A $700,000,000,000 Bailout, Golden Parachutes and The Invisible Hand
It’s hard to wrap my mind around $700 BILLION dollars. Look at all those zeros! What’s even more difficult is to ponder all the unintended consequences of using almost $1 Trillion tax-payer dollars to help Wall Street out of it’s troubles. One interesting byproduct of the bailout is the “shocking” revelation regarding executive golden parachutes. Since the 1980’s, executive compensation has been increasing at ridiculous rates. I think most Americans were convinced by the “investment class” that they actually deserved the exorbitant severance packages they received for running large corporations. My, oh my, Americans should have been paying closer attention. Allow me to illustrate my point with the following story:
I had a conversation with a good friend last week. He’s been a Realtor for close to twenty (20) years. He told me that he had to file for bankruptcy recently. He said his home had gone into foreclosure and that his “back was against the wall.” As is the case with so many real estate agents today, business has withered to almost nothing. The affects of the mortgage crisis have come down hard on our industry. And you know, my friend isn’t one of those speculator-type agents who purchased a number of homes as “investments” in the hope of becoming rich quick. He’s a hard-working professional with lots of experience and expertise. Right now he’s having a hard time finding a new job. His story is emblematic of the current state of our economy and it would seem almost cliche were it not for the news that came out a couple of days later: Washington Mutual Bank was seized by Federal Regulators. It was the largest bank failure in American History.
It’s bad enough that WAMU failed. It’s downright absurd that Alan H. Fishman was the new chief executive officer of the company for a total of 17 days when he bailed-out with a golden parachute worth close to $20 million dollars. Looked at another way, Mr. Fishman was paid $50,000 per hour (assuming he worked 24 hours a day whilst on the job). He didn’t even have to get results. It seems he just had to show up. Let’s be honest, we all have a picture in our heads about this type of person:
This morning Congress announced a Draft Proposal on the Financial Rescue Legislation which contains language regarding the limitation of CEO compensation:
- Limits on excessive compensation for CEOs and executives
– New restrictions on CEO and executive compensation for participating companies:
– No multi-million dollar golden parachutes
– Limits CEO compensation that encourages unnecessary risk-taking
– Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate
One can only hope that this portion of the legislation survives the legislative process. Already I can hear the corporate apologists whining and complaining that running a company is a tough job. Pardon me for being so blunt, but I’m sick and tired of hearing how tough it is on the wealthy and privileged . I’m particularly tired of the notion that it takes some sort of Ubermensch to run a corporation.
My friend, who has worked hard for many years, is not part of any bailout. He represents millions of other Americans who have worked hard and played by the rules only to discover that Adam Smith’s “invisible hand” (the wonders of an unfettered market place) is propaganda. It’s a philosophy that has been repeated over often enough that we actually believed it. I can only hope that this bailout will actually help the current market situation. Perhaps we will be better off in several years, but for now let’s all make a promise to ourselves: let’s be more vigilant with those in Wall Street who would have us believe they really care about us.
Pictures: capitalist pig, http://flickr.com/photos/urbanblitz/, Washington Mutual Tower, http://flickr.com/photos/cloganese/, Bailout http://flickr.com/photos/emdot/2880848408/
