Ethics Newsline®

At issue: Acceptable level of freedom in free markets, clamping down on executive compensation, and whether it’s ethical to profit from short selling

NEW YORK and LONDON
Ethics angles on the U.S. economic crisis were at the top of the news last week as the U.S. Congress repeatedly failed to pass the proposed $700 billion bailout of Wall Street. Among the stories:

• The chairman of the U.S. Securities and Exchange Commission, who had been a vocal advocate of financial deregulation, last week said that the voluntary supervision program for Wall Street banks had not worked and had in fact contributed to the global financial crisis. According to the New York Times, Christopher Cox conceded that the program, which allowed investment banks to opt out of oversight, was “fundamentally flawed.” Cox has now shut down the program. The decision, the Times notes, is largely academic because the major independent Wall Street firms have virtually disappeared in the current collapse, and under reformatted structures will be regulated by the Treasury.
• While U.S. lawmakers are insisting that Wall Street moguls take part of the same financial hit as taxpayers in the proposed $700 billion bailout, Reuters reports that experts interviewed by the world press differ on whether that will become a reality. One analyst notes that compensation has soared in recent decades despite several attempts to curb it, pointing to a measure enacted by Bill Clinton that imposed tax penalties on high corporate pay, but which also inadvertently opened the door to massive stock option perks. But another Reuters analysis counters that because the reorganization of investment banks will force them to take more conservative strategies, compensation is likely to be reined in as well.
• The BBC reports that the Church of England may rethink its rules on investment of church funds after the archbishop of Canterbury condemned the practice of short selling. According to the report, the BBC might add short selling, a financial manipulation in which shares are borrowed and sold on speculation that they will lose money, to its list of other prohibited investments, such as companies that are involved in tobacco, arms, or pornography.

Sources: New York Times, Sep. 26 — BBC, Sep. 26 — Reuters, Sep. 26.

For more information, see: Related Newsline story, Sep. 22 — Related Newsline story, Sep. 8 — Related Newsline story, Aug. 25 — Related Newsline story, Aug. 11 — Related Newsline story, July 7.