Wall Street Firms Are Now Federal Agencies
Is it really possible that the Wall Street community doesn't understand how much its world has changed in the past six months?
I have to ask this question after reading the weekend accounts about how surprised and angry Wall Street is about the extremely negative public response to the story about the million dollars John Thain spent decorating his office. It apparently is also shocked at the even more negative reaction to the very large bonues Merrill paid its staff last year at the same time the company needed a taxpayer bailout.
CNBC spent much of last Friday defending the decorating and bonuses. It's on-air personalities called the decorations an insignificant amount of money and said that the bonuses were just a fact of life on the street. Former General Electric CEO Jack Welch said on Squawk Box that the bonuses were the way to keep good people and make it more likely that the companies the federal government has invested in will do well.
Here's what Wall Street doesn't understand: You don't ask the federal government to come to your home, charge it $700 billion for the privilege, and then expect that it will leave the next morning when it starts to crimp your style.
Whether or not Wall Street wants to admit it, any firm that needed, demanded, or took federal bailout dollars now must think of itself as a government agency. As a result, it is now subject to the same types of things business executives (and CNBC on-air analysts) would criticize federal employees and agencies for doing...like flying first class, spending too much on conferences, overpaying staff, paying bonuses that are hard to justify, etc.
What Wall Street really doesn't seem to get is the level of anger being directed towards it. It is blamed not just for much of the macro economic problems, but for the decline in the average person's economic situation. This voter anger has been translated into elected officials' anger and the only thing they are interested in is showing how much they can stick it to the street on their constituents' behalf. They don't see any reason for Wall Steet rewards like nice offices, big bonuses, fancy conferences, and private planes; they are looking for perp walks, punishment, revenge, retribution, and convictions.
So making a strong business case for the bonuses or private jets, as many on CNBC tried to do last Friday, won't be enough. In fact, it may actually get Wall Street into more trouble because it will continue to demonstrate that it doesn't get it. That will create even more anger and more efforts at federal control.
Wall Street has only two choices: get on board or give back the money.
Wait! There's More. Here's Bull Dog Reporter's take on the same subject.