Friday, October 23, 2009

Chief Execration Officers Vs Politicians - a silly new class warfare!

We are a very trendy society. Jack Welch and Robert Kiyosaki were trendy when I came to the US in the late 90s. 10 years later, any one who talks about money is a pariah in the newly emerging class system. Post Lehman collapse, any top executives of any company, whether bailed out by US govt or not, taking huge compensations (I guess they just take them - unlike ordinary employees who receive them) will be scorned first by Robert Gibbs and eventually by the president. Actually, time of scorn has passed long time ago, its time for action. Top 25 executives of the companies that received substantial help will see their salary cut by 50% until they pay back all of tax payer money. Federal Reserve is proposing to review pay practices of 28 unnamed giant banks. They are no longer Chief Executive Officers - they are Chief Execration Officers!

Politicians have their fare share of excessive risk taking and wasteful spending. US treasury is deep in debt. Chinese kept bailing out US in the last decade by pumping around 800 billion of recycled dollar. Japan did that a decade earlier and holds around 700 billion of US treasury.

They were also greedy; for the shining legacy of protectors of freedom and proliferates of democracy. 
US spent around 700 billion to over-throw Saddam from Iraq and to transform Iraq into a beacon of democracy in the middle east.

Bankers leveraged big time to play the sub-prime game (a noble side-effect of expanding home ownership to every American family) and US borrowed big time to pay for two wars at the same time. Bankers took excessive risk and got rewarded handsomely. Politicians (both Republicans and Democrats who voted to authorize the war) took excessive risk to get reelected and to be placed on the right side of history - if history turned out to be the way they thought it would.

When the Bankers fail their company and bring the world to the brink of economic collapse; they loose billions of their own money (James Cayne, Ex-CEO of Bear Sterns lost a billion), get sued (Richard Fuld, Ex-CEO of Lehman is sued by State of New Jersey) or get fired (John Thain, Ex-CEO of Merrill got fired after losses at Merrill far exceeded what was projected during the merger with BofA). All of them get humiliated.

Politicians act irresponsibly and fail to provide leadership to combat world's severe problems. Melting ice, rising sea levels, hunger, HIV, religious tensions; the list is long. When Politicians fail their people and ignore inconvenient truths, how are they punished? President got reelected in the middle of two seemingly unending wars. Senator who voted for war in Iraq became the Secretary of State for a president who came to power primarily for his opposition to Iraq war from the get-go. Henry Kissinger won  Nobel peace price despite his role in starting many wars and being accused by some for war crimes!  Former Secretary of the Treasury who praised Gramm-Leach-Biley act of 1999 as 'historic legislation that will better enable American companies to compete in the new economy' is the economic brain power to a President who thinks de-regulation was a mistake and it caused the subprime crisis of 2007-2008. If we think Gramm-Leach-Biley caused the subprime collapse, how about every politician who voted and supported this bill take a 50% pay cut until foreclosure rate returns to normal levels?

So here is an advise to 'angry' politicians. Get some perspective. If Chinese were to declare a forced pay cut on all US politicians until we pay back all of 800 billion dollars, will that be an easy pill to swallow? What goes around comes around. The public is with populist politicians these days; that's because they have short memory. They forgot how bad the politicians were and how much they disliked government in their lives - until the CEOs did worse and made politicians look like angels!

1 comment:

Asish said...

Let me take a different position here. It has always been a struggle for Wall street to embrace a culture founded on morality as we all know the sole goal for Wall Street is to make money. Most of the public outrage makes sense when we disentangle a commonly accepted culture based on morality and the culture in Wall Street, obsessed and possessed by money power. Although the go of that world is good for the economy people will take time to digest. The elected officials are just responding to that public outrage although I personally don't see a deviation from 'business as usual' in the Wall Street.

By the way, I am totally with you on the issue of Nobel (Piece!) prize.