So far the U.S. has committed $12.8 trillion to bailing out Wall Street. Does this mean that Wall Street CEOs made mistakes? Apparently not. Because if it did, the Wall Streeters who cost taxpayers all that loot would be out of their jobs.
A few have moved on -- consider Merrill Lynch's former CEO Stan O'Neal, who, after leaving the investment bank with a then-record $2.24 billion loss, received a "kick in the rear" amounting to a $161 million retirement package. (O'Neal is just one of the Harvard MBAs whose destruction of the global economy is prompting some navel gazing at HBS.)
Most, though, are still at their desks, gamely calling the shots. Yesterday, Treasury Secretary Tim Geithner suggested it could be time for that to change.
As I posted, it's illogical that an auto industry CEO should pay the price for his failure while Wall Street CEOs get a trillion-dollar mulligan. But as today's puff piece on Steve Rattner, the Wall Streeter who fired General Motors Corp. (NYSE: GM) CEO Rick Wagoner, reveals, it is different when a Wall Streeter fires a Main Streeter. (Actually with Rattner engaged in an orgy of self-promotion, as a second puff piece suggests, he could be upstaging his boss, Tim Geithner -- which may not go over so well with President Obama.)
It could be a much more delicate matter for a Wall Streeter like Rattner to fire another Wall Streeter. And that's a problem for an administration that is crawling with them -- including economic adviser Larry Summers, who got $5.2 million from $30 billion hedge fund D.E. Shaw to give speeches that would draw in wealthy clients.
Until there is some other way for talented people to make that much money that fast, it is hard to believe that Obama's Wall Streeters will start firing their own, since it would strain their ability to reenter the game after their government service is over.
But let's assume for a minute that Geithner was serious about canning the individuals who led the financial system into catastrophe. He could demand that each Wall Street firm requesting additional taxpayer money put together a viability plan -- just as he did with the auto industry. (A mere stress test won't do). Then if the viability plan was not viable, Geithner could fire the responsible CEO.
Having really smart people running the country is a double-edged sword. If they come up with solutions that are in the country's best interest, it can be good. If they get clannish and protect fellow club members regardless of performance, it can be a disaster.
We'll soon see which it is.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.
Closing Bell: Can't go up every day (BAC, HE, HPW, COMS, BRCD, WMT, AMD)
Wal-Mart grows profit and cash flow in Q3, but comps still ailing
Chasing Value: Ten stocks for 2010 -- Part 2
Reader Comments (Page 1 of 1)
4-06-2009 @ 10:42AM
Lucho said...
Hi, let me say that this is a great blog, it's so useful and interesting so I'll put it in the topten in my blog: http://lanuevaeconomia.com/
Thanks for your blog.
Lucho.
4-06-2009 @ 11:09AM
BHarrison said...
Every CEO and Board of Directors member who have suported the CEOs whose corporation has lost substantial monies on the "derivatives", the pseudo-"drivatives", pyramid and Ponzi schems and who have been paid enomrmous salaries, bonuses, and "other compensations" should be purged from our business enterprises.
Those who used the fraudulent, unreasonable, and undsound business practices should be thrown out of our business enterprises and ANY participation in the recovery system. These supposedly "bright and talented" business leaders are ONLY talented in defrauding the stock brokers and the tax payers. How much difference is there REALLY between them and Bernie Madoff? Not much really when one considers all of the factors. Fraud is fraud, is fraud. "A rose by any other name is till a rose."
These CEOs and Board of Directors have merely shown their "true colors" and nature, which certainly should disqualify them from ANY participation in our business enterprises or government recovery efforts.
Those who should be purged from our business enterprises are EASILY and CLEARLY identified by the financial facts of the corporate losses and their exorbitant salaries, "bonues", and other compensations . . . there cannot be any rationalized "hair splitting" about these financial facts . . . It is what it is; and they are who they are. So, why are these people still employed at these corporations?
4-06-2009 @ 11:14AM
BHarrison said...
Let us not forget that these INEPT, INCOMPETENT and/or CORRUPT CEOs could not have orchestrated and perpetuated these FRAUDS without the tacit approval and support of the MAJORITY of their Board of Directors, and the Congressmen who 1) "relaxed" the regulations that were in place, 2) allowed existing regulations to expre without renewing them, 3) vehemently opposed, and VOTED AGAINST implementation of any NEW REGULATIONS to address these problems as they arose during the last eight years.
So, yes these CEOs need to be ousted from our business enterprises and prohibited from being a part of the government recovery programs; but these other "enablers" and tacit supporters . . . the Borads of Directors and Congressmen . . . should also be removed.
4-07-2009 @ 9:15PM
Joe said...
Athletes are the most overpaid people on the
planet. Many of the stadiums and arenas are subsidized by tax payer dollars. If they pay it back
we wont cap their pay. See if Obama can handle
taking down the sports world. I love sports but
whats good for one industry is good for all. In
fact lets all be poor and contract our nation into
the ground.
Joe