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Wall Street Bonuses Are an Outrage
Just a mere $18.4 billion in Wall Street bonuses, and suddenly the entire country is like Kansas in the 1890s, raising hell instead of corn, screaming for revenge on money power that has done us so wrong while rewarding itself so generously.
The outburst of populist rage is particularly alarming when we
consider how easily such sentiments were managed just a short while
ago. Americans have known about mounting inequality and king-sized Wall
Street bonuses for years. But we also had an entire genre of journalism
dedicated to brushing the problem off.
Recall, for example, the famous essay by David Brooks
published in The Atlantic in 2001, in which he declared that, in one
representative salt-of-the-earth Republican region, people had "no
class resentment or class consciousness"; that complaints about the
lopsided distribution of the economy's rewards were something one heard
only from people in the wealthy and tasteful reaches of blue America.
Mr. Brooks's argument was powerful not so much because it captured reality, but because, by suggesting that to care about economic inequality was itself an act of snobbery, it ingeniously short-circuited the entire debate. Egalitarianism begins at home, liberal!
Others simply insisted that markets were themselves democracies, that the deeds of business were an expression of the popular will, and that entrepreneurs were leading the only kind of popular uprising that mattered. The rightful home of that uprising was, of course, Wall Street, where rebel bankers were always supposed to be fighting stodgy aristocrat bankers on behalf of the common people.
That's why it once seemed to make so much sense to talk about grandmas in small Illinois towns who were ace stock-pickers, to fantasize about the conflict between man-of-the-people millionaires and horrible, affected Ivy League millionaires, to dream of the day the Dow finally reflected the common people's intelligence and made it to 36,000.
But does it console us any longer to recall that a CEO of Merrill Lynch was once excluded from some mythic Wall Street insiders' club? Can it make any possible difference, in our current predicament, to know that Richard Fuld, who allegedly collected around $480 million from Lehman Brothers in the eight years before its bankruptcy, attended not Harvard but the University of Colorado?
No. We're populists of a more fiery sort now, and the old bromides no longer palliate.
And those who once celebrated the virtues of the common folks want nothing to do with us now. As Mr. Brooks joked in yesterday's New York Times, all the current anger really signifies nothing more than the "resentments" of middle-class Washingtonians who have suddenly found themselves in charge of the world.
Besides, our former friends had their reasons for letting the party go on. If the federal bank bailout were to involve a real crackdown on executive compensation, the Bush administration reportedly feared, it might have driven banks away from taking the deal altogether. Bankers would prefer global disaster to a pay cut, in other words, and this obscene calculation needed to be taken into account. Public outrage was apparently nothing by comparison.
Now the populist shoe is on the other foot, though, and it's the
liberals' turn to hail the wisdom of the crowd. Maybe, in its fury at
the millions doled out to bankers who drove their institutions into the
ground, the public understands something about moral hazard that the
Treasury Department doesn't. Maybe, in its rage for fairness, the
public is on to something that the banking industry's remaining
defenders need to acknowledge.
It
is merely this: That Wall Street's compensation system isn't just
aesthetically displeasing to liberal snobs. It is the very heart of the
problem. According to Bill Black, a professor of economics and law at
the University of Missouri-Kansas City and an authority on
dysfunctional financial systems, "It is the compensation system that
has proved to be the weak point in everything critical that went wrong,
that has produced a global catastrophe."
At each stage of the disaster, Mr. Black told me -- loan officers, real-estate appraisers, accountants, bond ratings agencies -- it was pay-for-performance systems that "sent them wrong."
The need for new compensation rules is most urgent at failed banks. This is not merely because is would make for good PR, but because lavish executive bonuses sometimes create an incentive to hide losses, to take crazy risks, and even, according to Mr. Black, to "loot the place through seemingly normal corporate mechanisms." This is why, he continues, it is "essential to redesign and limit executive compensation when regulating failed or failing banks."
Our leaders may not know it yet, but this showdown between rival populisms is in fact a battle over political legitimacy. Is Wall Street the rightful master of our economic fate? Or should we choose a broader form of sovereignty?
