What’s Bothering Main Street with All of This
As the Bush Administration asks for close to a trillion dollars to prevent a worldwide financial cataclysm, here are some numbers you might find interesting — courtesy of the ABC News Research Center and ABC News’ Barbara Paulson.
In 2007, Wall Street’s five biggest firms– Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley - paid a record $39 billion in bonuses to themselves.
That’s $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns.
Those 2007 bonuses were paid even though the shareholders in those firms last year collectively lost about $74 billion in stock declines –their worst year since 2002.
This type of pay is corrosive and has many long term impacts on the world that extend beyond any moral judgment. First of all, like drug crime, it sucks the best kids away from all other ways of making a living. In the inner cities it is not the incompetent boys who get into the drug business, it is the kids with talent and drive. They mostly end up on the dark side. So, too, with investment banking where most of the most talented kids in business school aspire to join Goldman Sachs.
Because of this attraction of huge piles of money, this talent is not available for the other more important and productive parts of our society.
Secondly, investment banking no longer mainly works to ensure that the productive parts of our world are financed. Now it mainly plays with money. It was in 1984 that the power began to shift from the Investment bankers who financed projects to the trading rooms that dealt for their own book. Most of the action on Wall Street - where most of the serious money is made and hence where the attention is paid - is connected to trading for the house - either for a bank or for a hedge fund
So the huge paydays pull the best people away from the productive parts of the society and economy and into activities that are no better that drug dealing. But this giant casino is absolutely toxic as we are discovering.
It undermines the real world. It destroys the value of our lives. It too makes us all addicts of easy money. They are the crack dealers and we are the punters. They make the money and the public becomes helpless and impoverished.
For like drugs, easy play money feeds on itself. All the imagination and energy go into making the payday even bigger. All the imagination goes into new ideas of how to get us to do the wrong thing. So as we are finding out, the piper who pays for all of this is us. We pay in losing our homes and we pick up the bill for the dealers.
Any system of reform has to look into the “System”. At the heart of it is how people are paid. If we don’t change this - then nothing will have changed and we will end up in even worse trouble.
Martin Siesta
© 2008 Martin Siesta. Reprinted with permission.
Tags: bailout, Martin Siesta
October 7th, 2008 at 5:17 pm
Its is reasonable and necessary to identify the culprits in this mess. The fat cat CEO’s with their multi million dollar bonuses sure stand out. My goodness CEO Fuld, ex of Lehman Brothers, is selling assets and may be down to his last $100 million.
They are culpable and should be held responsible but they will claim they were given the huge bonuses by a willing board of directors representing the best interests of shareholders.
You are right of course. There is indeed something rotten in the state of Denmark. And just as Horatio said “heaven will direct it” so to will the will and consciousness of the people determine how we answer the important question you have raised. As said the bard, “To be (paid) or not to be (paid).”
October 30th, 2008 at 6:25 pm
To this, add the AIG parties. What are they thinking?