There was a nice turn-out at Socrates Caf\u00e9 last Tuesday evening, with 11 people (including myself) ready for some thoughtful discussion. We had two new faces and nine veterans (or semi-veterans, in my case), and the topic dejure involved ethics and ethical conduct. Specifically, what are the ethics of responding to someone who irks you, who is creating a nuisance in your life. Just how far can you go in responding; just how much do you have to put up with before taking drastic actions to defend your turf and your peace of mind? Just how dramatic can you get?<\/p>\n
The group quickly developed three real-life scenarios based upon inconsiderate neighbors. One involved a neighbor who had ten wandering cats; another involved an unchained, unfenced German shepherd; the third involved an apartment parking lot where a rude tenant appropriated another tenant\u2019s space with his boat trailer. Too many people, unfortunately, just don\u2019t seem to care about the misery they impose on those around them. We shared stories regarding angst and frustration in dealing with such people, about how legal remedies and due process seemed to accomplish little when the perpetrator just wants to be obnoxious. So what should be done about such people, from a philosophical perspective regarding government, society and \u201cthe good life\u201d?<\/p>\n
Actually, we didn’t get into that. After some lamentations about chronically inconsiderate people, the discussion veered off into other areas of ethical concern. I tried to bring things back to the dog \/ cat \/ boat scenarios, making the point that one has to think about the collateral damage to the social network that might be caused by a vigorous response to anti-social behavior. I suggested that one could put out bad food or a chemical to make the dog or cat sick, or drill a hole in the bottom of the boat and fill it with chewing gum, so that water would gush in once the rude boater was out on open water. Or, as pondered early in the conversation, trap the cat or the dog and take them to the pound, where they would probably be “put down”. That would definitely get the message across; it would provide an appropriate “tit-for-tat”. But, it would also be uncivilized. Justice is one of the keystone principles of civilization; to act in a way that violates local notions of civilization (e.g., harming a pet animal that is not an immediate threat, or causing panic out on the waters) would eviscerate one’s own claim to the benefits of civilization. <\/p>\n
So, it would be best to just try to put up with the nuisance if you can’t abate it via legal means, to wait it out until it too passes That’s basically what everyone who had such experiences eventually did. They didn’t give in to the angry urge to put an abrupt end to the insult upon their dignity. And you gotta give them credit for that. If I were the person who found a boat in my parking space one afternoon, I’d be looking for a power drill and some Double-Bubble!<\/p>\n
As noted, the group lost interest in \u201cnuisance ethics\u201d before the first hour was up, and veered off into other ethical \/ moral concerns. I was somewhat surprised later on that no one segued the “how far can you go” question into the topic of capital punishment; instead, members pondered the case of children trying to avoid peer pressure from their friends in group shoplifting situations, and that never-ending ethical quandary, abortion. But before long, the group flew like a moth towards the candle flame of Goldman Sachs and Wall Street greed. Some people were indignant about what Goldman Sachs has recently been accused of by the S.E.C. (the sale of ABACUS mortgage-related “synthetic instruments” to the German IKB bank, while the Paulson hedge fund, which retained Goldman to create and sell these investments, successfully short-sold them without disclosure to IKB that the Paulson fund was involved in selecting the mortgages behind this “instrument”). Other Cafe members who had some investment advisory experience were a bit more circumspect about it.<\/p>\n
I made the point that the S.E.C. prosecution brought up the ethics of information disclosure in offering something for sale. Most of us would clearly not tolerate a lie or a deceptive representation in any sale situation. And we agreed that questions from a buyer should be answered honestly and thoroughly by the seller, even if that will drive the price down. But as to how much information need be volunteered even when not requested by a potential buyer . . . well, that takes us into the realm of “situational ethics” (one fellow briefly discussed such ethics, in a different context however). The same fellow made the point that you shouldn’t sell anything that would be unsafe in its expected use, when it could cause death or injury due to disrepair. E.g., a car with a leaky brake fluid system. At minimum, morals require disclosing something that could be fatal. But as to a rattle that might or might not eventually require a significant outlay for a transmission repair . . . well, that’s a tougher question.<\/p>\n
