Here’s a thought what an incredible tin ear these people have. I wrote about this in an earlier post. Stepping back from the issue just a little I have to ask the question did no one in this company realize what the public reaction once the news of the bonuses got out. Seems to me they didn’t. Are they so arrogant and obtuse? I guess the answer is yes.
Company after company on Wall Street and the banks that got us into this mess just don’t get it. The landscape has changed. It seems to me that what they think will happen is this: the government will rescue them by spending billions if not trillions of dollars to right the mess they help to make. Then these firms believe business will return to the way it was before this mess. They expect they will still be getting 7 figure bonuses. Over and over again we get this well we must pay bonuses to keep people. Guess what in the current economic climate you don’t. If you insist on doing this you do so at your own peril.
What these guys really don’t seem to get about the bonus issue is how much it endangers their future survival. I’d like to see anyone try and come before Congress and ask for more money for AIG. I don’t think it is going to happen.
There's a great article from the Post by Steven Pearlstein. He talks about Wall Street's refusal to learn. And this goes beyond AIG. He talks about the chairman of Wells Fargo Richard Kovacevich. Essentially Kovacevich complained about:
how unfair it is that the government forced his bank to take $25 billion in bailout money last year when it could have easily raised private capital -- and then compounded that outrage by changing the terms of the deal and forcing Wells to cut its dividend. Kovacevich said it was "asinine" for the Treasury to order his and other big banks to undergo a special "stress test," explaining that well-run banks like Wells were routinely doing their own stress tests.
Kovacevich apparently believes that because his bank is still relatively healthy, he and his shareholders shouldn't have to assume the same costs and burdens as banks that aren't, particularly when those costs and burdens are imposed by incompetent government officials. That's the way it works in America.
Except, of course, when it doesn't. The reality is that, if the government had not stepped in to take over Fannie, Freddie and AIG; had not recapitalized Citigroup and Bank of America; had not provided the guarantees to allow for the orderly sale of Merrill Lynch and Bear Stearns; had not become the buyer of last resort for commercial paper and home mortgages, then the entire financial system would have melted down by now and taken Well Fargo and its arrogant chairman with it. Rather than bellyaching about how un-American it all is, Kovacevich ought to be thanking the government and asking what more he could do to help.
So now what to do. Well we can continue to be angry which we will. We can blame people. There's a great deal of that to go around. The Republicans want to blame Treasury Secretary Timothy Geithner. They say he should have know about the bonuses and stopped them. Well I think many people should have known. That would include Congress and the Republicans in. It seems the a notice was filed with SEC last year like in May stating when the bonuses would be paid. There was a provision in the stimulus bill that would have prevented such bonuses from being paid but the provision was dropped from the final law. I say enough of the blame game.
What needs to be figured out is how to make sure it never happens again. That means there needs to be regulations to prevent this in the future. Regulations that Republicans in the past wanted no part of. President Obama rightly pointed this out. Some of the people hottest under the collar are the same people who opposed regulations or oversight that would have prevented such things from happening.
I also have a different perspective on the guy who's running AIG, Edward M. Liddy. Talk about a thankless job. Read about his testimony by following this link. Could he have done more to stop this? Perhaps. I'm not sure. But he has taken the unusual step of asking people who received the bonuses to give them back. That to me is a first step.
I listened to Liddy's testimony on a feed and the highlights shown on the news. AIG has been able to reduce the derivatives portfolio by $1.1 trillion. But there's still a long way to go. He thinks mistakes have been made. He said he would never have set up a bonus system like this. He felt it had to be honored for the company to get ride of the remaining $1.6 trillion in toxic assets.
At the end of the day I have a suspicion that this is the right guy to do that job. All you have to do is look what he did. He came out of retirement to head AIG and try and fix this mess. He's taking no salary. Also, no bonus as far as I can tell. He appeared on the Hill to face hours of tough questioning. I have to think he was thinking why the hell did I agree to do this. But he did. Maybe he's made some mistakes but he stepped up to the plate. When his country called on him to help, he said yes I'll help. I'm beginning to think we need more people like Edward M. Liddy, flaws and all, to step up to the plate and say yes I'll help.
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