Public Outrage
There have been two bouts of public outrage over the last few months that struck me as weird and uncalled for and theyre basically related:
—Private Jets for executives of companies receiving bail-out money (primarily in the auto industry)
—Large retention bonuses for executives of companies receiving bail-out money (primarily in the financial industry)
I understand why these two things piss people off. Everyone is hurting in this economy; if you have any exposure to any major investment vehicle, you got hurt in the last year. Job security isn’t what it used to be, you almost definitely know someone that’s been laid off, etc. Times are tough. And when times are tough, jealousy ensues. Fuck that guy, he made $10mm this year. That fucking guy, with his big fucking house, fuck him! But what they’re really saying is I wish I was that guy.
And almost everyone thinks they pay too much in taxes beacuse no one likes taxes. You pay out a big chunk of your income for some abstract greater good that’s hard to fully comprehend. Even as a long-time consumer of government services such as my stellar, way-better-than-private-options public schooling and the massive public transportation system I used to get there, or the people who pick up my garbage, put out my fires, clean my streets, protect my country, etc., I still wish my taxes were less so I had more money to buy stuff or save for the future.
So considering those two things, it makes sense that people would be pissed off at the intersection of these two issues; tax dollars going to rich people who they perceive “caused” the economic melt-down.
When financial firms were breaking records of profitability thanks to the brilliant ivy-league math quants, no one was complaining. And no one that retired and cashed out their retirement savings or closed their positions at the market’s peak in Oct 2007 (Dow was @ 14000 vs. early March 2009 @ 6500) is complaining or being asked to return their money. But now, when things are bad, everyone is noticing that Wall Street was over-leveraged and the media is using Wall Street as an icon for greed and as a punching bag.
Bitching about AIG bonuses is stupid. It’s even more stupid than bitching about earmarks in the federal budget. The actual sum we’re talking about is .1% of the TARP money. That’s like giving your kid a $10 allowance and being super pissed because he wasted 1 penny. Yes, money is absolute and its more than a % issue and $100mm+ is a lot of money, regardless of its percentage of total. But I believe it is in the public’s best interest (now that we own significant parts of all of these businesses) to keep the best talent there. Paying out a huge bonus isn’t rewarding failure. It’s incetivizing people with high market value to stay and fix the problem.
People are acting like these guys intentionally did something wrong. They didn’t. They were doing what their firms did to make money, and it turned out there was a fundamental problem with that strategy that most people didn’t foresee. No one involved in sub-prime mortgages, neither the lender nor the lendee, thought they were going to default. No one with 30:1 leverage thought they were going to crash the system. And if they hadn’t crashed the system no one would be complaining.
I want the CEO of Ford to ride a private jet because his time is too valuable to go through security at JFK. I want him getting to where he’s going as fast as he can get there so he can get his ass back in his boardroom and figure out how he’s going to revolutionize the fuel economy and fix his company. And I want him to be paid a gajillion dollars to do it, because he could get that money elsewhere. I don’t want government aided companies being forced to only pay their executives $500k, because then their executives are going to suck.
$500k is too little? I would love $500k! That’s a fortune.
Yeah, well you’re not the CEO of Ford Motor and you probably never will be.
And now that I own like 80% of it, I want the best possible people to work at AIG and fix the problems there. And I want the salaries at my company to be competitive with Morgan Stanley and JP Morgan because so that we rebound and get a fair return on our investment.
I am a registered Democrat and will be until the day I die, even if one day I make $50mm or $100mm or $1bn. Anger over bonuses and private jets is not a point on the political spectrum; it’s jealousy and misplaced anger.