IMHO, once you get past the emotional indignation against “those Wall Street fat cats who ruined the economy and got saved by tax monies from we commoners, who are losing our jobs and houses; those bank executives who never stopped getting their million dollar bonuses despite their screw-ups”, I believe that the Goldman Sachs – ABACUS case becomes a tougher question too. The buyer, a big German bank that had significant experience in investing in American mortgage instruments, had plenty of resources to make its own conclusions about what they were buying from Goldman. <\/p>\n
IKB knew darn well (or darn well should have known) that SOMEONE was betting against the mortgages involved in the instrument in question; it’s the general nature of a “synthetic mortgage-backed obligation” that someone bets on the value of those mortgages to go up, and someone else bets that they will go down. They were told by Goldman that the mortgages referred to in the ABACUS instruments were selected by ACA Management, which like IKB invested “long” in them, hoping their value would go up. They weren’t told that Paulson, who bet on their price decrease, also had some say in the portfolio selection. <\/p>\n
Nonetheless, IKB knew just what mortgages were involved, and they had the chance to ask Goldman and ACA about the synthetic instruments (despite the S.E.C.’s allegation, various press reports indicate that ACA knew where Paulson stood; common sense says that if Paulson in fact HAD a significant say in the mortgage mix, ACA would HAVE to know where they were coming from). But IKB was satisfied by the fact that ACA was satisfied, and that it had put $951 million on the line. <\/p>\n
So forgive me if I’m not willing to cry any tears about what “nasty old” Goldman Sachs did to “poor little” IKB. These were big organizations and experienced traders and buyers, engaging in business as usual. One of the “financial market realists” in the Caf\u00e9 group made the point that big investment and risk transactions aren’t usually about morality and ethics; it’s generally accepted that when you invest in risky securities, you assume risk. Some of that risk stems from the fact that you don’t know everything there is to know about the investment; information costs money, and you only have so much money to invest in information. <\/p>\n
IKB obviously decided that it didn’t want to further invest in research regarding the underlying mortgages, or use its high-paid staff time to press Goldman for extensive details on the selection process for those mortgages. Goldman, for its part, wasn’t volunteering what the customer didn’t want. That slows down the transaction, and time is money. And Goldman is in business to make money. That is not a sin, for better and for worse.<\/p>\n
I’m not a Wall Street guy, but it seems to me that the S.E.C. is applying a new, higher ethical standard than what was expected by buyer and seller at the time of the ABACUS transaction. Perhaps this new standard will have social benefits, as it will promote more rational risk-taking by big corporations and investment entities. Fine. But new ethical standards are generally promulgated by legislation, not by suing someone for what they did under the old standards. That in itself doesn’t seem ethical, to me anyway. <\/p>\n
As one long-term member pointed out at the meeting, following my schpiel on SEC versus Sachs, the SEC is playing political catch-up, trying to redeem themselves in the public eye after their huge fall-down in the Bernie Madoff case (i.e., many press reports indicate that the SEC had warning of Madoff\u2019s hanky-panky<\/a> many years before the whole thing blew up in 2008). <\/p>\n So please excuse my lack of enthusiasm for the SEC now protecting the interest of a huge German bank, after letting down thousands of families and religious congregations and widows who lost all their savings because of Bernie. Politics are politics, I guess; politics and ethics often don\u2019t mix well, even in the age of \u201cyes we can\u201d.<\/p>\n So, another interesting night at Socrates Cafe; we started out pondering unwanted dog and cat droppings in one\u2019s backyard, and ended up pondering modern financial instruments that have been described by Goldman employees and by US Senators in scatological terms<\/a>. <\/p>\n Is that one of the not-quite-golden “threads of wisdom” behind ethics? Gee, I hope not!<\/p>\n","protected":false},"excerpt":{"rendered":" There was a nice turn-out at Socrates Caf\u00e9 last Tuesday evening, with 11 people (including myself) ready for some thoughtful discussion. We had two new faces and nine veterans (or semi-veterans, in my case), and the topic dejure involved ethics and ethical conduct. Specifically, what are the ethics of responding to someone who irks you, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"_links":{"self":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts\/1437"}],"collection":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1437"}],"version-history":[{"count":2,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts\/1437\/revisions"}],"predecessor-version":[{"id":1439,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts\/1437\/revisions\/1439"}],"wp:attachment":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1437"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1437"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1437"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}