Introduction
Banking is a major part of most modern nations. This is because they form as the point for an organized financial sector and allow for regulations to be applied and carried out. In spite of this, banks have been used as a tool for capitalism and the pursuit of personal interests and this has led to serious consequences for the economy. However, Parramore indicates that the idea of bailing out banks during financial crisis is a fraud on the taxpayers and this is akin to robbery. The purpose of this paper is to critically analyze the position of Parramore on this issue and evaluate it from the context of ethics and moral philosophy.
Basically, the argument is that banking is a private venture and a private activity. As such, bankers should be made to focus on their private ventures without gaining any support from government. This is because the financial crisis of the past decade were mainly due to moral hazards and inappropriate actions aimed at making profits. Most of these banks were involved in acts that were outside the normal scope of regulations at that time. Thus, going by the COSTCO code of ethics, they had to obey the law but they allowed greed to get the better part of them. And moreover, many of them went above board and used financial innovation to create products that they fraudulently sold to consumers who were told these products would bear profits for them. This often came at a time when the bankers knew or ought to have known that the financial products they were selling were worthless. These are fraudulent and by all standards, they were guilty of the actions they were accused of. Ultimately, there was a major crash and since the US economy is strongly tied to the banks, there was the need for the government to undertake some kind of bailout to rebuild the economy.
Looking at the situation from a deontological approach, it is clear and apparent that the law is straightforward towards deception. Therefore, deontology, which is based on Kant’s idea of absolute ethics and rigid rules which must be observed as a duty without regards to the possible ends. This means that from a deontological point of view, the bailouts should not have been granted and people who were involved in various forms of malpractices had to be punished in order to prevent these occurrences in future. Because the acts of most of the banks are thefts and they should have to be punished severely as a rule in the society we live in. These rules are necessary because there must be regulations and duties that all people in sensitive positions must be willing to obey. Any attempt to bend these rules are inappropriate and wrong to the society. Therefore, people who took part in all negative actions during the financial crisis have to be punished for their role.
The moral issue has to do with the greed of bankers. In an obviously capitalist society, it is generally accepted that anything that brings a high degree of profits which is not illegal can be pursued. However, in the case of the banks, they are in a privileged position and they can potentially abuse this position in return for the profit motive. Therefore, it can be argued that the bankers should be allowed to face the consequences of their actions. After all, there is a case to hold them to a strict liability because they take risks. And if the risks fail, there is the need for them to suffer from it. This is because if the risks payoff, they benefit and Parramore cites the example of Goldman Sachs which sold billions of worthless stocks to unsuspecting consumers who were convinced the stocks were worth it.
However, from a teleological perspective, it is impossible to pronounce the banks guilty. Teleology is defined as a system where the purpose or goal is put ahead of rigid rules in order to create the best end in a given moral dilemma. A teleological analysis of this situation relating to the banks comes with two perspectives. These can be analyzed to show that some degree of restraint is necessary in dealing with banks and their crisis.
The first teleological perspective is in the process of convicting people for an amoral conduct. This is because amoral conducts are generally not against the criminal justice system. This is usually the case until a law is made to render an amoral act as a crime. Therefore, the onus is on the lawmakers to ensure they regulate the banking sector and prevent irresponsible blend of the profit motive in banking with the legitimate art and science of pursuing the protection of people’s funds and resources in the banks. This therefore means that the banks just took up an opportunity and an irresponsible government did very little. Therefore, in a moral and ethical context, it can be said that as long as there are no laws, there is an opportunity for people to work within the relevant rules to achieve their goals and ends.
The second aspect of this situation is that banks are an essential part of the economy. They play a major role in keeping things going. Workers get paid through banks. Large transactions are done through banks. They have various roles and obligations to carry out the direction of the Federal Reserve and various state central banks to make the policies of the government achievable. Therefore, banks are vital and must function well. In line with this, when there are major failures and the economy is down, there is the need for bailouts to be given to the banks as a right. This is because without the bailouts, the economy will be a mess. Without the provision of injections and cuts, there is no hope for a financial recovery. Therefore, it is necessary for the United States government to make relevant bailouts when the time comes. And since there were no prior regulations, morality could not be used as a basis to jail people for their actions before the financial crisis. Therefore, a responsible government had no right to convict anyone. There was the need to give the bailouts and then focus on ways of applying lessons into the future.
In my opinion, I think an integrated approach of deontology and teleology must be applied to the banking sector and the issue of malpractices in the banking sector. There should be a clear separation of conventional banking from investment banking. Investment banking is what comes with the greed of bankers to make more money by selling financial products. These are prone to risks and error. Therefore, they should be separated and regulated with some of the strictest deontological ethics. A strict liability should be placed on a salesman and a professional who deceives clients and risks should be classified and people selling financial products must be monitored. This is because it is these elements of investment banking which causes the undervaluing of stocks and causes the financial sector to crush in the first place.
Conventional banking must be given the right monitoring within an appropriate scope. And this scope should include major trends and processes that causes society to achieve its goals and ends by way of what banking should do for the people. This way, people in positions will be given rules and regulations on what to do and what not to do. They will be monitored closely and their actions can be insured appropriately. With the rules and regulations, people can be made to face strict liability for their actions. Therefore, there could be strong regulations in order to prevent people from abusing their power and defrauding or robbing the taxpayer. When this precedent is instituted, there must be major actions and processes that will prevent people from abusing their roles in the banking sector. This will make it less likely for the failure of major banks. And where there are failures, people must be held accountable on the basis of the strict liability rules. The procedure will help to improve results of banks. And where there is an unlikely need for banks to be bailed out, it would have to be based on circumstances that were unforeseen and had not been abused by bankers.
In conclusion, the ethical dilemma of the bailout of banks is an issue of whether banks the bailout of bank is a robbery of taxpayers or not. From a deontological perspective, the bailouts are illegal and they support fraudulent acts of bankers. However, in the absence of criminal laws that rendered amoral conduct of bankers illegal and the essential role of banks in the economy, there was the need to bail out banks. Therefore, in the final analysis, it is recommended that investment banking should be separated from conventional banking. Investment banking must be regulated heavily and conventional bankers must be given strict liability. This way, the failure of banks will be reduced significantly and where they occur, bankers will be held accountable and punished for it.
References
Betzler, M. (2008). Kant's Ethics of Virtue. Amsterdam: Walter de Gruyter.
Gotthelf, A. (2011). Teleology, First Principles, and Scientific Method in Aristotle's Biology. New York: Oxford University Press.
Parramore, L. (2016, June 8). Stop Bankers From Robbing Taxpayers. Retrieved from Huffington Post: http://www.huffingtonpost.com/lynn-parramore/stop-bankers-from-robbing_b_10355202.html
