Word that Wall Street bailout bank total compensation (base and bonus) will likely be very high again this year, is almost certain to spark renewed righteous indignation among at least some U.S. investors/voters. It's a valid complaint, given the mistakes -- and in some cases outright fraud -- by the nation's investment banks. But it's best to express the complaint, and move on. And the reason is obvious enough, as New York Times (NYSE: NYT) business journalist Floyd Norris reminds us.
A half-year ago, Norris incisively observed that, "Justice and success don't come together in the solution for the financial crisis."
A matter of priorities
In other words, if you want success, there won't be justice; but if you want justice, the plan to solve the financial crisis won't succeed.
Rather than attempt to radically change the financial system during its moment of crisis, the U.S. Federal Reserve, the Congress, and now two administrations have correctly remained focused on stabilizing the banking system, getting in place a program for toxic asset removal, and being at-the-ready to allocate additional funds to facilitate the above and to provide additional fiscal stimulus. And the above, incidentally, is also consistent with the American political culture of sticking with the stakeholders in the current system, and implementing reforms, rather than creating an entirely new system, which is what a European nation would do.
Later on, after the economy is growing at adequate rate with substantial job growth (this may be a few quarters down the road), the nation can go about investigating and determining who or what public policies were most responsible for the financial crisis and the resulting recession. Don't worry: they'll be enough blame to go around.
Further, I would still argue that despite paying federally-subsidized bonuses to some of the very people who got us into the financial crisis in the first place, if the nation, backed by its resources, and by the knowledge amassed about economics and monetary policy over the decades, and guided by calm, candid analysis, arrives at the destination called Economic Health, it will prove to be the better road taken.
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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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Reader Comments (Page 1 of 1)
7-23-2009 @ 5:03PM
Brian said...
Justice must come or overall there will ultimately be no Economic Health. It maybe a question of timing but the ill gotten gains will not be soon forgotten. For now the revenge will happen in the tax code. The reforms in executive compensation will be more circular but new investor powers will tackle that at the behest of a truer market valuation that overrides the incompetence of the boards.
7-23-2009 @ 9:28PM
ij70 said...
People are going to vote with their wallets and pull money from institutions that are too obvious and since reporters need to make living too, we are going to hear about such institutions. :-)