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Editorial

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A Cerberus Carol?

Paging Mr. Fezziwig.

One might get the notion that Charles Dickens' good-hearted fictional employer was back in business after the announcement this week by a private equity firm, Cerberus Capital Management, that it intends to sell Freedom Group Inc., the company that manufactured the Bushmaster rifle used in the Sandy Hook Elementary School massacre. Was this a sudden case of moral conviction?

Meanwhile, Dick's Sporting Goods has suspended sales of semiautomatic rifles at its stores. Other retailers may be having second thoughts about selling such items, too. Shares of some major U.S. gun makers have fallen on the news.

All of which sounds a great deal like the kind of thing that the old-fashioned trader from "A Christmas Carol" might approve heartily. It wasn't just office parties that Mr. Fezziwig advocated (although he was known for them, too) but moderating profit-making with kindness and compassion.

And what did old Fezziwig get for his troubles? The 19th century equivalent of a buyout, with the new owners switching to a more profit-centered view. The company later goes under because of embezzlement, and Ebenezer Scrooge and Jacob Marley take over. As readers will surely recall, the author and his ghosts strongly disapproved of that duo's greed-driven approach.

We celebrate that story this time of year, but do we heed its message? The choice by Cerberus was made, at least in part, because a major investor — the California State Teachers' Retirement System — was reviewing its investments in light of the tragedy. And it clearly had not escaped notice that gun control is suddenly getting serious discussion in Washington, and that, despite a recent uptick in gun sales, may not bode well for industry profits.

Well, then can we at least say that the pension system was Fezziwig? Perhaps, but how many pension systems bring morals to bear on their investment choices? The California pension system has been invested in Cerberus since 2003, without any previous concern about the ethical implications of Freedom Group.

And what about Dick's? A pang of regret over selling deadly weapons — or a concern about the public relations backlash to the chain at a time of high emotion over the slaughter of 26 people, including 20 young children? Perhaps it doesn't matter, but maybe it does.

Meanwhile, we can't help but think there are others working in the free market who stand to profit from these choices: investors who will see Freedom Group as undervalued if they just wait out the public outcry, and specialty retailers who will happily absorb Dick's lost business. There are always winners and losers in the marketplace, or so we are told.

When Mitt Romney ran for office, he was all too happy to brag about the "job creation" made possible by Bain Capital and its private equity investment decisions. As for those that caused job losses? Well, that was just capitalism at work, separating the wheat from the chaff, creating efficiencies that ultimately serve the public well.

But if we are going to insert values in all other aspects of human existence, from the curriculum taught in our schools to the violence portrayed in our popular culture, why does Wall Street get a free pass? Yes, there are always investment funds that advocate higher moral standards — that consider climate change or human rights abuses, to name but two examples — but they are a tiny of fraction of the equity pool.

In choosing to divest from Freedom, officials at Cerberus issued a statement in which they pointed out that they are "investors, not statesmen or policymakers." They claimed they were simply trying to protect investor interests and "not get drawn in the national debate" on gun control.

Mr. Scrooge would approve; Mr. Fezziwig would not. Nor would the ghost of Mr. Marley, who informed his former partner, "Mankind was my business; charity, mercy, forbearance, and benevolence, were, all, my business. The deals of my trade were but a drop of water in the comprehensive ocean of my business!"

Does anyone in the mainstream of Wall Street really feel that way? Perhaps they would, if more pension funds, 401(k) managers and private investors made a more concerted effort to make mankind — and the impact of their financial decisions on humanity — their business, too.

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