Commenting on the recent news that Wall Street bankers paid themselves $18.4 billion dollars in bonuses for their magnificent work during 2008:
“That is the height of irresponsibility,” Mr. Obama said angrily. “It is shameful, and part of what we’re going to need is for folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility.
It'll be nice if the bully pulpit keeps getting used for reasons beyond, say, urging today's youth to pull up their pants.
4 comments:
FWIW, there are some firms that are conscious of conspicuous consumption in this time of hardship (or have a public relations consultant to tell them they should be.) For instance, via a confidential source I know that the total amount given in executive bonuses at Goldman Sachs was $0.00 and that includes cash, stock options, and all other forms of compensation. Also, their yearly compensation is performance based so it's (relatively) a very small fraction of a typical year. Of course, most people would take that small fraction of a Goldman exec's salary as their yearly pay for the rest of their lives and feel like they had just won the lottery.
Jes' sayin' that not all the firms are as out of touch with the real world as others.
Also, another group I'm sure most people would probably think are getting what they deserve rather than suffering in any way, I have a bunch of friends from college from middle-class homes who got degrees in finance and econ and who thought they would be like kids for years before them who climbed the Wall St or consulting or hedge fund or whatever else financial ladder who now have expensive student loan payments (well, not the ones lucky enough to go to Princeton where they give out grants) and no jobs or prospects for getting jobs (since the industry itself has shrunk by a significant percentage and the big companies that survived are cutting employees not hiring.)
Also I know a bunch of kids who are graduating college this spring who are freaking the fuck out since it seems like nobody's hiring in any industry be it finance or not.
At any rate, I digress. However, while you may not like the Wall Street master of the universe perversely enough we all kind of need him whether we loathe him or not.
I'm sure there are exceptions. Saying "Wall Street" is of course an awfully sweeping generalization. Still, there are enough examples that fit the stereotype that I'm not at all bothered by a torches and pitchforks mentality for a little while.
I'd also say that I'm a little dubious of "performance-based" bonuses. I've read too many stories about money management people boosting their numbers by churning, and I'm also fairly convinced that the yearly bonus structure causes too much short-term thinking. I'd like to see some (more) mechanisms developed that reward people for making smart long-term decisions.
I feel mildly bad about college kids facing suddenly bleak job prospects in the financial industry, but not that bad. As far as I'm concerned, they were motivated by greed at a time in life when they should have been being more idealistic. I also think it'll be good for the long run if more bright young people go into other fields, like science, engineering, and education.
Regarding your link, I agree that there are ripple effects that are nothing to cheer about. On the other hand, it's a necessary correction -- our economy has become too dependent on the giant Ponzi scheme these people have been running. I only wish the landing could have been softer than the crash that it was, but it did have to happen.
"I feel mildly bad about college kids facing suddenly bleak job prospects in the financial industry, but not that bad. As far as I'm concerned, they were motivated by greed at a time in life when they should have been being more idealistic. I also think it'll be good for the long run if more bright young people go into other fields, like science, engineering, and education."
I think this is a little crass; consider my ex-girlfriend. Her parents were well educated in Taiwan but by no means well off. They scraped together just enough money to move to a town with a good public school where she was the valedictorian of the high school and was accepted to Princeton where luckily they give students who can't afford the $160-200k education grants rather than loans. She has luckily kept her job but while lots of finance students at Princeton and other elite schools were born with a silver spoon in their mouth a lot of them study it for reasons like my girlfriend-- people who want to move from the lower-middle class up the ladder of money and class in the U.S.
Maybe you can't sympathize with that goal, but if my parents hadn't taken a similar decision my sister and I would never have had the fiscal freedom to both pursue careers in basic science research. Again judging from just my cohort of peers kids who majored in biology at Princeton were mostly kids who wanted to become doctors, presumably in private practice. Trust me, working in a dermatology lab, I see kids who have done the "idealist" route of scientific education and research plenty of times who are only doing dermatology research so that they'll be able to start their own very profitable lab treating acne and psoriasis.
