The current financial crisis and proposed bailout remind me of Jubilee, the Jewish ritual year described in the 25th chapter of Leviticus.
Jubilee occurred every 50 years, and it represented a sort of return to a financial Square One for the Jews: debts were forgiven, property that had been sold was returned to its original owner, and any Jew who had fallen into indentured servitude because of debt was released of his obligations.
In short, everyone got a fresh start every 50 years. Needless to say, it’s been a long time since this ancient ceremonial year was observed.
Except on Wall Street. Treasury secretary Paulson’s original bailout plan must have felt like Jubilee to the financial powers that have maneuvered themselves — and our country — into the current fiscal mess.
One difference, of course, is that the ancient Jewish financial system was regulated down to the finest detail, whereas ours has been increasingly de-regulated in service of the revered principle of the free market.
Another big difference is that Jubilee bailed out everyone, down to the lowliest slave. I suspect that the ordinary lower-middle-class worker who was beguiled beyond his means into a mortgage with a variable interest rate can expect little in the way of relief from the proposed bailout plan.
Still, the bailout may rescue our economy, which would be good for everyone. Then again, it may not. One disquieting aspect of the Great Crisis of 2008 is how little agreement economists can muster on what to do and whether or not governmental actions have any hope of success.
And when some respected economists are saying "Do nothing" and others are saying "Do everything … immediately," I don’t have a lot of light to shed on this complicated problem.
Except perhaps this: Any response to the crisis should include realistic caps on executive compensation for companies that benefit from a federal bailout.
I don’t feel a particular need to punish CEOs of financial firms whose imprudent practices have created this crisis. They may make more in a year — or a few weeks — than most Americans will make in multiple lifetimes of hard work, but their extravagance is only a grossly exaggerated version of a modern American principle in which many of us are complicit: get as much as you can, as quickly as you can, even if it’s on credit.
Furthermore, while executive compensation for the leaders of the failing companies amounts to hundreds of millions of dollars, it’s only a sideshow relative to the size of the larger crisis; it’s "window dressing," as one prominent pundit put it.
But one interesting element of the turmoil on Wall Street is that a good deal of what’s going on is psychological: greed and irrational hope for profit had a lot to do with creating the crisis to begin with. And overcoming fear, uncertainty, and skepticism will be important to its resolution. Trust and confidence are required.
So let’s take the psychological and symbolic step of severely limiting compensation to CEOs involved in the bailout, and connect their pay closely to performance, as we do, for example, with those two genuine American meritocracies, professional football and baseball.
A crisis like this calls for a new way of thinking about our essential financial principles, from the enormous national debt carried by the federal government to the unhealthy dependence on consumer credit that reaches down to ordinary Americans. Common sense says that things have to change, and the current crisis confirms it.
Capping executive compensation at realistic levels would be a concrete expression of a commitment to change, a symbolic demonstration of the necessity of a return to fiscal prudence at all levels.
(John M. Crisp teaches in the English Department at Del Mar College in Corpus Christi, Texas. E-mail him at jcrisp(at)delmar.edu.)