Let the conservatives' hosannas turn to sneers. The market god has failed.
- Posted in
26 Comments so far
Show AllThe "system" aas it stands today stinks. It rewards people at the top for merely being there in the tens of millions. There is nothing that these people have been doing that is worth a dime. In fact, if anything, they should be relieved of those bonuses, and if that leaves them on the street, so be it, as they have done that to us for decades, now.
Reagan put us on the course we are on now, and he should be reviled, not worshiped. He was the one who told us that if we gave the rich all the money, they would in turn reward us by creating millions of good paying jobs. In fact, there were plenty of us who saw it for what it was at the time: LOOTING. And now, under the watchful eye of the republican party, the looting is complete. We have nothing left, and 400 people in this country made double their money during the last 8 years.
If the idiots in charge of Wall Street can't live on three or four times what their workers make, then they are not worth keeping in place. They are too expensive to allow to stay. We can't afford to leave them where they are, especially since they are taking OUR money to "survive". What about OUR survival?
Remember, there are FAR more of US than there are of them. WE can take them out, if need be, as it's our survival or theirs. THEY declared war against us 28 years ago, it's time that we realized that we are in a war for our very lives.
The problem is not so much that the system rewards people at the top for merely being there.
The problem is that it rewards them even if they f*ck up. Even if they run their companies down the crapper, requiring billions of tax payer funded bailouts, they still get rewarded.
Worse, it often ENCOURAGES them to f*ck up It often ENCOURAGES them to take ridiculous risks, and then, to hide, to lie about, those ridiculous risks that they are taking. Even when the bank is down the crapper, and they are taking taxpayer money, they still continue to hide and lie. To not come clean about the huge losses that their reckless risktaking caused.
Wow.
The WSJ is the last place that I would expect a piece like this to be published.
It just shows why the WSJ is prospering and papers like the NYT are going in the sewer. It is called journalism, the Times could learn something from this.
Rick.ruskin February 7th, 2009 3:05 pm, check that, Rick. WSJ-owner Rupert Murdoch's News Corporation just lost over $6 billion and a large part of that was from the purchase of the Wall Street Journal/Dow Jones.
"(breakingviews.com) -- Rupert Murdoch isn't easily outfoxed. But the Bancroft family, which sold him Dow Jones, publisher of the Wall Street Journal, looks to have got the better of the media mogul.
"The latest News Corp earnings crystallize the value destruction that Murdoch's pursuit of the financial publisher has wrought for shareholders. News Corp paid $5 billion for Dow Jones in December 2007." [...]
"News Corp's (NWS, Fortune 500) quarterly results include impairment charges of $3.06 billion mostly related to Dow Jones."
-- Ron Cox, "Rupert Murdoch's tarnished trophy," CNN.com, Feb. 6, 2009.
http://money.cnn.com/2009/02/06/news/companies/breaking_views.breakingviews/?postversion=2009020611
"LOS ANGELES (AP) -- News Corp., the global media giant controlled by Rupert Murdoch, said Thursday it lost $6.4 billion in its most recent quarter because of a massive write-down in the value of its assets.
"The New York-based company, which owns The Wall Street Journal and the Fox broadcast network, also forecast a 30 percent drop in operating profits for the fiscal year to June from a year ago, when it earned $5.13 billion."[...]
"News Corp. also said it had cut 800 positions across its Fox properties, including the 20th Century Fox movie studio, in moves that it expected to save $400 million a year. The Wall Street Journal said Thursday it is cutting about two dozen newsroom positions."
-- Ryan Nakashima, AP Business Writer, "News Corp. loses $6.4 billion in 2Q," Feb. 5, 2009.
http://finance.yahoo.com/news/News-Corp-loses-64-billion-in-apf-14273746.html
In fact, Murdoch's media empire, which includes Fox News, is losing money, and audience, on all fronts.
