U.S. Senator Mitch McConnell said it best, in describing the various government bailout programs: "We are rewarding failure." As more becomes known, I think perhaps Sen. McConnell could add "greed" to his sentence.
The extent of the truth of that statement gained more proof this week when it was revealed by the New York State Comptroller's Office that some $18.4 billion in bonuses were paid to Wall Street executives for calendar 2008. Yep, that's BILLION, with a great big "B". Add this to recent revelations about John Thain, recently-resigned head of Merrill Lynch, and there is little surprise that Americans are growing more and more angry with the amorphous collection of people called "Wall Street."
(Sorry, Mr. Gecko, but unlike your speech to Teldar Paper in 1997, "Greed" is not "good." Michael Douglas, left, in the movie "Wall Street.")
Thain is perhaps one of the most extreme examples of the unbridled greed that has characterized some of our financial industry in recent years. Thain, almost exactly two years older then your blogger (he's 53, I'm 51), pulled down a 2008 salary of $83,100,000.00 That's $83.1 million. To earn that, he failed to report to Merrill Lynch's parent, Bank of America, that the "bullish on America" brokerage house was falling deeper and deeper into the red in 2008. Once this became known, Thain continued to fight with the organization's compensation committee for a $10 million bonus he claimed he had "earned" in 2008.
Not satisfied, Thain authorized the purchase in late 2008 of a $7 million corporate jet, and a $1.25 million renovation of his own office (including an $87,000 rug), both at the same time he was asking the Federal Government for bailout money. Once the bailout money was received, Thain accelerated bonus payments so several top Merrill Lynch executives totalling to $3 billion to $4 billion, and it is reported that the money to pay these accelerated bonuses came directly from the bailout money. Bank of America recently forced Thain out, but it appears that their doing so is closing the barn door after the horse has already run off.
Admittedly, Thain is an extreme example, but he is not off the charts in terms of the ridiculous compensation being paid corporate executives in America, particularly when compared to the lack of performance in corporate America. I have been accused of having simplistic thinking at times, but why is it that a corporate executive is being paid ANY bonus if his or her company is losing money? Economics 101 should tell us all that before we get any extra goodies, we've got to pay the bills. That's the way most of America has to live - why not these people? Of course, the ultimate insult is the executive who runs his/her company into the ground and then resigns/is fired with a lucrative, multi-million dollar "golden parachute" severance package.
Average American people have been angry for years over corporate executive compensation, but that anger has been tempered by the relative prosperity the entire country has enjoyed. Until 2008, that is. Now that we are facing rising unemployment, still-rising foreclosures and repossessions, and the virtual nationalization of many segments of our economy, I fear that this anger may soon begin to boil over. President Obama and some in Congress are discussing ways to rein in corporate executive compensation, but if they do not do so quickly and severely, do not be surprised if ol' John/Jane Q. Public doesn't take some of this situation into his and her own hands.
Lest we forget history, many of the great revolutions in world history - the American Revolution, the Franch Revolution, and the American Civil War, to name three - have been triggered by economic causes finally prompting people to seek freedom from their oppression. I'm not predicting war, mind you, but we should never underestimate the collective anger of a people as a force for real change. Wall Street would be wise to fix its own house before it gets fixed for them.