Is the solution yet more government intervention, thereby shackling the invisible wise hand of the free market? Remember the government's track record. Here are a few examples in the financial arena:
- Fannie Mae and Freddie Mac, massive government-sponsored enterprises, now in financial disarray and under conservatorship. Fannie's stock price has crashed from 70 a year ago to 1.5 today. Freddie's has plummeted from 62 to 1.7.
- The Community Reinvestment Act, which encourages lending to underqualified borrowers in the name of "social justice" and thus helped cause America's current financial disaster.
- The Sarbanes-Oxley Act, which mandated that U.S. companies submit mountains of paperwork that cost companies and in turn consumers $1.4 trillion(!) without clear evidence of SOX providing even a small fraction of that amount in societal benefit. You can't legislate integrity; unethical people will always find a way to be dishonest.
- Requiring buyers of CDOs, CMOs,and CDSs to meet margin requirements, just as stock buyers are.
- Preventing conflicts of interest between credit rating agencies and issuers of CDOs, CMOs, and CDSs.
- Ensuring that the companies that write insurance on those securities keep enough capital on hand to make good on the policies they issue.
4. Periodic ethics training in the workplace. Just as annual sexual harassment workshops are required, annual ethics workshops should be. This training should focus on ethical stress points in that particular workplace: for example, whether a salesperson should voluntarily disclose a product’s weaknesses to potential customers.
5. 1-800-ETHICAL. Just as participants in Alcoholics Anonymous can call for counsel and support when tempted to take a drink, a government-paid-for hotline should be available for people, especially in the workplace, tempted to do something unethical.
As corporate America, government, indeed all of us should have done in the past, we need to eschew short-term profit for long-term, sturdy growth.