Frank states the problem well but I'm not sure his solution is nearly radical enough. We need to do a lot more than merely "redesign and limit executive compensation". The Wall Street mafia should not be allowed to get away with all the looting they've been doing, very consciously and systematically, for all these years. They need real punishment, and even though no one seems to have the stomach for it (look at Madoff, still luxuriating in his $7 million Park Avenue penthouse), they should be rounded up as common criminals and prosecuted for all they're worth.
They shouldn't be told, "No, you don't get a $15 million bonus this quarter, naughty boy! You'll have to wait until the next quarter and prove you deserve it." Mainly, they shouldn't be entitled to ANY bonuses ever again. How many of the rest of us who actually do real work, unlike the abstract, self-serving number shuffling these parasites do, ever see any kind of bonus? Hell, we're lucky if we can keep our jobs at all. But through some pervese mysticism these assholes are entitled to obscene bonuses every year, on top of their already hyper-inflated, undeserved salaries.
Only in an economy celebrated by the disgusting David Brooks do people who should be in prison strut around with assets and privileges any king would envy. We need to begin "limiting their compensation" by having them stamping license plates in federal penitentiaries. Let them find out what working for a living really means.
These various Wall Street 'Masters of the Universe' who are demanding compensation for past performance are from the Chainsaw Al Dunlap school of business. Chainsaw was notorious for showing a tremendous profit for a couple of quarters, as he did with Scott Paper, by cutting employees and selling off warehouse stock. Of course, by the third or fourth quarter, the company was a gutted ruin, after Al had made off with his loot, naturally. Ah, the operation was a success, but the patient died.
In the case of the MofU, they also cut and sold stock with no regard to the consequences and now want to be paid for the quarters of the game where they were ahead on points. Like football, the only quarter that really counts is the last one and they lost.
They also owe their incomprehensible arrogance and incredible isolation to Ken Lay and his hearty heels at Enron. Ken infamously encouraged the suckers to hang on to their stock while he was secretly dumping his, and he fostered such a broadminded view of the 'little people' forced to buy Enron's power that his employees giggled proudly about robbing Northern California grandmothers of their meager monthly SS checks to pay for over-priced electricity. Even the French aristocracy of the House of Bourbon had more concern for the peasantry. Ken should have made "Let them eat urinal cake" the company motto.
Soft-shoe conservative David Brooks was reporting from his usual proctological vantage point; even as far back as 2001, friends of mine in the plumbers and pipefitters unions, some former 'Reagan Democrats,' were openly angry at the Power Elite in Washington and New York issuing edicts and legislation that resulted in fewer good-paying jobs coming their way. He's also apparently unaware that in the Midwest, as early as 2004, blue-collar imbibers were booing the images of Bush, Cheney and their Wall Street cronies whenever they floated up on the saloon TV. The class resentment and class consciousness was as hard to miss as an iceberg in the middle of Times Square in July.
It should also be recalled that the Masters of the Universe were really just a line of plastic toys that are no longer in favor with the public because they tended to break apart easily.
Sioux Rose
RSJ: Good points but the problem goes back much further. In the good ole days when Phil Donahue got to interview real movers and shakers on his original talk show, he had on as guest Stephen Pizzo, co-author of the IMPORTANT book, "INSIDE JOB: The Looting of America's Savings and Loans." In my view, that served as the prototype. The savings and loans just needed (I believe it was) $100,000 in secured assets, and from there could do their loans with FDIC guarantees. They purposely made bad loans on housing developments no one would ever live in, a huge one was done in Texas and one of Reagan's department heads saw the rot and intended to expose it, but they had him by the balls (some illicit activities he didn't want published) literally. And the heads of these S & L institutions lived lavishly, made themselves the privileged owners of yachts, and fancy homes, etc.
