Geithner Is Stalking Horse for Rage at Wall Street: Albert Hunt
Commentary by Albert R. Hunt
bloomberg.com
Nov. 23 (Bloomberg) -- Let’s stipulate: Lloyd Blankfein and Jamie Dimon are enlightened, broad-gauge chief executive officers, among the finest in the world.
Their firms, Goldman Sachs Group Inc. and JPMorgan Chase & Co., are indispensable in raising capital for companies, creating wealth. They’ve repaid the government assistance money received in the financial crisis and are showing record profits today. Finally, I am no expert on the ways of Wall Street.
Still, if Goldman and JPMorgan hand out record bonuses next month -- reportedly they’re planning more than $20 billion combined -- in this economic and political climate, it will underscore why, whatever their Wall Street colleagues think of them, they are hated by Main Street.
The leading edge of this anger could be seen in Congress last week when Treasury Secretary Timothy Geithner faced calls to resign. One lawmaker said he should never have been hired.
Geithner also has become an issue in the Connecticut Senate race. Christopher Dodd, a Democratic senator from the state who is chairman of the Banking Committee, faces a challenge from Republican Rob Simmons, who called on Geithner to resign over the bailout of insurer American International Group Inc.
The Treasury secretary is a proxy for the real animus, directed at Wall Street.
Blankfein Apology
Goldman is trying to pre-empt criticism; last week it announced a $500 million program to help struggling small businesses; Blankfein, for the first time, apologized for the firm’s role in the financial crisis that began well over a year ago.
This, and other charitable gestures by Goldman and JPMorgan, are chump change compared with the bonuses.
They also stand in stark contrast to the actions of a fabled corporate chief executive officer three decades ago. Chrysler Corp.’s Lee Iacocca, who successfully sought a government loan guarantee to save his foundering company, cut his own salary to $1 a year. As the government loan guarantee worked and the company’s situation improved, so did his compensation, rising to a total of $20 million. There was no resentment; he became an American folk hero.
These big New York banks, especially Goldman, claim they owe the taxpayers little, they weren’t the ones rescued, and any money forced upon them was promptly repaid.
Taxpayer Bailout
Rubbish. Federal Reserve Chairman Ben S. Bernanke, former Treasury Secretary Henry Paulson and his successor, Geithner, by tapping the American taxpayer to the tune of trillions, rescued the U.S. economy from the abyss. If we’d gone over the cliff, would Blankfein and Dimon be sitting in their comfortable executive suites today?
The public isn’t confused. Almost two-thirds of Americans, in a recent Time magazine poll, say Wall Street executive pay is completely out of sync, and more than seven in 10 want the government to limit this compensation.
It infuriated people when Blankfein, 55, said this month in an interview with the Sunday Times of London that Goldman Sachs is “doing God’s work.” In March, the usually smoother Dimon, 53, assailed politicians for populist rhetoric, saying government officials have to stop the “vilification of corporate America.”
Actually, the public thinks the government has been too soft on Wall Street. Blankfein and Dimon should test-market their views about God’s work or populist demagoguery on a jobless welder in Steubenville, Ohio. If he’s angry now, when his town has an unemployment rate of more than 13 percent, imagine the rage if Wall Street pays out record bonuses at year’s-end.
‘Marie Antoinette’
“Marie Antoinette would be embarrassed by these guys,” says Nell Minow, the irrepressible shareholder advocate and corporate-compensation watchdog who is co-founder of the Portland, Maine-based Corporate Library. “They have no clue as to how much they’ve devalued the brand of American capitalism with this sense of entitlement, the arrogance; they genuinely feel the world will come to an end if they don’t take everything.”
I’m picking on Goldman and JPMorgan because they are the cr‘eme de la cr‘eme of global corporations. Goldman is the most renowned financial firm of the past half-century, producing a remarkable array of leaders that includes former Treasury Secretaries Robert Rubin (arguably the most successful in that post since Alexander Hamilton) and Paulson.
‘Omaha Beach’
Blankfein, whom I’ve never met, seems like a fellow with good values. In 2008, with the world economy teetering, a group of Goldman executives took a limousine for a crucial meeting at the New York Federal Reserve. One executive said he couldn’t take any more tension. “You’re getting out of a Mercedes to go to the Federal Reserve,” Blankfein replied, as described in an account in the New Yorker magazine. “You’re not getting out of a Higgins Boat on Omaha Beach.”
Dimon may be America’s CEO. He was publicly ousted and humiliated by his mentor, Citigroup Inc. CEO Sanford Weill, a decade ago. He came back at Bank One Corp. and then JPMorgan, fashioning a legacy that far outshines Weill’s, who created a company that was both too big to fail and to succeed.
“I love Jamie Dimon, he’s the best; at Bank One he borrowed money to buy company stock,” Minow says. “But on these bonuses he just doesn’t get it.”
Suppose these two smart men, instead of handing out record payouts, decided to use only one-third of this pot for bonuses, with a disproportionate share going to less-affluent employees. Another third would be invested in small businesses in struggling communities, five- or ten-fold what Goldman announced last week. The final third would be given to charities, like the Local Initiatives Support Corp. or helping kids of the jobless get swine flu shots.
Goldman and JPMorgan would continue to flourish; they aren’t going to lose a lot of talent by cutting still lavish bonuses. And Blankfein and Dimon might join Iacocca in that rarified air of revered chief executives.
(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)
To contact the writer of this column: Albert R. Hunt in Washington at ahunt1@bloomberg.net.
Last Updated: November 22, 2009 14:24 EST |
