Editor’s Note: The “V&V Q&A” is an e-publication from The Center for Vision & Values at Grove City College. In this latest edition, we interview Dr. Craig Columbus, co-author—along with Dr. Mark Hendrickson—of the new book, “God and Man on Wall Street: The Conscience of Capitalism,” which debuted at number two on Amazon.com among new releases in the Business Life category. Dr. Columbus is a fellow for entrepreneurship and innovation with The Center for Vision & Values. He is also the executive director of the entrepreneurship program and chair of the entrepreneurship department at Grove City College.
V&V: Dr. Columbus, why did you write this book?
Dr. Craig Columbus: The financial-scandal genre is a very crowded shelf. These books do a fine job of recounting Wall Street’s misdeeds. But no one had addressed the topic of fixing Wall Street in a balanced, post-partisan way. Financial reform can’t just be about punishment. It also has to be about possibilities.
V&V: What do you mean by “possibilities?”
Columbus: We can’t restore trust to the financial system by simply scaring Wall Street into better behavior through stepped up enforcement. Financial reform should also be an “up” idea, an optimistic and patriotic goal predicated on growing the pie. To do that, we have to also challenge Wall Street to improve itself from within by appealing to the industry’s better angels.
V&V: You realize many people have a hard time seeing Wall Street’s “better angels?”
Columbus: (Laughing) Yes, it can be a difficult concept to grasp. We spend much of the book taking Wall Street to task for its compensation and accounting practices. But we also thought it was important to do more than paint a superficial caricature of the financial sector, one that sees financial professionals as nothing more than modern-day robber barons and regulators as “asleep at the switch.” Neither popular portrayal is accurate.
V&V: Can you give me an example?
Columbus: We examine the period after the 9/11 attacks to demonstrate that Wall Street is capable of purposeful and patriotic conduct. The world got to see a very different side of the financial industry. It provided a glimpse into “working class” Wall Street—ordinary people, not fat cats, who behaved with tremendous honor.
V&V: So how would you “fix” Wall Street today?
Columbus: I think there are two very important reform elements. Firstly, we defend reasonable attempts to update the regulatory framework. At the darkest hour, 12 of the 13 largest banks in this country were likely insolvent. But regulation alone won’t solve Wall Street’s problems. We also need market-based solutions as well as the steadying hand of culture-shaping institutions like educational, civic, social, and faith communities.
V&V: That sounds very “Madisonian.”
Columbus: Precisely. Wall Street closed itself off from these influences during the last decade. Senior officers and directors took their eyes off culture and values. They narrowed their focus. All you needed to boost profits was a small band of fearless traders, a large balance sheet to support the leverage, and a risk model to convince regulators that you knew what you were doing.
V&V: What is the second piece of your reform agenda?
Columbus: Build on the foundation of a principled core. The financial services sector includes seven million Americans working in a great variety of capacities—the vast majority of whom never stopped playing by the rules. A new Wall Street/stewardship model begins with identifying those who behaved with honor and multiplying their influence. Learn who the heroes were. Celebrate them. Reward them. Place them in positions of power. Make character an essential leadership quality again.
V&V: Let’s assume you are correct about the presence of a principled industry core that stayed true to its values. How then did Wall Street go so astray?
Columbus: The financial sector, as a whole, missed the big picture. Over the last 20 years, finance has become increasingly specialized with workers operating in functional silos devoid of social or moral context. A much more global, consolidated, and electronic Wall Street severed interpersonal relationships and diluted accountability. These high-pressure, skills-based job functions became so specialized that it fostered a “heads down” attitude. Most thought that as long as they were personally living up to high moral and ethical standards in their own work, then that was enough.
However, the financial industry failed to recognize how sensitive the American economy had grown to its actions. Financial professionals are now part of a mosaic that forms the public trust, along with the likes of police, fire fighters, educators, elected officials, healthcare providers and clergy. Financial professionals have a stake not only in their own personal reputation but in Wall Street’s reputation, as well.
V&V: You write that William F. Buckley Jr.’s “God and Man at Yale” influenced your title. We’re big fans of that book. How did the title influence your title?
Columbus: In his 1951 polemic, Buckley sought to identify what he believed to be the root causes of Yale’s moral decay. He concluded that secular humanism did not challenge individuals to improve their behaviors. Wall Street also stopped challenging itself. It lost respect for absolute moral standards. Too many decisions were seen as gray areas subject to one’s own personal interpretation. And just like Mr. Buckley’s Yale, there was a classic failure of leadership on Wall Street.
V&V: That’s a great point. Some say capitalism, itself, failed. How do you and Mark Hendrickson answer that?
Columbus: We wrote this book because we need a new approach to financial reform. In a 2011 Pew Research Center Poll, a majority of Americans ages 18-29 held a more favorable view of socialism than capitalism! But the financial crisis wasn’t a failure of capitalism. It was an epic management, policy, and human failure. Wall Street needs a new operating system. But, we must also recognize that there is nothing better with which to replace capitalism. Each of the alternative economic models such as socialism has proven to be both ineffective and even more prone to corruption and abuse.
V&V: Very recently, well-known author and professor, Nassim Taleb, advised young people to stay out of the investment industry. What do you tell students?
Columbus: Many voices are steering young people away from the field of finance, though I think they are a major part of the solution. Wall Street needs their idealism. Young people are very eager to make a difference. They are increasingly attracted to situations that allow them to register an immediate impact. Think of the response of young Americans to Hurricane Katrina.
The financial sector, at this moment in time, offers its participants unique opportunities to both create and redeem, i.e., to heal a variety of harms. As I said earlier, real reform isn’t about settling for a financial system that is “less bad.” It’s about asking, how can we make the financial system better? It is an awakening.
— Dr. Craig Columbus is a fellow for entrepreneurship and innovation with The Center for Vision & Values and co-author of “God and Man on Wall Street: The Conscience of Capitalism.” He is also the executive director of the entrepreneurship program and chair of the entrepreneurship department at Grove City College.