Richard W. Painter, professor of corporate law at University of Minnesota Law School, has posted The Moral Responsibilities of Investment Bankers. In it, he explores the need for greater moral consciousness in the banking world.
An array of parties share responsibility for the 2008 crisis. Among these are not only the commercial banks, investment banks, and insurers whose investments proved so resoundingly disastrous, but individual decision makers within those institutions.
Professor Painter asserts that government regulation alone will not avert future crises—not without a simultaneous focus on individual ethics and morality in the investing profession that goes beyond bare legal obligation. While Painter posits that a variety of faiths and secular moral teaching may contribute to this discussion, he particularly emphasizes Catholic social thought.
Painter cites papal encyclicals, from Leo XIII’s Rerum Novarum (1891) to Benedict XVI’s Caritas in Veritate (2009). Altogether, they teach that the pursuit of individual economic gain occurs in a wider human community whose welfare must always be regarded as the end of that activity.
Please read the abstract after the jump:
This paper, presented as the annual law review lecture at St. Thomas University Law School, explores the moral obligations of investment bankers in light of the 2008 financial crisis. Topics such as disclosure to investors, the safety and soundness of investment banks, excessive risk taking, responsible use of derivative instruments, and banks’ responsibility to the community and to the financial system as a whole are discussed as issues of personal responsibility for investment bankers rather than only as subject matter for regulation directed at banking institutions. The particular perspective discussed in depth is grounded in Christian social teaching but the paper also offers insights on how the moral responsibility of investment bankers can and should be approached from a range of religious and secular philosophical perspectives.
—DRS, CLR Fellow