Are the barons of high finance ever called to account for their avarice, or for the billions squandered by their schemes?
A culture has evolved which allows the corporate executives of public companies to achieve monumental pay packages without investing a dime of their own money. I recently talked to the 45-year-old retired CFO of a famous Silicon Valley company who justified his $250 million stock package by saying that he had worked six days a week for five years. I thought of my father, who worked six- and seven-day weeks for 40 years as a deliveryman for Berkeley Farms and Dreyer’s Ice Cream.
Business leaders are portrayed as omnipotent gurus who blame the ills of society on a recalcitrant government bureaucracy and a self-dealing political class. The myth of the meritocracy of financial genius is perpetuated by horserace coverage of wealth, such as the Forbes 400 list. Here the accumulation of money is more than lauded; it is mythologized. Success has become so equated with money that critical professions such as teaching, journalism, medicine, public health and government service, which require a spirit of sacrifice, are made to seem less important than pure capitalistic endeavors.
But current events are challenging the myth of the omnipotent businessman.
Brand names in finance are reporting catastrophic losses. Homebuilder stocks have plummeted. The paper value of loans is evaporating like water in the hot sun, while an epidemic of foreclosures spreads through middle class communities from coast to coast. “For Sale” signs sprout like trees in Bay Area cities like Pinole, Vacaville, Hayward, Dublin and Fremont. Behind most of these signs, a family agonizes over the loss of their property and the embarrassment of returning a home to the lender. Real pain – emotional and financial – plagues many households as a direct result of predatory lending. Although borrowers must bear responsibility for their loans, there is a larger story.
The credit crisis has revealed the dark side of a system in which incomes are fabricated not by borrowers, but by lenders. Anxious to earn fees, these lenders avoided responsibility for their own lax lending procedures by selling off the newly processed loans as bonds. It is a meritocracy of greed rather than brains.
The blood on Main Street foreshadowed a massacre on Wall Street. The boards of Merrill Lynch, Bear Stearns and Citibank have fired their CEOs. But unlike borrowers, who have often seen their net worth wiped out, these executives left with severance packages valued from $41 to $160 million.
I am reminded of rebukes to business elites delivered by two great Democratic Presidents: Franklin D. Roosevelt and John F. Kennedy. When he assumed the presidency in 1932 in the midst of the Great Depression, Roosevelt condemned the sordid results of capitalism without values:
“The rulers of the exchange of mankind’s goods have failed through their own stubbornness and their own incompetence, have admitted their failure and have abdicated…they have no vision and where there is no vision the people perish. The moneychangers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of that restoration lies in the extent to which we apply social values more noble than mere monetary profit.”
Thirty years later, President John F. Kennedy slammed the country’s steel barons who violated a public agreement not to raise prices. “The American people will find it hard as I do to accept a situation where a tiny handful of steel executives – whose pursuit of private power and profit exceeds their sense of public responsibility – can show such utter contempt for the interests of 185 million Americans.”
The most powerful lesson to be taken from today’s massive financial losses might be to teach us once again that making money does not necessarily equate with achievement, wisdom or virtue.