In any case although it was back in the age of dinosaurs, way past our instant gratification culture's capacity to remember, in the 80's, billions and billions were absorbed by taxpayers. Kenny boy Lay came around with the idea of upping the ante on supply and demand by making supply APPEAR scarce enough to jack up rates; and then there were the likes of Arthur Anderson, those high-paid accounting firms prepared to cook the books for their corporate clients. I think these THREE modalities all coalesced into the types of "products" Wall St and big banks were then able to pass off in loan packets that could be sold on the global market, similarly given high AAA ratings, etc. In other words, since few to none were punished for any of these scams, crime ended up paying more... and the criminals, learning how to improve their methods, put together the basic components of previous scams all rolled into one that now quite literally is taking down the entire world economy with the poorest of the poor unable to buy the rice/grains that are being manipulated as a "cash crop" on Wall St.
Corruption this systemic is like trying to save a patient who has cancer in every one of its major organs. The only cure is fasting and detox...
Or, the system is corrupt and the only cure is death!
With all the problems that we and the world face because of this corrupt system, isn't it high time that the United States become, for the first time, ... a democracy?
Siouxrose February 4th, 2009 2:21 pm, you're right, it does go back to St. Ronnie's deregulation of the SandL's and the looting of the treasury to pay off all of the bad debts incurred by the white-collar criminals running those organizations. I think only Charles Keating, who cheated the depositors of Lincoln Savings and Loan out of their life savings, did any jail time, about four years in minimum security. Incidentally, Keating was a staunch crusader against pornography from the '50s through the '70s -- like most Republican bluenoses, he was incapable of seeing the true indecency of his own actions.
There was also Junk Bond King Michael Milken, who spent less than two years in a country-club jail and emerged with $400 million in the bank. Today he's worth over $2 billion. How many average Americans would spend 20 months in prison working on their tennis swing if they had $400 million waiting when they were released? I've been in court where an indigent defendant was sentenced to two years hard time just for having a pot roach in his car ashtray and an unanswered warrant for a traffic offense in his past. Now that's justice.
Then there was Ivan Boesky ... well, I'll stop there. You're right, Sioux Rose, if the government had been doing its job back during Reagan's regime, we might not have these problems today.
Sioux Rose
RSJ: I shared a few weeks ago that years ago I wrote to an inmate at Angola as a story posted on 60 Minutes moved me. The inmates there get the biggest jail sentences (in terms of time and punitive elements) of any prison. Rates for the same crime vary state to state, and often when a husband KILLS his wife, he gets less time than a drug deal gone south.
I'd like to see UNIFORM scales of justice... if a rich person steals 50 million, he SHOULD get more time than the kid who steals sneakers. If they have sentencing guidelines for the idiocy of "the drug war," they should have sentencing guidelines so that those accustomed to using 14 K toilet paper serve commensurate TIME for misdeeds, and no longer get carte blanche!
Siouxrose February 5th, 2009 8:19 pm, absolutely, Sioux Rose. There are people rotting in Texas jails doing hard time for possessing the same amount of pot that would get them a few months probation in California.
Then there was that ridiculous persecution of Tommy Chong for selling 'Chong's Bongs' online. If he had simply called them 'pipes' the feds couldn't have prosecuted him. Add to that the arrests in CA of vendors legally selling medicinal marijuana with a state license. (Thank heaven Bush and Ashcroft are gone.)
Then there's this outrage, from Mississippi:
"On December 8th, 17-year-old Billey Joe Johnson died from a gunshot wound to the head. Police say he killed himself with a shotgun after being stopped for a simple traffic violation in Lucedale, Mississippi. Several things seem to cast doubt on the official story, including an independent investigation that concluded it would have been impossible for the shot that killed Johnson to have been self-inflicted."
-- From "Truth in the death of Billey Joe Johnson," feb. 5, 2009.
http://www.colorofchange.org/billeyjoe/message.html
Billey Joe was black and he had a white girlfriend in a small MS town which often seems to lead to a sudden 'suicide' these days in the 21st century Old South where they can't get away with lynching as easily as they once did. If this enrages you as much as it did me, go to the site, read about the case, and sign the petition demanding an independent investigation.
