The economic meltdown of firms like Merril Lynch, Bear Stearns, Lehman Brothers, Frannie and Freddie, and soon AIG is doing what no Marxist college professor or Soviet-era sleeper cell has ever managed to do: nationalize a huge swath of the American economy. Laissez-faire capitalism has been chucked out a Wall Street window in a panic, followed by desperate phone calls and face-to-face meetings with the Fed. European socialists are left scratching their heads as America races to nationalize an industry that had just recently been the “poster-boy” of American capitalism.
The US taxpayer is paying for the collapse. This is the same tax payer facing plummeting home prices and 35% credit card interest rates, the one who cannot escape thousands of household debts thanks to the Bankruptcy Reform bill of 2005. Yet the people running 100 year old firms into bankruptcy with hundreds of billions of dollars of debt are able to walk away with tens of millions of dollars in stock options and bonuses.
It’s time to sharpen the headsman’s axe and erect the scaffold. If the US taxpayer is going to pay for the hubris of the banks and investment brokerages, their leaders must be sacrificed for nothing less than the future of Capitalism is at stake. If they are able to walk away from this mess unscathed, then the politicians who allow them to get away must replace them on the scaffold. While this option may superficially appeal to the Obamanistas, his Number Two Joe Biden would be in the first group due to his sponsoring of the Bankruptcy bill that provides more onerous terms on those making thousands a year than those making tens of millions. Politicians from both parties including The One himself have received millions of dollars from the same firms they now criticize. Anyone who thinks that the bloodletting will stay on the GOP’s side of the aisle hasn’t been paying attention.
Lehman Brother’s CEO Richard Fuld’s Future?
There must be blood if faith is to be restored in the capitalist system, where one is rewarded for taking risks and should things turn out badly, suffer accordingly. Being forced out by the board or losing face at the country club is not enough. Corporate leaders must be held personally accountable for the mess they helped create and manage. If we live under a system where the owner of a small restaurant that fails loses everything, then in fairness so should the top executives of a firm.
There is no bailout option for the small businessman. The Fed is not arranging a bailout for Mitchell’s Train, Toy and Hobby store, a local institution after 55 years in North Wilmington that has fallen on hard times and is now closing. There are no golden parachutes for Joe Mitchell, Jack Mitchell and Joan Hicks the current owners. Their employees will receive little if any severance pay, and the loss of the store will mean just as much to the residents of Brandywine Hundred as the loss of Lehman will mean to the denizens of Wall Street.
If there is no safety net for the small business owner or the consumer (thanks Sen. Biden), why should there be one under CEOs like Merril’s John Thain, AIG’s Robert Willumstad or Lehman’s Richard Fuld? Do we live in a country where the government provides a safety net for the nation’s few woven together from the sweat of the working many? If these institutions are now too big to fail, should they also be too big to succeed on their own? Should draconian regulations be put into place along with the bailout- or is the American taxpayer expected to fund the debacle knowing full well that he or she will be responsible for the next sure-bet placed by a company CEO that turns sour?
These are important questions that must be answered, but until they are there must be blood. The human beings on the boards of these dying and defunct companies should lose everything, and have their income garnished by their creditors – the shareholders of the firms they drove into the ground – just like anyone who files for bankruptcy and does not have their debts discharged (thanks again, Sen. Biden).
There must be blood for nothing less than the very soul of the capitalist system is at stake. Great rewards can only be justified by those who take great risks, and if it turns out that those risks weren’t real, than the rewards should be forfeit. Without blood the system is a sham, and its critics proven right all along.
Bloomberg columnist Michael Lewis suggests that the following three men should be at the top of the scaffold stairs:
1) Christopher Cox. He’s the chairman of the Securities and Exchange Commission, and so has the job of regulating these companies that helped make it possible for every poor American to get a mortgage and are now, as a result, falling apart.
That, in itself, is no reason to blame him. He inherited a broken operation: the SEC has been morally bankrupt for some time now. The people who work for the place—especially the ones who call the shots—have for years had a disconcerting habit of leaving their low-paying government jobs regulating Wall Street firms for high-paying ones at those same Wall Street firms.
They are meant to guard against systemic corruption when they are themselves systematically corrupt. It’s hard for people who are paid $85,000 a year to police people who are paid $15 million.
Happily, you can still blame Cox for something. He went as far out of his way as he could to enable the brokerage firms by harassing the small group of informed financial people who have been trying to tell the truth to the markets: the short sellers. They bet against the stock price of a company and so have always had a bad reputation with the public. But in this case, they are the closest thing we have to heroes.
A man named David Einhorn is a case study. He runs a hedge fund called Greenlight Capital, which sells short some stocks and buys others. That is, he doesn’t just bet against companies but for them, too.
Still, for some time now, he’s been standing up in front of large audiences, announcing that he was short Lehman Brothers stock, and then explaining in great detail its dubious accounting practices. The SEC responded by demanding to see his firm’s e- mail, hinting darkly that he was part of some conspiracy to drive Lehman Brothers out of business, and generally making him feel that he’d pay a price for telling the truth.
Christopher Cox is probably a nice man who has no real idea what just happened. But for the way he treated people with the nerve to speak the truth to power you should feel free to blame him anyway.
2) The Wall Street CEO.
Stan O’Neal was the chief executive officer of Merrill Lynch, Dick Fuld was the CEO of Lehman Brothers, James Cayne was the CEO of Bear Stearns Cos. Each took home tens of millions of dollars in pay for making the decisions that destroyed his firm.
Stan the Man
Of the lot, O’Neal deserves perhaps the greatest scorn as he took a business that wasn’t well designed to take huge trading risks and wagered it all on a single bet.
He screwed up the lives of more innocent people than the others. But interestingly, if any of these men had behaved well and resisted the pressures and temptations of the moment, his firm would have, for several years, dramatically underperformed the competition. Probably he would have lost his job.
Let the axe fall and the blood flow into the gutters. The time of reckoning is at hand.