Friday offered a frenzy of bad economic news, starting with worse- than -expected negative job growth and moving on to the usual combination more decline in the dollar, another loss for the stock market, and another rise in oil prices. David Leonhardt rubbed it in with a good piece about how the new recession started before most Americans had gotten back zero from the last recession six years ago. The annoying headlines juxtaposed economic decline to boardroom stupidity and greed: "3 Executives Under Fire on Exit Pay" (below) was next to "Tough Times Arrive for Buyout Specialists."
The only good news is that economic coverage is starting to improve.
Congress is worried enough to start looking for people to blame. It compelled some rich CEOs to testify yesterday, and the NYT's coverage had some nice detail of an angry aside or two. Several of the CEOs netted over a hundred million dollars in personal income after resigning over huge losses on sub-par loans wrapped up in various murky investment vehicles. Here's part of yesterday's lineup:
From the left, this is Charles Price, former CEO of Citigroup (retaining $110 million on $20 billion in losses); Richard D. Parsons, head of Time Warner and a Citigroup director involved in the collosal platinum parachute that slowed Price's fall from his lofty perch; Stanley O'Neal, former CEO of Merrill Lynch (retaining $161 million - plus $70 m over the previous four years - on $10.3 billion in losses so far); John Finnegan, a Merrill director; Angelo Mozilo, formerly of Countrywide Financial, who earned $410 million over the previous 8 years while running the institution at the center of the subprime crisis; and Harley W. Snyder, head of Countrywide's compensation committee.
The Committee on Oversight and Investigations is chaired by L.A.'s Henry Waxman . He's mad as hell. He out the obvious fact these guys play by different rules from the rest of us. They not only make in one year what the median family earns in 100 years (not Waxman's numbers) but make it even when they fail. Waxman asked Finnegan, the head of Merrill's compensation committee, why they didn't fire O'Neal "for cause" for losing 10 billion, thus costing O'Neal his $131 million. "Mr. Finnegan said cause involved unethical behavior, not bad judgment. Mr. Waxman retorted: 'to say you don't have the tools, it means that even if someone performas badly there are no consequences.'" Exactly: there is no accountability for performance at the top.
Waxman concluded, "It seems like everyone is hurting except for you." And he said tha this compensation may "represent a complete disconnect with reality."
That's what strikes me the most about all this. Much of the 2000s wealth came from various kinds of speculative investments that depended on other people's believe that the value of your asset would go up indefinitely: your house, your asset-backed security, whatever. Manufacturing accounts for less that 10 percent of US output, and finance for close to 40 percent. Why did the leaders of this financial world, who made up the instruments, think it was real? I can only assume because they were getting super-rich by thinking that.
The other question I keep asking is not why people aren't angry - they are - but why they can't focus it on the right targets.
I ask this because regular folks and their communities need to claw back resources from the great siphoners who have drilled a thousand wells sideways into every one of the country's pools of money. Most workers haven't gotten a raise in real dollars for thirty years. Even families (which include new entrants to the workforce, mostly women) haven't seen improvement since the Clinton administration. Our public systems - health and education and transportation - gets worse all the time, and in terms of low-income healthcare and traffic problems for everybody are literally sucking the life out of people.
But I also ask it because the current finance-driven "market" system has gone as far as it can go - into the fabrication of investment vehicles that rest on the buyer's pure faith rather than any value created. Nothing will improve until the other voices get back into the game, with all their better ideas for how to run things.