The Repelicans dug up Ronald Reagan's body last night. They are giving it coffee enemas and mega doses of electricity, trying to bring it back to life. So far, nothing's worked. What most of the grave robbers didn't know was that (at Nancy's orders) Ronnie was buried with $100,000 in cash in his pockets to pay for a cushy ride to the other side. One of the body snatchers took the money and didn't cut the rest of them in. How very American; how very Repelican.
Mordechai Shiblikov February 4th, 2009 1:08 pm, can't we give St. Ronnie his very own pyramid somewhere out in the Mojave Desert, stocked with all of his favorite things -- GE armaments, Warner Bros. film scripts, 20 Mule Team Borax, a signed picture of Loyal Davis, an award from the White Citizens Council of Philadelphia, MS, running tape loops of his 'Morning in America' ads, an SS soldier's headstone from the Bitburg cemetery, an embalmed intern from Grenada, the collected works of Milton Friedman and the bar napkins of Arthur Laffer, et al -- and let that be the national monument to Reagan's regime? We can appropriately put it right behind the Sunoco station with the sign out front, "Last gas for 100 miles." Ronnie was always good for plenty of gas.
By the way, rumor is the Nimitz-class US Navy supercarrier USS Ronald Reagan is a 'jinxed' ship and sailors are loathe to serve on it. Apparently the computers on board have a nasty habit of going haywire and freezing up, especially when you enter anything having to do with 'Iran,' 'Lebanon,' 'Marines' or 'Contras.'
My father, who was a die-hard GOPer his whole life, resigned when the GOP nominated Reagan for president. He waxed long and vehemently about his criminal business dealings and deal-cutting that went on while he was the 'Guvernator' (of CA) of his time. The fat cats of Orange County & their cohorts got much fatter at the expense of the CA taxpayer. The blueprint for current financial shenanigans was created then.
But I could be wrong !
Sioux Rose
Here's my idea of how karma SHOULD operate with respect to all those who made off like modern bandits with the public's money: a separate sphere that ONLY they can become privileged members of (in the after-life), except now all those who used to hob knob when they had their $3000 suits and dresses, their drinks filled by "the hired help" of top-shelf liquors before they asked, FORCED TO SPEND ETERNITY in each other's company, bereft of any of those assets that made each feel like a little emperor in a sphere of infinite riches. In other words, naked and barren, they must tolerate the awful personalities of one another; and awful they MUST be, since these are persons who could so callously and adroitly turn off their hearts and souls to the pained conditions their own excesses leveraged against so many.
Sioux Rose, have you heard this story?
A man spoke with the Lord about heaven and hell. The Lord said to the man, "Come, I will show you hell."
They entered a room where a group of people sat around a huge pot of stew. Everyone was famished, desperate and starving. Each held a spoon that reached the pot, but each spoon had a handle so much longer than their own arm that it could not be used to get the stew into their own mouths. The suffering and misery was terrible.
"Come, now I will show you heaven," the Lord said after the man turned from the scene in disgust. They entered another room, identical to the first -- the pot of stew, the group of people, the same long-handled spoons. But there everyone was happy and well-nourished.
"I don't understand," said the man. "Why are they happy here when they were miserable in the other room and everything was the same?"
The Lord smiled, "Ah, it is simple," he said. "Here they have learned to be unselfish and feed each other."
I'm not conventionally religious, but I liked the moral of this fable.
These Wall Street barons and their ilk got where they are and amassed riches by greed and selfishness and now they are paying the price for going too far -- they don't know how to feed another with their spoon, and they are becoming a dying breed as a result.
As Dorothy Parker once said: "If you want to know what God thinks of money, just look at the people he gave it to."
You can buy many things, but you can't buy intelligence, talent, skill, compassion, kindness, love, or an appreciation of beauty, and yet that's what these people in their mean little lives need and covet most. Money can make life easier, but not really better.
Sioux Rose
RSJ: Yes, it was taught as an allegory at the Unity of Keys Church I attended in the l990's. I believe it's a timeless morality tale, too.
