Apr 27, 2010

When taxpayer's money is engaged, accountability.

One more from French Economy and Finance Minister Christine Lagarde's interview on Morning Joe. Her comments stand in stark contrast with the shameless remarks of Goldman Sachs bigwigs before the Senate.

Asked about the French perspective on the American approach to the financial crisis, she advanced two operating principles: clarity and accountability. A couple of days ago, we heard her on clarity. Today, we hear what she said about accountability—particularly when taxpayer's money is, as she says, "engaged." Watch this, and pay special attention to her attitude.

"Those who make mistakes should pay for it," she said. Thank you, Mme. Lagarde.

French banks that received taxpayer engagement must pay back the money with interest. And bank executives who received "bonuses in excess of certain amounts," or "excessive compensation," must pay an extra tax (a 50% tax on any discretionary bonus above $39,000 in American money, according to the NYT).

What was special about Mme. Lagarde's attitude? Well, ... nothing. And that's what made it special. While speaking of a 50% tax on executive bonuses, she was perfectly relaxed—one could even say mundane. No defensiveness. No dilemma. No ducking. Just a simple, unremarkable two-pronged qualification, hedging against regarding the tax as "trivial" (perhaps a response to German Chancellor Angela Merkel's dismissing the idea as "charming") or "interventionist" (almost certainly referencing American anti-tax indignation).

Mme. Lagarde could say all this with no dilemma because she isn't an American. In particular, she isn't an American who embraces the "materialistic vision" (see my post "Why we Americans argue the way we do" for a fuller explanation of that phrase).

People who embrace the materialistic vision of the American Dream narrative believe in personal responsibility. They believe in accountability. But they also feel a visceral revulsion for taxes, especially those that they regard as punishing individual achievement that leads to financial success. In the context of the recent financial crisis, these two impulses are at odds.

For 30 years, the Reagan version of the materialistic vision dominated the American landscape. But it ran out of gas to account for and solve the problems of our era. It can't embrace real accountability with heart all in. That would require full-throated regulation of Wall Street's acquisitional impulse. That would prohibit the moral hazard of allowing arrogant traders to load their wallets with taxpayer-engaged largesse.

I like Mme. Lagarde's principles of clarity and accountability. And I like how easily accountability lives in her world without hand-wringing qualification or nauseating obfuscation. President Obama and the Congress would do well, it seems to me, to contrast Mme. Lagarde's principled accountability with Goldman's moral solipsism as they address financial reform.

Rings true to me. And you?

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