Just don’t fail
From someone who would rather remain anonymous:
The recent uproar over fallen Lehman Brothers President Richard Fuld has raised a number of interesting questions. Protesters held aloft signs that read “shame” and “cap greed” during his testimony at a congressional panel yesterday, and the web site Gawker even reports he was cold cocked by an unknown assailant at the gym this week.
Fuld has become a symbol of excessive greed on Wall Street but the truth is that he became a lightning rod for committing one cardinal sin: failure.
When times are good investors and regulators grouse about greed but the complaints are muted so long as everyone is making money. Few protested when Stanley O’Neil’s parachute topped $140 million because the firm was handed off largely in tact, or so we thought, to John Thain.
The list of bloated CEO pay packages at struggling companies goes on and on. Where were the protests when Bob Nardelli left Home Depot with almost a quarter of a billion dollars of compensation in his pockets?
Wall Street is allowed to steal, lie and cheat if the transgressions fall short of driving companies to the brink. Crowds suddenly reach for pitchforks and torches when investments are wiped out and fortunes are altogether lost.
Erin Callan jumped ship as Lehman’s chief financial officer with a decent pay package and landed on her feet at Credit Suisse. Will she share the hot seat with Fuld and answer questions? The answer is probably no, which suggests regulators have short attention spans, and executives can insulate themselves from wrongdoing by making sure they maintain a safe distance from ground zero when the bombs begin to fall.
The lesson of Lehman is that greed is good and thievery is tolerable — if it stops just short of toppling a house of cards.
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7. October 2008 at :
The real problem with gutting a public company with outrageous salaries and bonuses for the executives is that the shareholders don’t see the benefits of ownership they deserve. The boards of such companies should be required to consider the shareholders when they vote on compensation packages.
The problem is that the boards are made up of friends of the executives, who are often on the boards of other companies and who vote for each others compensation packages. One hand washes the other! As long as there is no oversight such abuses will continue. There must be a fiduciary relationship between the executives and the shareholders and as long as executive pay is wildly disproportionate to the value they create in the company that will not be true. And, having gutted the company with billions in executive pay and bonuses, it is the shell that now stands to be rescued by the government (read the people here). I agree with Ben Stein, who said recently that there ought to be criminal prosecutions of anyone who hid the true condition of the company from the public.
8. October 2008 at :
At least no one’s been killed yet.
http://in.reuters.com/article/topNews/idINIndia-35604720080923
8. October 2008 at :
I don’t think that the people on Wall Street are going to be allowed to get away with what they did this time. The entire economy of the World is falling apart and the finger is being placed squarely on those people who ran the investment banks, the traders, and the kooks who cooked up the securities that brought the entire house of cards down.
People will exact vengeful revenge upon those who brought them to penury. I’m not even sure that they will receive justice in the courts, no matter how much they pay for their attorneys. The public will be out for blood - think “The Terror” of the French Revolution. Who will be our Robespierre? Where will the Guillotine be erected?
8. October 2008 at :
At some point I”ll have to stop by the supermarket to pick up some groceries. Would you like rotten eggs, potato’s or cabbage to throw at the accused during the public executions?
9. October 2008 at :
Since blaming “Wall Street” doesn’t get us anywhere, here’s a great summary (from economist Barry Ritholtz at The Big Picture):
10. October 2008 at :
To Josh,
Nice list, but how about adding the following. Add all of mortgage brokers who made out false applications so that they could get commissions. Add all of the lawyers who represented people who were taking mortgages that they couldn’t possibly pay for and didn’t sit down and really tell them what their costs were going to be when the interest rates went up, or who didn’t let them know that the market doesn’t always go up. Add all the people who ate the free food at the bar of the market without remembering that there is no such thing as a free lunch. Add all of the banks that forgot that they were supposed to be prudent with their depositors money and gave 106% on equity instead of the former 80% of equity (a/k/a assessed valuation). Add all of the Members of Congress who allowed the banks to operate without proper reserves and let investment banks give money out with no real reserves whatsoever. Finally, add all of the jackass voters, that’s you and me, who elected the bozos repeatedly when we should have known better. After all, the money all went to such a small group of people and the rest of us didn’t get any major benefits from the markets prosperity for the past 30 years; we should have risen up and stopped it. Yeah, I know, it was so important to make sure that gay people couldn’t get married and women couldn’t get abortions on demand. A country full of assholes is what we have.