A Show of Restraint

In 2007, when nobody was focusing on Wall Street because the world seemed to be humming along, Goldman Sachs’ current chairman, Lloyd Blankfein, received a whopping $68 million dollar bonus. For 2009, when Goldman was even more profitable than it was in 2007, Blankfein was bonused in company stock to the tune of a measly, how-can-you-live-on-so-little (think Haiti earthquake) $9 million (announced February 5^th). The February 6^th New York Times: “While most people can only dream of such a reward, the news was widely seen on Wall Street as a show of restraint and a nod to the uproar in Washington and elsewhere over resurgent pay and profits at banks like Goldman.” In that context, Mr. Blankfein (who claimed that Goldman’s trading activities were “God’s work”), show the Wall Street version of restraint. But let’s get real here! While I have no issue with value-producers making even more than $68 million under the right circumstances, there is still something very wrong here.

Wall Street figured out that if you bonus executives in almost freely-tradable stock, it gets out of the restrictions for TARP beneficiary companies on cash bonuses (big loophole), but Goldman already paid back its TARP money, so that’s not an issue for them. The bigger issue is how financial institutions that encouraged the over-borrowing against assets that were only going to appreciate (houses, stock, corporate assets, etc…. all of which tanked!) and created trillions and trillions of dollars of global economic damage, decimated life for millions of Americans (not even looking at the rest of the world), even created funds that bet against the very investments they recommended to clients and maybe set the United States on a downward streak from which it actually might not recover… well how they really never had to pay for that folly. And what’s worse, the bonus structures on Wall Street are still based on risk-taking and market-making/ manipulation that only encourage speculation and bubble-making In short, American financial players are still rewarded for recreating the very economic instability that brought us down in the first place.

I picture the 2004 meeting at the Securities and Exchange Commission of the CEOs (including then-Goldman CEO, Henry Paulson… yup, that Henry Paulson) of the top five financial institutions in the U.S., including Bear Stearns and Lehman Bros., that they should be exempted from the 12-to-1 ratio of debt-to-assets because they were “too big to fail”… and then ruling on April 28^th of that year that lifted that restriction. When Bear and Lehman failed, their ratios were north of 30-to-1!

And with a Supreme Court ruling that allows these mega-rich institutions to spend a disproportionate amount of cash to support candidates that won’t regulate this behavior out of existence, the likelihood of a Congress that is bought and paid for by special interests instituting the kind of change that will stop this kind of “reward for recklessness” in the future is exceptionally low. That’s not sitting right with me. In the real world of reckless individuals, someone causes lots of damages, there are lawsuits and payouts. Where is the payback from the big moneyed companies and individuals who have left a path of destruction in their avaricious wake? Where is Earth vs. Financial Institutions that Caused the Meltdown? Or are we going to live in a world where a reckless drunk driver who crashes his/her car resulting in profound mayhem is let off scot free and dropped off at the corner bar with a gift certificate?

I’m Peter Dekom, and I still am shocked at how bad behavior is rewarded among the power elite!