Banks Shirk Subprime Responsibility

ROGUES IN ORBIT: Clockwise from top left, Morgan Stanley’s John Mack; James Cayne, formerly of Bear Stearns; Chrysler’s Bob Nardelli; ex-Citigroup C.E.O. Chuck Prince.

Image: Gluekit

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Not since Ward and June Cleaver looked after the Beaver have we enjoyed such a feast of responsibility. When New Century Financial, a purveyor of disastrous subprime mortgages, failed to deliver hundreds of thousands of documents to a court-appointed bankruptcy examiner, the company accepted "full responsibility" in a filing with the court. The now-former chairman of British bank Northern Rock told the Times of London that his board of directors takes "full responsibility" for going belly-up. And IndyMac, an American provider of toxic mortgages, "could have done some things differently," according to its C.E.O., who said, "I take full responsibility for this." (View an interactive feature that calculates how much shareholders are due back.)

Full responsibility is one thing. Consequences are another.

We have reached escape velocity and launched into the No-Consequences Economy. To pause for a moment of overgeneralization: America used to be about exceptionalism and optimism, a place where anybody could try anything and make it work. Across the business and political spectrum, it's now about entitlement, where everyone deserves a shot but no one gets blamed for screwing it up. Stuff happens, as Donald Rumsfeld said, referring to another affair with no consequences for the architects. (Read more about the consequences of no consequences.)

When Bob Nardelli said in September 2006 that he took "full responsibility" for manhandling Home Depot, how was he to know that he'd be kicked out four months later with an extra $210 million in the bank? Or that he'd end up at the wheel of an American icon, Chrysler? Merrill Lynch's Stan O'Neal, who also mouthed the responsibility platitude, received $160 million when he was dumped after billions of dollars of bets went bad and word leaked out that he had toyed with selling the company without talking to his board.

Other disgraced Wall Street executives are hot commodities in the job market, valued for their perceived ability to walk through fire and survive. Private equity firms are turning away from deals signed mere months before. J.C. Flowers & Co. even managed to leave Sallie Mae at the altar and not pay the contractually negotiated breakup fee. Housing-industry shills who championed a rising market are keeping their jobs. Banks that made disastrous loans are cutting in line to borrow at below-market rates from the Federal Reserve. "It's amazing, the lack of shame," says Lawrence Mitchell, a George Washington University professor and author of The Speculation Economy: How Finance Triumphed Over Industry. "The guys on Wall Street claim they believe in free markets and are entitled to enormous compensation because of their risk taking. But when they lose, do they say to themselves, 'I'm going to take my losses'? No, they go running to Uncle Ben"—Ben Bernanke, the Federal Reserve chairman—"and he, in a grotesquely irresponsible move, bails them out."

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