Monday, April 5, 2010

Sisters of Charity

Sisters of Charity of Saint Elizabeth, Missionary Oblates of Mary Immaculate, and 13 other religious organizations are trying to get Goldman Sachs, JPMorgan, Citigroup Inc. and Bank of America Corp. to make public more information on the collateral used in their derivatives trading.

Father Seamus Finn, of Missionary Oblates, said in a statement: "The use of these instruments, if they’re not disclosed by the dealers and the information made available, by their very nature can contribute to systemic risk.”

The proxy votes for the different groups are being co-ordinated by the Interfaith Center on Corporate Responsibility (ICCR), whose executive director is Laura Berry. A Bloomberg story last week quoted Ms Berry saying: "The immorality of the financial crisis is rooted in the fact that these derivatives contracts weren’t based on creating value and didn’t create incentives for people to keep their promises."

Frankly, my own belief is that the immorality of the financial crisis (or just its imprudence for that matter) are alike grounded in the inability of the government to maintain a hard money policy. The government's continuous resort to easy money, the forcing of more credit upon the economy than it can productively use at a given moment, necessarily leads to bubbles and to nasty bursts thereof. But I don't know if the managers of these banks will say that, or anything like that, if they resist the ICCR's proposed resolutions in a proxy campaign.

When I saw the name of Father Finn's organization in a story about this proxy campaign, I scratched my head a bit. What's an "oblate"? Well, in ecclesiastical history the word has had a variety of meanings. I won't bore you with that but will refer you to wikipedia.

In geometry, the term refers to a sort of spheroid that is not perfectly spherical, but flattened. The distance from pole to pole is less than the diameter. The planet earth is, roughly speaking, an oblate.

This fact brings us back to my reflection on monetary policy. Addressing the use of derivatives on a company-by-company basis seems to me a matter of treating the "immorality of the financial crisis" as a local topographical feature of the planet, rather than (more accuartely) treating it as a systemic characteristic, akin to the planet's oblate shape.

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