Horning into ethical dilemmas.

• Author: Gearino, G.D.
• Position: FINEPRINT

In mid-December, as Christmas 2010 loomed and the values of the season were on full display, The Charlotte Observer intruded upon the happy jingle of the cash register to pose a bona fide spiritual conversation starter. Is it time, the Observer asked, for the banking industry to stop focusing exclusively on what's legal and start thinking about what's moral and ethical? That's a fine question, actually, and a treacherous one, too. Any conversation starting with that query can spin off into all kinds of uncomfortable directions with the smallest of nudges. Naturally, I'm the man to give it one.

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In one sense, the Observer's question--framed this way: How do Charlotte's many church-going, God-fearing banking executives square their faith with their industry's recent business practices?--was rhetorical. The answer is, they can't. Jesus had very well-articulated views about wealth, lending and money-changers. None were favorable. Instead, what the Observer seemed to want to know is whether North Carolina's bankers now have second thoughts about such things as the aggressive promotion of mortgage loans that required little income verification and the subsequent bundling of those loans into securities whose radioactivity eventually caused a financial market meltdown. Again, the answer is obvious: Sure, who wouldn't now have second thoughts?

But before we wander off in other directions, there are two points to be made. First, remember that law and regulation have a way of crowding out ethical considerations. Rules tend to replace values. Take the federal tax code for example: Citizens have an ethical responsibility to pay their taxes, but the size and detail of the tax code practically demands that you game the system to your advantage. The banking and securities industry is subject to much regulation, but those rules are largely designed to foster transparency and equal access to information. Within the rules, competition, even ruthlessness, is encouraged. Second, remember that ethics in banking tend to be situational rather than fundamental. If there had been no real-estate crash, or had it been much less dramatic, would those subprime loans and mortgage-backed securities still have been ethically questionable? If both borrower and lender come out of a liar's loan transaction OK, is there still an ethical lapse?

Yeah, I know: This is all theoretical and argumentative. It's like debating whether the running of a red light in...