Friday, January 30, 2009
I have been hearing people all over the TV today saying that it's just wrong for the government to require that the failing banks not give out bonuses until they pay back the taxpayers for their hundreds of billions in bailout money. Apparently, there is some idea that it's now immoral for someone who is paying another to require certain behaviors from them. (I've heard quite a few people argue that these people are the best at what they do and if the taxpayers don't pay their bonuses, these failing banks will lose their expertise and the economy will suffer. )
All over the country, workers are being told that they can't have bonuses or raises, that they have to cut back their hours, that they are being laid off. The waiters at my favorite brewpub, who have been there for a decade or more, are all being reduced to part time (so that none of them have to be completely laid off) and their tips are off by 60%. The idea that the people who caused all this should get bonuses at the taxpayers expense because they are such valuable employees is ludicrous. That these people who work forsuch massively failed enterprises should be rewarded by the taxpayers for their failure is beyond reason. I can't fathom why they haven't all been fired.
Here's David Brooks explaining once again that his elite friends shouldn't subject to laws because public shame is far more difficult for them than it is for the little people and so they learn their lessons and suffer enough just by being humiliated. Laws aren't necessary for such paragons. They will be regulated with social pressure. (As the British House of Lords used to punish their own by banishing them to their lavish estates and depriving them of access to the court for a time, perhaps.)
I mean, I thought what Obama did was the right thing. First of all, you need social pressure. Capitalism is a great system, but you can't have amoral capitalism. Capitalist institutions have to be surrounded by social understandings, by a set of norms that we all adhere to or that are enforced by shame.
And the president was absolutely right to impose a little shame on people who, A, didn't understand the situation has changed, the environment has changed now that the public is helping support their institutions, and, B, who are just awarding themselves bonuses at the expense of their shareholders that are way out of line with what I think most people believe is necessary to keep talent at firms.
Well, it wasn't exactly just at the expense of their shareholders, now was it? These are institutions that took huge sums of money from the taxpayers after all.
But they are very, very special people who just can't scrape by on less than half a million dollars a year. Indeed, they are so valuable that they will just up and leave the country to work as mercenaries for some foreign kingdom, er corporation, if they aren't allowed to make gigantic sums of money as their companies fail miserably. They are superstars!
JIM LEHRER: Is that a moral -- that's a moral issue?
DAVID BROOKS: Well, I do think it's a moral issue. I still think the McCaskill idea is just a terrible idea.
JIM LEHRER: Why? Why?
DAVID BROOKS: Because these are banks that depend on superstars. And there's not an ocean of superstars out there. And we may not like these people, but the fact is, to get a good CEO who can lead a company effectively, there are actually, if they can do it well, if they're Jack Welch or somebody, they're actually worth the money.
Now, that doesn't mean I'd buy into the hedge fund bonus structure, which was yielding $300 million bonuses. But, nevertheless, the reality is, to keep top talent from going overseas or wherever it would go, you've got to allow pay over $400,000 a year in New York City.
MARK SHIELDS: These are companies -- let's be very candid -- they are now taxpayer-subsidized. If they have these superstars, they probably haven't reached that point.
I say if there's an overseas market for these greedy, incompetent bastards then the best thing we could do for the country is to exile them. Unfortunately, they've managed to take down pretty much the entire world with us, so I don't think there are a lot of jobs for failed wall street executives out there right now. But hey, let them put their resumes up on Craigslist like everyone else and see what the market for such superstar talent will yield these days.Obama is smart to take this one on. It's important to target some villains in all this and these guys are right at the top of the list. (I wasn't all that thrilled with McCaskill being the point person on this, but then I've never liked her much because she's a Blue Dog type, so my impression is not entirely reliable. Maybe she really connected with the folks.) But it's a savvy move to go after these guys because I can almost guarantee that what they did makes no sense to working people around the country and the idea that the government can't put any strings on that money is completely absurd.
I wrote earlier that Obama should take to the bully pulpit and channel a little FDR. But channeling TR isn't a bad idea either. These "malefactors of great wealth" (or in 21st century parlance "the Superstars") have been swallowing a firehose of money for the past several decades, and especially in the last eight, at the expense of everyone else. There is no CEO on this planet who is worth the kind of money these jackasses have been giving to each other and it's long past time that this nearly pornographic obsession with the manly John Galt myth be put to rest.
Bust 'em Obama. It's smart politics. Me likee.
Kevin Drum has been writing about obscene CEO pay for years, by the way and has provided a wealth of information about why this is a completely disingenuous argument. Here's a random one from 2007:
Charles Munger, Warren Buffett's partner at Berkshire Hathaway, talks to the LA Times about the insane levels of CEO compensation these days:
What makes CEO pay so difficult is that only a few of the people who are earning these huge amounts are actually worth it....I like the idea of high pay for people who are really worth it. The problem is that most of them are not. Every mediocre employee who rises through the ranks to become CEO thinks he should retire rich. It's crazy.
Do you think this might be what Munger is talking about?
Embattled Home Depot Chief Executive Robert L. Nardelli, under fire from stockholders for earning hundreds of millions at the same time the company's stock fell and market share dropped, resigned suddenly today and will walk away with a severance package of $210 million, the company announced....During his tenure, Nardelli earned $240 million in salary, bonuses and stock options.
....During his leadership of the nation's second largest retail chain after Wal-Mart, Home Depot lost market share to home-improvement rival Lowe's Cos. and its stock price declined almost 8 percent.
Let's get out our calculators. $450 million for six years of service comes to....about $75 million per year. And this is for reducing Home Depot's value and losing market share to its main rival.
I wonder what Nardelli would have been paid if he had actually increased Home Depot's value? Would there be enough money in the world?
Does everyone remember where the Superstar Bob Nardelli works now?
digby 1/30/2009 08:00:00 PM