I read this excellent column bu Jay Hancock in this morning's Baltimore Sun.
I couldn't agree more.
If there is any overarching goal for President Barack Obama and Congress as they face economic and fiscal disaster, it should be to end the Age of the Deal.
Let's inaugurate the Age of the Sustainable Relationship.
Whether we're interacting with a banker, a CEO, a doctor, a car dealer or a politician, we need to be able to see him or her the morning after and agree it was good for both of us.
The Age of the Deal hit bottom when trillions in mortgages turned to poison for borrowers and lenders alike. The emphasis was on getting the loan, closing the sale, packaging the mortgage and signing the line, each of which generated huge fees and profits.
But nobody focused on what might happen later.
Business in this country seems to have been reduced to a series of exercises in paper-shifting financial gamesmanship. The cart of value extraction has been put before the horse of value creation. Too much of our energy has been spent on clever rent-seeking schemes (Enron being perhaps the best possible example) which has been crowding out capital.
Something needs to be done to fix the incentive structure within the community because it has grown dysfunctional. It has become the case that the incentives toward quick, short term growth as the expense of more sustainable growth have grown too strong and thus too tempting for executive actors to pass up. Their own paychecks depended on bigger and bigger bets, and if they got any short term gain out of it, that was money in their pockets, consequences down the road be damned. And whatever responsible entities were left standing were rendered vulnerable to being gobbled up by the paper empire builders with their castles of wealth built on little but air. When this behavior is repeated over and over again across entire firms and industries the emphasis on quick turnarounds and instant results drives a market culture that lacks a respect for sustainable profits and growth.
To make things more concrete, why be stuck in the boring old business of solid mortgages when there's so much more money to be made in the speculative mortgage market - as long as you can sell off the hot potato before the proverbial buzzer on it goes off? Especially if said hotshot speculators are going to buy you up and put you out of a job if you don't dig in?
Often the taxpayer ends up holding the bag when the "Big Deals" go belly up. While that's better from the standpoint of public utlity than having a "Panic of 18xx" every five years when someone figures out a new swindle, like what happened in those days that the market fundamentalists seem to pine for...it's still far from optimal.
We need to restore confidence and faith in our business sector. That means more disclosure, more oversight, more transparency and less of that "We can't disturb the wizards of finance for they are so much wiser than we are" type of thinking, on the part of politicians and pundits on both sides of the aisle, that got us into this mess.