The way that monetary incentives are currently set up, unless your family is personally wealthy getting a PhD in science basically requires taking a vow of poverty. That should be changed but how can you blame people for responding to incentives as they exist, not how they should exist? I mean, yea, science and liberal arts are good, but other than engineering going all the way studying science is a very difficult decision for a person who isn't already rich to make.
For my ex, she was the first to go to college in the U.S. and she wanted to provide for her family when she gets older and to give her children a better life where they have the options to choose a course of study without worrying as much about financial incentives.
But lots of people don't have that option to be idealistic. Can you really blame a 22 year old who has tons of loans to repay and doesn't have rich parents for going into the industry that yields the greatest economic return? And you can't sympathize with them just because they weren't idealists and now the field they spent 4 years getting educated in doesn't appear like it will provide them with any sort of job?
Or consider my current girlfriend; she is "idealistic" and very left-wing and into spiritual and mystical stuff (studied abroad in India for like 6 months) and the financial crisis has tanked all the industries that she could get jobs in (like audio or video post-production--she was a film history major at U Chicago) and now she has $100k+ in student loans, no skill set that seems like it will repay her loans anytime soon, and a job that barely pays the bills, let alone her loans (which she's had to defer payment on.) Now that's very unfortunate and is a shitty consequence of her being "idealistic" instead of practical. But what about somebody in the exact same situation (UChicago is famed for its economics education) but who chose to do something practical like go into finance? Their plight is less shitty than my girlfriends because they planned for their future?
These people are just kids, remember, and I think that the view that Americans have of the whole culture of Wall Street as these rapacious jackals who'd sell out their own grandmother for their own personal profit is just totally inaccurate. For kids coming out of college they work their asses off so that they never see their friends, they barely have a social life, work 12 or more hours a day, 6 or 7 days a week. You can't survive in that environment if you don't like both hard work and solving difficult intellectual problems, in my opinion. Of course there are financial incentives, but they're not as great as you might think right out of school (starting salaries are $60-90k, versus $30-50k for other professionals I know like writers.) Or at least there were, but until the last year or so those came for people working at firms that were generating billions upon billions of dollars of profit for institutional investors... sure there are some rich folks who profited from the hedge fund bubble but for the most part it was pension funds, governments and other institutional investors with billions of dollars to invest in the first place who reaped the windfall. The biggest investor in a hedge fund my dad was associated with was the Teamster's pension fund.
And when I said that comp at Goldman is performance based I meant yearly compensation, not any form of bonus. So, like, this year a guy who made $1.2 million last year might make $100k this year. As I said, a lot of people might think of this as winning the lottery, but I think that the image of these people as people dominated by greed who are obsessed with money is a caricature. They are people who studied really hard in school, worked their asses off out of college for slightly more than other professional jobs, and finally found themselves in the leadership roles of what had until this year been highly profitable companies driving the American economic engine by providing a service not available at the same quality anywhere else in the world.
Surely some are actually crooks like the Enron guys (I realize they weren't on Wall St literally) but there are criminals in every field of work. Shit, I'd guess that more than half the Goldman people I know are Democrats.
But bubbles happen in all sorts of industries and are driven by human psychology. Were the tulip vendors in 17th century Holland evil? Maybe in your opinion some of them were. But for the most part the people on Wall Street are normal people with the same virtues and foibles as everybody else. And certainly the people who were just getting into the financial industry weren't in any way culpable for the current financial crisis, so why are they not deserving of empathy like any other jobless person with a massive amount of debt? Because they wanted to be wealthy? I think this is either a failure of empathy or a narrow vision of what the culture of Wall St is really like on your part; of course there are millions of Americans who have been hurt financially by this economic clusterfuck, but they don't hand out golden parachutes at graduation from Princeton... lots of people who were in the industry or were planning to be in it are in financial trouble that's just as real as that of middle class folks anywhere else in the country.
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