Eliot Spitzer: Wall Street bankers expect big paychecks — even when their banks fail
“My View” from the Sept. 27, 2012, edition of “Viewpoint with Eliot Spitzer.”
Sheila Bair, former chair of the FDIC — one of the few heroes to emerge from the financial crisis — has written a marvelous new book, “Bull by the Horns: Saving Main Street from Wall Street and Wall Street from Itself.”
She was inside the room when the major bailout decisions were being made, and she was one of the few pushing for real accountability for Wall Street and real protection of homeowners.
In the book — and last night on the show — she told an amazing vignette. When the infamous TARP [Troubled Asset Relief Program] funds were being discussed with the CEOs of the major banks — all called to Washington for the critical meeting with the Treasury Secretary — and the financial world was literally teetering on the brink of disaster, the first question asked by the CEO of Merrill Lynch, John Thain, was not about how the system could be saved, the economy preserved, the integrity of the banks upheld.
No, he asked if his compensation was going to be cut. This is the guy who spent over a million dollars putting new carpets in his office, paid for by shareholders and then taxpayers.
Today, I participated in a radio broadcast for BBC and NPR, again on the topic of the financial crisis. On the panel was Bethany McLean, a great author and one of our favorite guests. She made a really important point: that flawed compensation structures that gave bankers perverse incentives to take great risk at the expense of others was at the root of the crisis.
But, she pointed out, we as a society did not and do not object to high pay when people perform. It’s when they are compensated with huge paychecks and bonuses even when they fail — and then are compensated again and again — that we are troubled. She’s exactly right.
We do not object to Derek Jeter’s big paycheck or Warren Buffett’s. They earned them. The Thain vignette and his demeanor trouble us because he did such harm and yet continued to feel so entitled — no sense of remorse or recognition that his stewardship had led to the troubles and that maybe there should be consequences. He and others on Wall Street personified the world of “heads I win, tails you lose.” Or put another way, socializing risk while privatizing gain.
So have we learned any lessons? We can discuss the intricacies of Wall Street compensation more over time, but the critical point is this: We don’t resent success; we applaud it. We don’t begrudge others the well-earned fruits of their labor, yet we do resent an attitude of entitlement without obligation. And for too many of us, we’re seeing that same attitude still pervasive on Wall Street.
That’s “My View.”