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Jewish World Review
Sept. 23, 2008
/ 23 Elul 5768
Bonnie and Clyde, banking pioneers
Now we see what Bonnie and Clyde could have made of themselves if only they had gone to Harvard Business School. Machine guns and fast getaway cars are not nearly as efficient as computers, lawyers and imaginative accounting.
Bonnie and Clyde relieved depositors of their savings at little banks in out of the way places, dealing only in retail. The Lehman brothers and their sisters, Bear Stearns and AIG, relieved investors of their money on Wall Street and now get to relieve taxpayers of their money from coast to coast, dealing in wholesale. The brothers and sisters have given "free markets" an entirely new meaning. They're free to take the money and run, with Hank Paulson driving the getaway car.
Bonnie and Clyde had to plan their robberies carefully. If they hit a bank in Joplin and the haul was too small to pay for groceries and gasoline, they worried about where and when to eat. Too many bad choices and they were hungry and out of cash with nothing to carry. The Lehman brothers and their greedy and ultimately incompetent ilk didn't have to worry. They were too big to fail, and government enablers would always be there.
But capitalism, with its winners and losers, risks and rewards, is only for the poor. The rich - the investment bankers, the high rollers and the croupiers at the Wall Street casino - get socialism, with never a worry about getting "shaken out" by the free market. So this is what George W.'s "compassionate conservatism" was all about. Who knew?
The business reporters at Reuters sat down over the weekend and did the math, to see who will pay for the nightmare on Wall Street. They reckon the rescue will eventually cost $1,800,000,000,000, when all the various rescue measures are counted. (Trillions are no longer exotic figures; our typesetters are running out of zeroes.) This sum is equal to 13 percent of the entire U.S. Gross Domestic Product and considerably more than twice the entire economic product of both Canada and Spain. If that's not scary enough, these measures will cost every American $6,000 in increased taxes, now or later, or about $15,500 for each household. That's only the average; since some taxpayers pay more (and you know who you are) and some pay less (and you know who they are), this will require sending for Bill Clinton to feel all that pain.
We're told that this is no time to play the blame game. But why not? Since we're all stockholders now in a vast Ponzi scheme, we should have some say in who gets thrown into the street and who doesn't. The Democrats are particularly eager to avoid the blame game. They fiercely opposed legislation in 2005 that would have imposed sanity on Fannie Mae and Freddie Mac, whence came this misery. The legislation was written by three senators, including, as it happens, John McCain. The senators who blocked it were, as it happens, Barack Obama, Hillary Clinton and Chris Dodd. This unholy trio took more than a quarter of a million dollars in campaign contributions from executives and employees of Fannie and Freddie. Just a coincidence, of course.
The men and women who blew up Wall Street, counting on the rest of us to clean up the debris, will now move on to other places where life will continue to be rich. For example, the average annual salary at Goldman Sachs, which has yet to go bust, is $521,000, including secretaries. The chairman took away $38 million last year, and bonuses of $2 million, $5 million and $10 million are the norm.
The New York employees of bankrupt Lehman Brothers will share a bonus pool of $2.5 billion - the "b" is correct - for their good work in assisting in the destruction of the company. Barclays Bank PLC of London, which is buying the rubble, says the New York staff will nevertheless get their bonuses. Barclays is even negotiating with 30 top Lehman executives to hire them for jobs at Barclays paying millions of dollars a year.
Executive salaries in a private business are the legitimate concern only of the stockholders; if stockholders want to pay ridiculous salaries and bonuses instead of taking the profits as return on their investment, they're entitled. (Bonnie and Clyde would have been ashamed of such greed.) When taxpayers are abused by having to pay for a bailout, we're entitled to take charge, through our elected officials. So congratulations to all. We're all Wall Street bankers now.
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JWR contributor Wesley Pruden is editor in chief of The Washington Times. Comment by clicking here.
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