Regardless of the investment merits of Facebook ( I personally think there were none), I find it stunningly contradictory that our culture teaches fair play yet rewards just the opposite. For example, the institutional investors that got the early call that Facebook’s revenue growth had shortcomings were big customers that showered Morgan Stanley with fees. Since the deal was way oversubscribed, it didn’t hurt Morgan Stanley to deflate a little air out of the deal by alerting the good customers, that maybe the oh so hot deal wouldn’t pop just the way they thought.  But Facebook is just a sideshow anyway.

The real ethical question is can capital markets function without the trust and belief of the participants that it’s a fair game and somewhat level playing field?  I believe the people that write books and teach philosophy classes, economic professors, and moralists and lawmakers all would resoundingly say no.   Markets cannot thrive without trust and transparency.  I know Ben Bernake, current Chairman of the Federal Reserve and  a college professor at heart is a big advocate of greater transparency at the Fed.  He certainly spares no effort in proclaiming that. But in reality does anyone with power and money believe that the world really works that way?

Certainly Ms. Lazar and Mr. Fink are telling their clients and prospects that their hard won and fought connections at the Fed and at all all levels of Government are worthwhile reasons to do business with ISI and BlackRock.  When Romney or Obama host $25,000 per head special events for big donors, do these contributors really expect they won’t be given special access to the candidates? Paying for access undermines the integrity of not just capital markets but the ethical foundation itself.  But that’s the essence of the contradiction.  Our moral values and ethical teachings tell us that investors should be treated equally and fairly  but capitalism at its very nature, has nothing to do with morality.  It’s the opposite.  It’s a Darwinian like economic engine that leads to monopolies and barriers of entry. It’s survival of the strongest, the most ruthless, and the most privileged.  When you hire the fox to watch over the chicken coop, don’t be suprised to see feathers on the ground.