StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Wall Street Firms Are Now Federal Agencies

02 Feb 2009
Posted by Stan Collender

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.

At a time when the gov't is

At a time when the gov't is running up debt on the taxpayer's charge card at the fastest rate in peacetime history, were any of the politicians similarly upset about the record lavish spending on innaugeration ceremonies, parties and celebrations?

I can at least imagine potential cost-efficient business reasons for some of these criticized actions by the bankers -- but is it really necessary to spend a couple hundred million dollars just to swear in a few new gov't officials? Since we're criticizing lavish spending in time of hardship, I'm just wondering.

...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...

Surely true as a matter of fact, but is this an endorsement of elected officials' behavior -- they should be solely interested in "showing how much they can stick it to the street"?

If not, then maybe more stories should come from the likes of CNBC and Jack Welch explaining to the public otherwise.

Wall Street firms now either are federal agencies or they aren't. If they are, we want them staffed with GS-9s and GS-12s, and expect corresponding performance. If they aren't we don't.

My local Post Office recently took out all its stamp machines because, they told me, the Post Office can't make its stamp machines work. It leases candy, soda and coffee machines that work just fine, but it can't make its own stamp machines work. Right afterward the NY Times ran a story confirming this is indeed true nationwide -- stamp machines are being abolished. The Post Office can't make them work right. So if you want to buy a few stamps you have to wait in line to get to a window. Or, like I did, avoid that long line by going to the deli across the street and paying double.

Personally I'd hope to keep Wall St functioning on a somewhat higher level.


Post Office has moved to run like a business

The USPO made a business decision, driven by cost/benefit analysis, to remove the stamp machines. More people are buying stamps online (I do) or via carrier service, pay their bills online or via direct debit, etc. The post office is also considering dropping one day of delivery. It's a digital world.

Here's an article about it:

http://www.knoxnews.com/news/2007/sep/08/machines-stamped-out/

On inaugurations:

"Although many people assume the inauguration is paid for with tax money, in fact the entire event is funded by donors.

In 2005, President George W. Bush's inauguration cost $40 million and 2009's inauguration of President Obama will cost about $150 million. The entire list of donors is available: http://www.pic2009.org/page/content/donors/."

But the security is paid by the taxpayers for every inauguration, but security for the president et al is a standard operating cost of that office.

http://wiki.answers.com/Q/Who_pays_for_the_inauguration_of_US_Presidents


Cap the salaries today

No one in these banks makes more than the President of the United States. Including deferred income, benefits, stock, options, etc. What are they going to do? Quit? Where would they get jobs?

What a load of bull about this "keeping good employees" stuff. They just pay too much. I'd be glad to do that job for half their salary plus bonus, working for free for 3 months to learn the job.

My message to Congress: clawbacks. Disgorgement. Make them pay it back now.


Tom C is right

http://www.youtube.com/watch?v=5kwA-CwFK5A

Some have the balls to call the distribution of wealth socialism . . . I say that creating a healthy middle class is the way to save our democracy and fuel the economic engine.

But heck, who ever listens to common sense these days?




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