Street – the financial center thatHong Kong moneymen had always looked up to. How could it be, theywonder, that such brand names as Bear Stearns, Lehman Brothers and AIGcould turn out to have such feet of clay? Where, they wonder, was ourSecurities and Exchange Commission and the high standards that we hadpreached to them all these years?
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What do you call giving a worker who makes only $14,000 a year anothing-down and nothing-to-pay-for-two-years mortgage to buy a$750,000 home, and then bundling that mortgage with 100 others intobonds – which Moody’s or Standard & Poors rate AAA – and thenselling them to banks and pension funds the world over? That is whatour financial industry was doing. If that isn’t a pyramid scheme,what is?
Far from being built on best practices, this legal Ponzi scheme wasbuilt on the mortgage brokers, bond bundlers, rating agencies, bondsellers and homeowners all working on the I.B.G. principle: “I’ll begone” when the payments come due or the mortgage has to be renegotiated.
It is both eye-opening and depressing to look at our banking crisisfrom China. It is eye-opening because it is hard to avoid theconclusion that the U.S. and China are becoming two countries,one system.