Have you ever wondered why nearly every picture of, the high-profile CEO of Goldman Sachs, always shows him grinning from ear to ear?
He looks like the cat that just swallowed the canary in most shots, although the glare from his balding countenance can be distracting. But distraction and obfuscation are traits heavily endorsed by this corporate leader, and how he has managed to avoid serving time behind bars is a testament to how corrupt our financial and government systems have become in today’s topsy-turvy world of global finance.
While the rest of us are struggling to make ends meet, Blankfein and his Goldman cronies are staring at a bonus pool of $12.2 billion, give or take a billion or two, and complaining that it is not larger, as if the gods had rained on their parade. It was not that long ago that this crowd avoided prosecution by forking over a $550 million fine to the US Treasury, whining all the way like scolded puppies but still paying out bonuses that were twenty times that figure.
Presently, however, tensions are rising within the firm as Compensation Communication Day, the name attached to the event when individual bonus amounts are disclosed, approaches later this month. These lofty bonus figures tend to average out at somewhere north of $400,000 per employee for the 30,000-plus staff of salivating investment bankers. And at the top of the pyramid, the payoff can be dramatically higher.
Back in 2007, before banking bailouts became a household phrase, Blankfein pulled down a mere $68.5 million to reward his Herculean efforts in the capital arena before the crisis hit, a record at the time for any Wall Street executive. According to , managing director of Johnson Associates, a firm that publishes a compensation survey in this area, “These figures, compared to what real people make, are enormous, but compared to what Wall Street executives made in 2006 and 2007 it’s a fraction of the pay.”
It is no wonder that most Americans despise these fat cats with utter distain. But as what some may call a public relations stunt of the first order, Blankfein recently wrote in a commentary in the Wall Street Journal, “I believe that tax increases, especially for the wealthiest, are appropriate.” Bill Moyers, however, quickly exposed Blankfein's self-serving hypocrisy by revealing that Goldman had made advance stock awards of $65 million back in December, ostensibly for senior executives to benefit from existing Bush tax rates that were set to expire. The CEO’s feigned sincerity is appalling but expected.
Moyers, one of our most respected journalists, did not stop with blasting this singular public faux pas on the part of Blankfein. The fiscal cliff deal was rife with sausage making—“from tax credits for NASCAR racing and the railroads to subsidies for Hollywood, rebates for the rum industry and loopholes for offshore financing,” amounting to “corporate tax breaks worth tens of billions of dollars.” Goldman also benefited from the extension of several financing tax breaks that were used to construct their new 43-story headquarters in lower Manhattan. They had to stretch the definition of “small business” to qualify, but when the fix is in, go for it.
Mike Lux of the Huffington Post laments the current situation in his recent article entitled “Wall Street Keeps Winning: Can It Change?” His conclusion is compelling: “If people steal money and commit fraud and never have to go to jail or pay any real penalty, they generally keep doing it. It is equally true of street criminals and Wall Street bankers. With a government that is doing nothing to prosecute these crimes, that is settling for light slap on the wrist settlements time and time again, and that is still allowing banks to get bigger and bigger, what exactly will stop future financial crises caused by big bank greed and fraud?”
Our present dilemma raises the question—Will this cycle of greed keep repeating itself while each collapse of the banking system is greater than the one before? This picture of the future is a depressing one, to say the least, and we are presently at a crossroads where battle weary officials are stepping down, while new bastions of hope are stepping into the fray. These new appointees are untested, but their opponents are already dug in with years of experience under their belts.
Our new generals, however, may be nothing more than raw meat thrown at the feet of ravenous wolves on Wall Street. As long as their fee engines keep churning out compensation to the tune of 42 percent of revenues collected, these firms see no reason to bolster our domestic economy by taking more risk. But if you even suggest the return of Glass-Steagall, bankers tend to go apoplectic. A simple threat may not suffice, but public outcries will at least get the ball rolling in the right direction.
Decades ago, the favorite mantra bandied about our corporate hallways was, “So goes GM, so goes America.” The apparent hubris of this remark went to our automakers’ heads and led to their downfall, as Japan and other competitors taught us that quality, customer service and price still mean something in the mind of the consumer. US carmakers are now riding the crest of a wave again, but have they really changed their ways? Is another fall on the horizon?
The same phrase may now apply to our banking industry, especially following the likes of Bob Rubin, Larry Summers and Tim Geithner at its apex. Will Jack Lew, President Obama’s nomination to be the next Treasury secretary, reverse the course of the banking industry as we now know it? Don’t hold your breath. These banking guys stick together like super glue. The spotlight of public condemnation seems to be the only thing that gets their attention, so it’s time to pour it on! Lean Forward!
References: Embedded links provided, but points made are primarily the opinion of the author.