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Drivel from Wall Street

No one has ever acused me of being a financial expert. In fact, until the past couple of years no one has ever accused me of doing a very good job balancing my checkbook.

But I (sometimes) know the difference in fog in the air and smoke being blown up my tailpipe.

And I just read at the Daily Beast what I think might be the ballsiest and whiniest and most ridiculous defense I've seen to date of the fatheads on Wall Street who helped facilitate the current financial meltdown.

CNBC's Charlie Gasparino, in an article headlined Freakout on Wall Street, defends continued big salaries for the people running the almost-failed-banks-turned-welfare-banks on Wall Street, with two detailed arguments based on the following premises:

  • That little guys - waiters, cab drivers, bartenders, etc. - will suffer if high rolling folks on Wall Street don't eat out and drink out and spend money in restaurants and taverns, and so on.
  • That by limiting the pay of Wall Street's top bosses at companies surviving on tax payer dollars, "we" will drive those companies' "best and brightest" to other companies that won't limit their pay. 

I know it's inevitable that some of my friends who are 1,000 times better versed in this topic than me (You know I appreciate you Monty!) will scold me and remind me that this meltdown may have well been seeded in the 1960s.

Still, this has to be the weakest appropriation of trickle down economics theory I've ever seen. Waiters will suffer if the greedy - Gasparino's word, not mine - don't eat out as much?

Waiters and the like are already suffering. And you know, that's what happens when you take government AKA tax dollars to run your business: you invite the government AKA custodians of tax dollars to tell you what you can and can't do with that money. Dance with the Devil...

And what's up with this "best and brightest" argument? John Thain, former CEO of  Merrill Lynch - the guy who spent $35,000 on an old toilet that you can't even relieve yourself in - made that argument on CNBC too.

"Best and britghtest" are usually responsible for companies' success. I want no parts of the kind of "best and brightest" that ran Citibank and Merrill Lynch, among others, into the ground.

If I'm running Bank B, a successful bank that hasn't folded and isn't operating on tax dollars, and you, former head of the now defunct Bank A, apply for a job with me, why would I want your plague on my payroll? I'm gonna avoid you like an infectious disease.

You know who on Wall Street should get megabucks? Those folks running those banks that haven't applied for welfare.

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BobG

"That by limiting the pay of Wall Street's top bosses at companies surviving on tax payer dollars, "we" will drive those companies' "best and brightest" to other companies that won't limit their pay."

If the other companies can run without needing a bailout, then they probably already have the best and brightest.

ɔıuʎɔıʇsɐɔɹɐs ǝɥʇ

Argument #1 might make sense if the numbers of "high rolling folks on Wall Street" were a significant percentage of those who are served by the little guys - waiters, cab drivers, bartenders, etc. I guess the rumors that arrogance abounds on Wall St are true after all.

Argument #2, unfortunately, may be a sad truth. Competition. "Come join us at Walkoverya Bank! We won't limit your pay like the guys down the Street!" Ooops, there go the best and brightest. But you know, I'm sick of demanding the best and brightest. Right now I'd settle for Second Best and Least Arrogant.

The CEO

I sent you my response in e mail. The Miami Herald blog system refused to accept my data. I didn't say anything really, really bad, I don't think, except maybe Socialism.

James B.

Monty, I plan to post your email comment. Not sure why it got filtered out. In fact, your comment didn't even register with Typepad. It didn't even show up in the spam filter. Not sure how that happened.

James B.

Too true, Bob G., too true.

Sarc, we are in 100% agreement on Argument1, but for Argument2 I refer you to Bob G's comment.

The CEO

Walkoverya Bank (Wachovia) was also sold. It no longer exists, for the record.

The system simply said it wouldn't accept my data. I thought it was either because I mentioned CNBC or another writer, not from the Herald. Everyone knows the best are in Miami, right. I hope it takes this.

James B.

From The CEO via email: Sorry to disappoint you, but I am not here to scold, but to concur with you. Gasparino is merely looking at the number of top management who left top management at Merrill Lynch to go to Deutchbank and extrapolating. The Wall Street counter argument is, where are they going to go? Almost every bank took TARP (Troubled Asset Recovery Program for the record) money, and in the beginning, Secretary Henry Paulson almost literally forced TARP money down the throats of the major banks.

Earlier today, Jeff Immelt, CEO of General Electric, spoke out against limiting CEO and executive pay at $500,000. He pointed at Jaime Dimon, CEO of J.P. Morgan who steered his bank cleer of the entire sub-prime mess yet had taken $25 billion of TARP funds after buying Washington Mutual, the big mortgage bank, at the government's request. Sort of the way they request you to pay taxes so very gently. To continue, Mr. Immelt argues that it would be a shame to lose a Jamie Dimon by cutting his salary after you pushed him into both buying a distressed bank, and then pushed him into taking TARP money. The rules of the game just keep changing. Now certainly not all the CEOs are Jaime Dimon-caliber. There is talk of claw-backs of the huge bonus' guys line Stan O'Neil of Merrill Lynch etc. took and then left, leaving Merrill leveraged to the eyes when the downturn hit. We're talking hundreds of millions. That's also on Walls Street and you can hear Dylan Ratigan, also on CNBC, and Maria Bartiromo and Larry Kudlow, CNBC, with Senators and Congressmen. Kudlow is a conservative Wall Street economist who is excellent, and an authoritative supply sider. You want the supply side story, he and Art Laffer are the two to believe. Laffer is Kudlow's mentor, and you can see him on Kudlow's show fairly often.

Now, let's dispel waiters and other service personnel. There are a lot of other rick people all over New York to take up the slack of the few Wall Streeters involved. 47th Street is still flourishing and women's handbags costing $2000 still fly off the shelves on 47th Street. The streets are still crowded and so are the cabs. I don't eat in the restaurants where Gasparino has lunch and films interviews because I'd gag on the check.

The reason I would be against the cap on salarys would only be because I don't like government intervention in the markets. I tend to be a Libertarian politically and feel that less government is the best government. Yet these are desperate times and we have chosen a Socialistic v a Capitalistic response (let us remember that Libertarianism is a political system and Socialism and Capitalism are economic systems) so let us be consistent. I have no problem with limiting the salaries and giving the executives stock that won't be exercisable until after taxpayers are repaid. Pay for performance.

For $500,000, I consider myself among the best and brightest. I am available, ready, willing and able. All I ask is a place to live close to where I'm working because this job isn't going to be easy. Want to join me?

P.S. Charly Gasparino speaks for himself, not for anyone else. Next time I'm in Miami, it's you, me and Mrs. B for dinner, for sure. Some place with napkins and silverware. She deserves it!

James B.

Monty, for $500K a year, I'd say count me in. And it's a deal next time you're in Miami. Just try to give me a few days advance notice so I'll know that I will be in town.

Pamela

I think that "commode" was actually a piece of fancy french furniture and not a toilet. But still...that give me the shudders.

M@

That argument about the "little people" seemed spurious at best to me.

Several months ago, I found myself killing time in a bar in New York City on a business trip. The financial worker on the stool next to me replied to my question about bonuses thusly:

"Well, they deserve it!"

They really do think they deserve it. Boggles my mind. And then the push back in the conservative media after the president capped executive pay (for companies in which the government now holds a major stake and, in some cases, the largest stake). They pointed out that Obama makes a really good executive salary but... so what? We're talking about YOU!

M@

I would pay $35,000 for a toilet that f-cking TALKS to me....

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