I have a multi-millionaire friend-client who thinks the allegory about the rich man getting through the eye of the needle relates to camels being left outside for hygienic purposes. I mean he had the most twisted logic in trying to turn that EVIDENCE about rich people don't easily get to heaven into something about where you parked your ride/camel in THOSE days. People only see what they are ready, willing, or able to see.
Siouxrose February 5th, 2009 8:14 pm, I've noticed that particular quote from Jesus is left out of most modern sermons, along with his multiple condemnations of deception and hypocrisy. He said nothing about gays or socialists, but he heaped a whole lot of scorn on liars and hypocrites, but you wouldn't know that from the TV evangelists and their cousins in suburban American churches.
Markets are not and never have been democratic institutions. Supply commands an active role and demand the passive role in the production market, while on the labor side demand plays the active role and supply the passive role. Unfortunately the financiers comprise the active role in both sides of the market while the workers comprise the passive role in both sides. Only government can cause the market to abide by laws and democratic principles.
Well,many of the "usual suspects" have posted on this thread.Thank you all.Mordechai,I don't want to be snacking when I read your posts,else I have a splattered screen.
Last Thursday and Friday MSNBC,among others were at least mentioning the possibility of "clawing back" the looted funds.Limiting bonuses as the only "punishment" for what these scumbags have done is insulting to all who have only begun to suffer.
It's my understanding that there is only vague idea of how many trillions of these toxic assets are floating around.Therefore,any bailout of these perps is preposterous.Many billions ARE needed for the homeless and hungry,but a single buck more given to the Overlords should,and may lead to open revolt.At the very least,the rest of the world hates the US even more,doesn't that matter anymore?
There have been reports in the British press that the British government doesn't even know just how much the losses of the British banks that they are trying to bail out are. Including the banks in which the British government has already poured humongous amounts of money into.
Wow, on some major media networks today I actuality heard some intellectual jackass say that if banks are not going to be allowed to pay the multi million dollar bonus's all these financial genius's that run these institutions will quit.
Not a single person on the panel during the discussion said GOOD!!!
These guys are not worth the 500,000 cap that's been proposed.
Let them quit, where will they go, who will hire them??
I say we use the huge spy network that Bush/Cheney created to start spying on the mega rich, politicians and Judges and make sure they are not breaking the law.Boy , if that does not get these morons to return us to constitutional law requiring legal warrants for surviellance , nothing will.
Pay back is a B%#$%!!!!!
Get them all.
BornFreeMen
American Patriot. Not a SPYmerican, not a TORTUREmerican.
Here's an unpopular opinion:
The financial institutions lost over a trillion dollars, a million and a half homes are estimated to be at risk of foreclosure.No talk about prosecuting those who , in reality, duped and defrauded the shareholders, many of which are pension funds thus spreading and magnifying the hardship. Yet we quibble over a few millions in individual compensation.....
I agree that those recipients of such largesse demonstrate greed and are grossly undeserving of said compensation when they led their companies to the brink of disaster. But while we fasten upon their individual earnings, as maddening as they might appear to be, we are doing nothing to alter the system in which such trillion dollar losses became inevitable.
We are so easily distracted.
"Most people would sooner die than think, in fact they do so. Bertrand Russell
Red Rick February 5th, 2009 6:29 am, you're right, and the law says -- really the only law governing corporate executive behavior -- that corporate officers must first serve the needs of the shareholders above all else. They have failed to do this and should be prosecuted.
IMO, they are becoming extinct, along with the diversified multi-national mega-corporations they run, as they have failed to even serve themselves. Of course, some have made off (or is that 'Madoff') like bandits, but they have, in the process, destroyed, by their rampant greed and unconscionable deceit, the structure of the edifice that allowed them to profit. In other words, they put themselves out of business. China and Japan cannot afford to keep funneling money to the US to bail them out and when the credit line is cut, which may be soon in the future, that's it, game over. We'll be forced to return to the days of smaller, locally-owned businesses that just do one thing and are more responsive to the needs of their customers.