Along with a financial mess fix we need to understand

A U. S. Supreme Court decision in 1886 created a new class of people.

The case, Santa Clara County vs. Southern Pacific RR, was supposed to be about a county’s right to tax things such as fence posts installed by railroads. Its due-process decision, though, ended up setting off a string of legal decisions that firmly established corporations as persons — at least to the extent that they enjoy the same rights as individuals under the Constitution.

Corporations are not real persons, of course. That would be silly. They are different from the rest of us in one very particular and important way: They are immortal. In that sense, they are more like vampires than people.

You would think that immortality would imbue corporations with a deep sense of history. This seems to be the case with many of our fictional vampires, at least.

But for some reason corporations display just the opposite trait. For most corporate businesses history was earlier this morning or, at best, yesterday. The past has no real meaning. The interacting forces of economics and law created an irony worthy of classical Greek mythology: The gods give corporations immortality but take away their memory. They live forever, but only in a kind of overbearing time present that does not allow them to realize, let alone enjoy, their gift.

The memory-free nature of corporations is an unspoken, but important, factor in our economic recovery. The bailouts and rescues of corporations are deemed necessary by the federal government and welcomed by financial markets. They are viewed in a very different light by ordinary citizens … precisely because people have memories.

Deprived of any real memories themselves, banks and other corporations have difficulty relating to those who do. Certainly, they have no sense of how deeply their past behavior can be resented, and recalled, by real people. There is almost a kind of “Who, me?” innocence in their seeking taxpayer money to help them through their difficulties.

When the Big Three automakers first appeared before Congress seeking rescue money, for example, much was made of their chief executives arriving in Washington, D.C. by private jets. But that was simply icing on a cake that had been baking for some time. Long before the corporate airplanes landed, Congress had been hearing from large numbers of constituents who opposed any bailout for the automakers.

In fact, it is difficult to think of one corporation either seeking or receiving a bailout that has made a lot of friends among their millions of customers.

That is certainly true of the banks and many of their credit card operations. While there are exceptions, thankfully, for most it seems that the only history that counts is the part that can be used to raise fees and interest rates.

The nation’s credit card industry developed the subprime market model long before the home mortgage business had ever heard the term. As the market for installment credit became saturated, the search for profit growth pushed the industry to offer credit cards first to marginal customers and then even to those with a questionable ability to repay … ever.

It was the expansion of credit cards into this risk-laden market, and the consequent rise in delinquencies, that prompted banks to lobby so strongly, and ultimately successfully, for changes in our bankruptcy laws. These changes made it more difficult to erase credit card debt, including the cascading fees and interest charges that now routinely attach themselves to delinquent accounts.

The changes in our bankruptcy laws did not cause the recession, but they certainly contributed to it. By reducing the risk, the legal changes encouraged credit card lenders to extend credit into markets where it was almost certain to come to grief.

Since much of this high-risk debt was collateralized and sold into financial markets, just like the subprime mortgage rubbish, it is unlikely that we have heard the last of the credit card problem. In fact, one way or the other, given the current rules of inheritance these days, it will probably become our problem eventually.

It is not the job of Congress to deal with the sad fact that banks and automobile companies are unloved vampires. But legislators in Washington should be, and are, concerned with designing new regulations that will keep us out of the kind of financial mess we are in today. And the fact that the iconic corporations in our economy have no friends should be telling us something.

Congress, after getting elected, will now need the wisdom of Solomon to sort out how to reshape and restore our entire economy. Of course, it was Solomon who advised, “With all thy getting, get understanding.” That would be a good place to start.

James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.