Tim Sloan resigned as the CEO of Wells Fargo a few months ago.  I had briefly worked with Tim and much admired him so, on a personal level, this was sad.  Now, Mr. Sloan’s resignation might have been a compelling and obvious move in any crisis consultant’s playbook, so I get that – but – oh, the vilification!

This commentary is about the ease with which we now embrace vilification and the substitution of ad hominem attacks for policy discussion about ideas and about the danger this poses to capital market participants.

I started with Tim Sloan’s defenestration to illustrate how the playbook of the aggressive policy advocate these days apparently recommends the weaponization of the narrative; turbocharging criticism through the “discovery” of criminal behavior in those with whom we don’t agree or don’t like.  Take some facts, mix in a soupçon of supposition, stir in a hefty dose of obdurate ideological certainty, meander through the statute books looking for heretofore seemingly innocuous criminal statutes that could be repurposed in novel and unique ways, and shout loudly that doing or not doing something is certain to be the basis of criminal liability.  Think about the recent alleged violations of the Logan Act.  Really?  A piece of legislation that no one has ever tried to use in over a hundred years, written in the age of wigs and stockings (for that’s just for the guys) and designed to harass one lonely private American citizen in to France.  We’re dredging that up?  (No convictions to date, but hey, you can’t blame a pol for trying!).  Shame!  Shame!  Lock ‘em up!

We do seem to increasingly enjoy a public hanging, don’t we?  (As long as we are not the one being hanged.)  I’m afraid that our political culture has developed a taste for it, recapitulating scenes from the Coliseum of ancient Rome where plebes and patricians alike brayed for blood while tigers dined on Christians (perhaps I slander the noble Romans, but that’s how it’s done in the movies).  This sensibility is fertile ground for the criminalization of disagreement.

This retributive revelry around these falls from grace of those in the public and political crosshairs are mile markers, as it were, in a downward spiral where many with access to the public megaphone seem to blithely and unreflectively inject claims of criminality into policy disputes, alleging crimes where once we saw errors of judgment, or even a little modest venality.  This is largely new.

We, in the capital markets, top five finishers in any good populist list of fiends and disreputables, have to pay attention to all this.  Hard as it is to believe, given the past several years, the political class is not finished with us!  During this election cycle (which will never really end, will it?), and good heavens, when the inevitable recession finally occurs, we are all going to go back in the box.  And, let’s be absolutely clear here, we will be defined by our worst; and we all have our worsts (just ask the Pope).  No forgiveness, no balance.  Add an assertion of criminal liability to a narrative of misdeeds and the story takes flight, fascinating the media and the polity, disconnected from any possibility of a serious conversation, indeed obliterating any possibility of the balanced consideration of issues.  Cage matches to the death on everything.

The extended public flagellation of Mr. Sloan during his exit is an example of what happens when growing populist anger becomes supercharged by weaponized memes of criminalized behavior, behavior heretofore perhaps thought wrongheaded but surely not criminal.

At one time, it was only voices on the wild-haired left and right that panted about sending the bastards to jail every time something went wrong.  But now?  Now, it’s sneaking into the political center and is beginning to blot out intelligent conversation.

It’s getting worse and we cannot simply wish for an Edward R. Murrow-Senator McCarthy moment when our polity is jolted back to sweet reason and the clarity of common sense.

Here are just a few recent examples:

I’m glad Tim Sloan got canned, but let’s be clear, if he broke the law, he should go to jail…  By the way, getting fired shouldn’t be the end of the story for Tim Sloan.  He shouldn’t get a golden parachute.  He should be investigated…and if he’s guilty of any crimes, he should be put in jail like anyone else.  (Senator Warren)

Donald Trump may already be committing new crimes, (Vanity Fair, April 24, 2019)

 Impeachment of Trump Should Start (Maxine Waters)

 Lock ‘Er Up  (every Trump rally) 

 Indict Eric Holder (editorial, Investors Business Daily)

 Russia investigation ‘case closed,’ move on to probe Comey, Strzok (Graham)

 The list could go on and I’m not hard pressed to find samples from both sides of the aisle.

Remember the Duke Lacrosse players?  How about Senator Stevens?  Each was charged and each was both ultimately vindicated, but the damage was done, wasn’t it?

