Page 1 of 2 Bring on the banking dullards
By Julian Delasantellis
There was nothing in the background of the late senator, Daniel Patrick
Moynihan, that would indicate just how far off the reservation he would travel
in his life, that he would become, in essence, one of the first
neo-conservatives.
Raised in a time and fashion that mainly produced apparatchiks for the welfare
state, Moynihan set his own course very young. As an assistant secretary of
labor during the John F Kennedy and part of the Lyndon B Johnson
administrations, he wrote reports suggesting that the American poor might be at
least partially responsible for their predicament, an outrageous apostasy from
the then dominant liberal canon.
He later went on to be US ambassador to the United Nations (1975-76) and the
first in that position who believed that he fulfilled
his charge by insulting the Third World. Later, as a Democratic senator from
New York state, he played a key role in torpedoing the Bill and Hillary Clinton
healthcare initiative of 1993-94, arguing that it was more important to cut the
poor's public assistance benefits than to give them healthcare.
In a 1993 article in The American Spectator called "Defining Deviancy Down",
Moynihan noted how standards of public conduct and deportment had seemingly
declined over the recent past; once it would have been outrageous for suburban
men to attend a neighborhood barbecue in something other than a suit and tie;
now, people attended nationally televised sporting events in garb that would
make strippers quake and the homeless blanche.
But what can be worse than the current situation, where it's hard to find a
public space not bathed in eau de cologne de urine. This is another feature of
modern life - how competency has been defined down; way, way down. This becomes
obvious in the renewed debate over executive salary and benefits that erupted
in Washington last week.
United States President Barack Obama may be a lot of things, but a populist is
not one of them. His economic stimulus plan drove millions who once thought
that anything in the shopping aisle except Maxwell House was carcinogenic into
buying teabags; his health plan has stoked fears that Houston hearts were going
to be forcibly removed for shipment and transplant in Hanoi. His cap-and-trade
proposals for global warming raise fears that automobile drivers and other
consumers will have to pay more for petroleum products. Obama has made little
attempt to counter the cap-and-trade fears, probably because, at their heart,
they're true.
But one area where the administration has hit the American public's nerve, just
as sure as fugitive Nazi dentist Christian Szell (Laurence Olivier) could hit
the spot in Marathon Man, is in the area of financial-sector executive
compensation. After getting burned on the issue early in his term with the flap
over senior executive bonuses at bankrupt and now government-owned AIG, it is
obvious that Obama has radically changed tack.
Maybe the long summer the Obama team spent having the health insurance industry
clean the soles of shoes by rubbing on their suits whatever they picked up in
the gutter has finally focused their minds a bit. Maybe they finally realized
that, in actuality, both the individual faculty of the Harvard University
Economics Department and the members of the group who put a handmade sign on a
Chicago bridge calling for the government to "Jail 'Em - Don't Bail 'Em" during
a bankers' convention have exactly the same number of votes - one.
The media have taken to calling government officials with purview across
different departmental jurisdictions "czars", so, naturally, there is a czar,
Kenneth I (otherwise known as corporate lawyer Kenneth Feinberg) to deal with
issues of executive compensation regarding the seven companies with outstanding
Troubled Asset Relieve Program (TARP) loans from the government. These are
Chrysler, GM, GMAC (General Motors' lending arm), Chrysler Financial, AIG,
Citigroup and Bank of America.
On Friday, Feinberg produced a report with his recommendations for action.
Suddenly, at least among those affected by the process, the relentless
snickering by those who derided the president as a weak-kneed "Obambi" were
nowhere to be heard.
For the top 25 paid executives of the seven, reading the Feinberg proposals
must have seemed like an invitation to be extras in a new movie about the
gulag. Cash salaries are to be capped at US$500,000; an average 90% pay cut.
Cash bonuses that wildly fluctuate from quarter to quarter are to be eliminated
in favor of grants of stock that cannot be cashed out for an extended period of
time, thus giving the recipient an interest in the company's longer-term
performance and viability.
No grants of stock bonuses will be permitted until the company has fully repaid
its TARP obligations, and no attempt to evade the restrictions through
donations to severance or retirement accounts will be tolerated. Maybe it
wasn't the Winter Palace being stormed, but, at the very least, the ski-lift
lines at Vail should be that much more reasonable this season.
Although it is true that, as the detractors of the plan put it, Czar Kenneth's
plan to re-indenture the serfs of Wall Street only applies to 25 people, on
Thursday the US Federal Reserve released new guidelines that sought to "ensure
that compensation packages appropriately tie rewards to longer-term performance
and do not create undue risk for the firm or the financial system". These would
not be limited and applicable to just a few, but to "all employees who have the
ability to materially affect the risk profile of an organization, either
individually, or as part of a group".
If fully implemented, these proposals could lead to one of the greatest changes
in the relationship of the American elite to the masses in half a century,
perhaps more. No longer would the elite's status be mostly predicated on what
they could do for themselves or for their bank in the short term. Now, some
consideration would have to be provided for the long-term soundness of the
bank, and, by extension, society as well. [1]
But, like the Czarina Alexandra complaining about the cold in the Yekaterinburg
root cellar where she and her family were about to be shot, some of the ancien
regime just don't seem to get it. "Mr President", one reportedly complained to
Obama after the outlines of the plan became known. "Last year I made $30
million, but under these arrangements I'll only make $10 million. How is this
fair?" he asked the chief executive of a nation with now over 15 million people
unemployed.
On hearing this, and knowing Obama's penchant for cooperation among the Group
of 20 countries now charged with guiding the global economy, I wonder if he was
ever tempted to call British Prime Minister Gordon Brown to inquire as to
whether Monty Python's Flying Circus still had any nominating forms left over
for this year's Upper Class Twit of the Year prize.
Like borscht, charges of "communist" and "Trotskyite" flew thick through the
air on release of the Treasury and Federal Reserve initiatives. That should not
be all that surprising; similar charges dog this president when he tells
toddlers to brush their teeth.
A more reasoned objection that gets to the more substantive neo-conservative
objections in this was to be found on the blog of National Review Online, the
"Corner".
Three things about the Obama administration's
publicity-seeking move to curb executives' pay at bailed-out companies: It is
inevitable, it is stupid, and it is inevitably stupid ... The most highly
sought-after talent surely will exit the targeted companies and, short of
giving some presidential czar or another the power to reduce executives to
indentured servitude, there is nothing that the government can do to stop them
from taking very lucrative positions at firms free of the TARP taint. Wall
Street is powered by financial innovation, and we are willing to bet that
billion-dollar performers will be able to connect with multimillion-dollar
paychecks, even under the stern gaze of the people's tribunes ... Who wants to
do business with a firm that cannot pay top talent what it commands on the open
market?
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