Of Free Speech and Insensitivity Training

There is a poignant scene in “Lawrence of Arabia”, a movie with many poignant scenes, in which Lawrence demonstrates to a fellow officer how to snuff out a candle. He pinches the flame with his fingers. The other officer gives it a try but jerks back his hand when his fingers are scorched.

“That hurts,” the officer complains. Lawrence replies, “Certainly it hurts. The trick is not minding that it hurts.”

There is a lesson there, particularly important for a society that has become hypersensitive to injury, real or imagined. Hurt may come from something as small as a look—or failure to look. It may come from an article of clothing, either worn or neglected. Lately flags have been targeted as sources of personal and even societal pain. Hurt may come from something as small as a word. Indeed, I think that most often today and in our society, both words and our sensitivity to words have become sharpened.

If we are to preserve freedom of speech—in all its important varieties—we need to develop some insensitivity, as in not minding when it hurts. Freedom of speech only matters when someone hears something he does not like. The choice then is intolerance and silence or freedom and not minding the hurt.

Another way to look at it is that we most desire freedom of speech when we are the speaker. From the point of view of listener, we may have mixed emotions. We may like what we say, but when we do not like what we hear do we wish to silence the speaker, or do we accept the options of free speech, to turn away or to endure another’s unpleasant rodomontade?

Freedom of speech was made part of the First Amendment, because rulers and monarchs were at pains to inflict genuine physical hurt whenever they took offense at the words of their subjects. The First Amendment’s protection of free speech was needed to protect people using words that hurt people in government, that offended people in power.

Even though enshrined in the Constitution, freedom of speech has to be won by each generation, because it is constantly in jeopardy. Americans are nearly unanimous in their support of freedom of speech when it is speech that they like, speech that reinforces their own views, and especially speech that praises and flatters. We do not particularly need the Constitution to protect that kind of speech. Speech that is unpopular, speech that goes against the grain, speech that is obnoxious to our opinions, speech that challenges our beliefs, that is the speech the Founders fought to protect. Most of human progress has come from that kind of speech. It is speech that is worth protecting today and that many try to silence.

President Obama and his political friends are fond of declaring that “the debate is over,” whether referring to Obamacare, the Dodd-Frank Act, climate change, same-sex marriage, or other important issues of significant disagreement. I expect that soon we will hear President Obama, Secretary of State Kerry, and other administration spokesmen insist that the debate is over with regard to the nuclear deal with Iran. In a free republic, can the debate ever really be over?

This is nothing new; it is a continuation of a very old struggle. Despots great and petty since early ages have exercised what power they might to silence ideas and expressions they did not want to hear, or did not want others to hear. The gallows, flames, and torture chambers of yesteryear are matched today by bullets, bombs, and bayonets from radical Islam and totalitarian governments. In the West, where constitutions solemnly embrace free speech, voices are silenced by public ridicule, elaborate and intrusive regulations on what can and cannot be said and when and where—reinforced by government fines, restrictions, confiscations, and jail time.

I recently visited my son at his new job at a large factory. He was very careful to spell out to me a lengthy list of subjects I should not bring up, whether from fear of his colleagues, company policies, or federal, state, and local regulations. I have been given similar training at my place of work.

When I was young I was taught to be courteous and not seek to offend. I was also taught to be slow to take offence. Do children today repeat the rhyme I heard as a child? “Sticks and stones may break my bones, but names can never hurt me.” I wonder. Or are our children taught today that there is great reward in being the sensitized “victim” of someone else’s “offensive” words? Where do we find freedom in that?

Of Banks and Over Taxed Regulators

Banks, who needs them? A quick question and a quick answer: a thriving, prospering banking system is essential for a thriving, prospering modern economy. Banks bring together the resources of savers and the needs of borrowers, particularly borrowers who seek funds to establish or expand businesses or families and individuals who use occasional borrowing to smooth out their income (good banking principles penalize people who would borrow in order to live beyond their means, but more on that at another time).

Banks also created and maintain the payments system, the means by which money is transferred quickly and accurately throughout the nation and even internationally. Bank services include as well a variety of wealth management tools by which individuals, families, businesses, and governments can store, grow, and make best use of their financial wealth.

Without banks, almost none of these services would be available. Many non-banks provide bank-like services, but they all come to find the need to rest their own services at some point on a bank.

Banking in the United States has grown with the nation, from very simple institutions in the eighteenth and early nineteenth centuries, to a wide variety of bank types, charters, and business models, as diverse as the financial demands of the customers of the largest and most diverse economy in the world. I once presented at a meeting in Chicago a list of about two-dozen different types of banks in the United States. We have national banks, state chartered banks, small community banks, larger regional banks, and very large banks with extensive national and international business products and services. All of these operate and compete together, with a body of customers behind each one who think that their bank offers the best available choice of services that they want. No other nation in the world has a banking industry like ours.

The recent recession and financial panic—and the inevitable politicizing of finance that came in its wake—have thrown much into confusion and imposed upon sound and prudent bank supervision harmful ideas born of reckless sloganeering and hubristic financial engineering. The complexity of banking—no more complex than information technology, communications systems, or modern manufacturing—has been superseded by even more complex bank regulation.

The rules governing banking are too much and too many to function reasonably. They have become more than the very human people in the multitude of bank regulatory agencies can manage. The disciplining role of markets and the valuable service of banker judgment have in large measure been replaced by bureaucratic procedures and the judgments of government officials. These officials have had little if any practical experience making loans, taking deposits and putting them to work, building financial wealth, or otherwise providing products to customers. Government officials cannot run businesses. Now, their government jobs have become so demanding and complex, that they will not be able to do their own jobs, either. Too much has been placed upon them.

Those most harmed by all of this are bank customers. For the moment, bank profits are up, but that is because their losses are down as they recover from the recession, not because services to customers are expanding. As a result of government interest rate policies, depositors earn almost nothing on the money that they place in banks. The expanding oversight involvement of bank regulators makes it dangerous for banks to offer new services to customers; the risk of breaking any of thousands of pages of regulations has become too great. It takes almost half an hour to open a new bank account, something that used to take minutes. Fewer credit-worthy borrowers today qualify for mortgages than just a year ago, before new regulations went into effect. The number of banks has been declining in recent years, dropping at the rate of nearly one for every business day, week in and week out. Only one new bank has been opened since 2010. We have fewer banks today than the nation had in 1893. A stagnant industry is less able to evolve to meet changing customer needs and preferences.

For the good of all of us who rely upon banking services, and for the sanity of financial regulators, we need to return to the principles of good banking. We need to restore a system of supervision that is measured, not by how much banker judgment it takes over, but by how it adds value to the ability of banks to serve customers. Government agencies—and the laws that they administer—that are derived from a founding document that begins with the words, “We the People,” should do nothing less, and nothing more.

On another day I would like to share some thoughts about how banks are being goaded to become their own enemies.