During especially the last two years news reports have been making us aware of the ever increasing number of big businesses, some of them with long established reputations for producing dependable products, that have been bought by new owners or are threatened with what are sometimes called hostile “takeovers.” This process suddenly got general attention throughout the news media when the government announced its court action against Mr. Ivan Boesky, fining him a $100 million penalty and banishing him from the stock market. Time magazine on December 1 devoted an illuminating nine-page article by George Russel to what it called the “enormous scandal . . . spreading at the core of America’s investment community, touching some of the biggest moneymen in the country.” The article’s title was “Going after the Crooks” and its subtitle read, “As Ivan sings, traders quake and investors weep.” Such a report could arouse anyone’s curiosity. What is creating this sensation throughout the business world?
The Boesky case as analyzed in the article shows how “Wall Street high rollers had been ripping off millions of dollars by trading on knowledge not available to the general public.” The case of’Mr. Boesky was leading tp the government investigation of many other financial leaders including, according to the article, “some of the biggest names in the corporate-takeover business.” The report highlighted the role of what are called “junk bonds,” “the high-interest but risky investment vehicle that has provided much of the financing for the stock market’s takeover frenzy.”
Although Mr. Boesky had gotten into trouble for contracting fur illegal inside information, one banker observed that “I have great trouble in knowing the difference between insider information and a very fine research report.” In other words, the difference between illegal information and the shrewd knowledge of the market that any legitimate investor seeks are evidently not always clear-cut. It is becoming apparent to the public that the small investor cannot begin to compete with the large well-informed traders who have power to influence as well as gauge the market, and the number of small individual investors in stock has been “steadily shrinking.”
Even where an attempted takeover is not successful, a company, in order to resist the hostile effort to buy it out, may have to spend enormous sums of money to repurchase enough of its stock needed to maintain its control. The article mentions such an unsuccessful 2 1/2-week effort to buy Goodyear Tire and Rubber which netted the raiders $93 million profit. A congresswoman, commenting on the disastrous results of such corporate raiding, was quoted as saying that, “profitable companies are being driven into debt, American jobs lost, and American businesses are being taken overseas, all so that a few enormously wealthy individuals can add to their personal fortunes.”
“As news of these abuses is coming to public attention, pressure is rising for the congress to take legal action against them. That, the article observes, is not as simple as it might seem. When a business becomes inefficient and unproductive discontented stockholders may need the freedom‘ to oust the incompetent management by an attempt to take it over. Perhaps the most perceptive comment on this matter was that of “an eminent Washington securities lawyer”: “The millions and millions that are made out of non-productive deal making represent the collapse of real morality in our markets.” In trying to better understand what has been happening we perhaps ought to begin by observing that there is nothing inherently wrong in buying and owning stock in the companies that comprise our business world. The capital with which our factories are built and operated usually has to be obtained at least partly by organizing a corporation and selling stock to share their ownership among many investors. When, however, today’s corporate raiders are buying and selling companies with no interest or concern in their productive operation, but only to make a last and unearned profit on the transactions, it is obvious that the stock market is being misused as a tool for theft on an enormous scale. (We may recall the Heidelberg Catechism’s explanation of the eighth commandment, that God “forbids not only outright theft and robbery, punishable by law. But in God’s sight theft also includes cheating and swindling our neighbor by schemes made to appear legitimate . . .” And it ought not to be overlooked that the evil so sensationally apparent in the case of the stock market is not restricted to the relatively few large and powerful investors, but becomes increasingly evident all through our business world. One can hardly buy any kind of merchandise without encountering some extra incentive to take a chance on some kind of “sweepstakes.” And the governments, instead of trying to curb the abuses, are getting in on the act on a massive scale by pushing tickets for their own lotteries. Everywhere the idea is being promoted that it is smart to get ahead not by hard work but by tricky dealing, legal or illegal. When Christians get carried away with these popular vices, they are not exonerated from their consequences, as God’s prophets and apostles always had to warn us. Judgment and correction has to begin at home, (1 Peter 4:17; Mt. 7:3–5; Lk. 6:41f,). Herber Schlossberg’s remarkable 1983 book, Idols for Destruction (May 1985 Outlook), citing Hosea 8:4, “they made idols for their own destruction,” called attention to the way whatever people idolize becomes the means God uses to judge and punish them. This stock market scandal reveals exactly the kind of judgment God is visiting upon us by means of one of our most popular idols. In it organized greed is destroying our national industries and economy.
What can be done about it? It appears that the government will have to take some corrective measures. Although such corrective action has been restrained by the notion that “the free market will correct itself,” that does not seem to have been happening. The Apostle Paul reminded us that God in His providence has given us government as “God’s servant to do you good” and “an agent of justice to bring punishment on the wrongdoer” (Rom. 13:4). We recall that in His laws for His people in the Old Testament (Lev. 25,27) God curbed the unlimited accumulation of property by the few by requiring the return of lands to the families of their original owners each 50th year. Isn’t such government interference with the free market “socialism?” It is not. Socialism promotes government ownership instead of government checks on the abuses of private ownership. In doing that, socialism robs us of proper government protection against the greed and incompetence of its own officials. The current scandal may call for some government corrective measures.
Legal remedies, while they may, in God’s mercy, to some extent restrain evils, do not really eliminate them, because they cannot eliminate their causes. God’s word shows us that God’s judgments on and even through such evils (Romans 1:18ff.) show in all kinds of ways the need for the saving and transforming work of the gospel of Christ in our hearts and lives, including even the· way we handle our money. Paul, applying that gospel, wrote (Eph. 4:28) “He who has been stealing, must steal no longer, but must work, doing something useful with his own hands, that he may have something to share with those in need.” The genuine transformation brought about by that gospel was demonstrated in an especially dramatic way in the change in the life of Zacchaeus, the rich publican (Lk. 19:1–10). When that notorious financial manipulator announced, “Here and now I give half of my possessions to the poor, and if I have cheated anybody out of anything, I will pay back four times the amount,” the Lord said, “Today salvation has come to this house . . . For the Son of Man came to seek and to save what was lost.”
PDJ