Recently, Senator Warren proposed legislation, with several co-sponsors, which would create a criminal cause of action against officers of a corporation for the negligent acts of the company….negligent!  The bill was captioned, without any apparent sense of irony, as the Corporate Executive Accountability Act.  Really?  Doesn’t that strike you as a tad Orwellian, certainly un-American, as the type of thing that autocratic states tend to embrace?  Most autocratic states have loads of laws. A lack of law is not the problem.  In fact, almost everything is pretty much illegal.  Professor John S. Baker writing in a Heritage Foundation article from June 2008 reported over 4450 federal crimes. God managed in 10 commandments; 4450 federal crimes, now that’s outstanding! (Although I’m worried I might have just committed one while sitting here.) If we are heading to a place where everything is a crime and where everyone can be a criminal, the rule of law is over.

It’s good to be King.

As with our good senators, many of the initiatives to broaden the notion of what’s a crime are couched in the oblique and discursive language of politics where, larded with expression of deep concern for justice and “fairness” of outcome, any excesses are justified.  We are increasingly turning the power of the state into an adjunct tool of polemists, agitators and politicians.  When Barry Goldwater said over 50 years ago, “Extremism in the defense of liberty is no vice.  Moderation of justice is no virtue” we had a sense at the time to think that was a pretty frightening thing to say (and God help us, we then elected Lyndon Baines Johnson), but it seems a large part of our polity these days is warming to Senator Goldwater on that score.

Meanwhile, closer to home, there are certainly issues, there are always issues, that serious people can talk about in serious ways regarding the performance of our banking and financial sector.  Should the banks have more capital?  Should they have less?  Is excess capital damaging capital formation?  Is it critical to protect our banking system?  How to reconcile CRA with prudential lending?  Does our banking system adequately serve all Americans?  Should the alternate lender market be more aggressively regulated?  Etc.?  But in the current environment, those conversations are getting increasingly hard to maintain.  Not to be overdramatic …, okay, I am being over dramatic, but remember that the French Revolution in 1790 was a bourgeois and relatively civil affair.  It was only later that people lost their minds and then their heads, including the unlamented Monsieur Robespierre, a leader ultimately no less autocratic than poor Louis XVI (less hair; same haircut).  There are plenty of other examples where virtues transmogrified into vice.  Moral certainty and ideological clarity coupled with the ability to exercise the unrestrained power of the state almost always leads to trouble.

I’m not seriously suggesting here that we’re heading for the edge of apocalypse (although we might be).  Plenty of room yet separating us from that place and plenty of opportunities to pull back and, heaven forfend, I’m not a pessimist.  But one can’t assume the populist fervor now directed at the financial sector (and other parts of our economy and polity) will burn out on its own.

Look, we’ve been under a Republican(ish) administration which has been pushing back on regulation for a while now and while largely that pruning of the Dodd-Frank kudzu plant is a good thing for capital formation and for business in general, the makings of an enormous and troubling backlash are present.  Many across the aisle are honestly aghast at the deregulation that has occurred. They are concerned that bad things happen too regularly in the banking and financial sector and that those bad things will hurt the folks. They are fixing to reverse all this when they are in power.  That’s all fine, elections have consequences, but with the braying for scalps which passes for political debate these days and the criminal weaponization of the narrative this becomes scary.  Was it AOC who said moderation is for sissies?  (If she didn’t, she could have.)  Moderation itself is now viewed in certain circles as an ethically and morally challenged position.  Take the toxic brew of the “lock ‘em up” culture, throw in populist anger from the right and left against all forms of the institutional architecture of our economy, add some notable excesses and instances of bad behavior to crystalize this sense of outrage (and there will always be bad apples), and we have a real problem.  Our increasingly large and powerful cadre of populist politicians with more than considerable faith in the ability of the state to do good, a certainty that its powers should be unleashed in righteous causes and a disinterest in the whole means and ends thing, and the outcomes are not likely to be pretty.

There’s nothing like feeling you’ve been injured to inoculate oneself against any remorse while enjoying retribution.

This is not about left and right; not about the “R”s versus the “D”s.  It’s about those parts of our polity that still defend moderation and recognize that there are two sides to almost all arguments, that understand that the middle is a place of honor, being overwhelmed by the fringes that share, frustratingly, a hostility towards moderation, and a hostility towards the institutional structure of our economy.  If the loony fringe prevails, a vast amount of damage to our economy will occur.

So denizens of the middle, defenders of the institutions of our extraordinarily well-functioning economy who naturally support the architecture upon which the economy is built, step up and defend it.  If we don’t fight the simplistic narratives of the Manichean world of good and evil, and fight the quick resorts of the “lock ‘em up” gang, we’re in trouble.  The good guys have to support compromise and support the infrastructure that has provided so much to so many.  When those constituencies sit on their hands, leaving the field to the looney ends of the bell curve, bad things happen.

And that’s fixing to be true.