Americans Are At The End of Their Ropes, Mr. Benmosche

Terrance Heath

Someone should tell AIG CEO Robert Benmosche that unless he’s hanging from the end of a rope, he’s not being lynched. Americans are at the end of their ropes, because the wealthy got bailed out while the rest of us got left out.

Benmosche recently told the Wall Street Journal that:

The uproar over bonuses “was intended to stir public anger, to get everybody out there with their pitchforks and their hangman nooses, and all that — sort of like what we did in the Deep South [decades ago]. And I think it was just as bad and just as wrong.”

I started to write about how offensive it is for Benmosche to compare lynching —  the torture and murder of  5,000 black Americans from the 1800s to 1955 — to public anger the over multimillion dollar bonuses paid by bailed-out Wall Street firms. But I don’t need to. That history speaks for itself

Yes, Americans still hate Wall Street. According to a recent Reuters/Ipsos poll, 44 percent of Americans believe that the government shouldn’t have bailed out financial institutions. As many as 30 percent think Wall Street banks and traders do nothing to help grow the economy and create jobs. (Only 26 percent believe the financial sector is good for the economy.) Fifty-one percent believe Silicon Valley is better at creating jobs than Wall Street. (Only 10 percent think Wall Street does better.) Only 14 percent of Americans have a positive view of Wall Street.

A majority of Americans in the Reuters poll also said Wall Street bankers, traders, and CEOs are still paid too much. Maybe they’re asking themselves the question that Barney Frank asked a couple of CNBC anchors: Why is it that “poor, beleaguered bankers” can afford to pay themselves huge bonuses, but couldn’t’ manage to pay their debts without a government bailout?

A majority of Americans in that Reuters poll also wanted the government to do more to punish those responsible for the financial crisis — and with good reason.

  • Five years after the financial collapse, not one Wall Street Executive has been prosecuted. Once “deregulated,” banks ran wild, and loaded up on toxic debt without “sufficient capital.” Bear Stearns had about $25 in debt for every $1 it actually had. Some, like JPMorgan (which bought Bear Stearns, while the government guaranteed Bear Stearns debts to the tune of $30 billion), Bank of America, and AIG behaved like criminal enterprises.
  • Wall Street CEOs made out like bandits. Their shenanigans brought the country to the brink of financial disaster, but Wall Street CEOs had very soft landings. One former Bear Stearns CEO walked away with over $300 million, and now passes the time in retirement playing “high stakes bridge.” Merrill Lynch’s Stan O’Neal, Citigroup’s Charles Prince, and former Bank of America CEO Ken Lewis got “golden parachutes” worth a total of $272 million. All three of their firms were bailed out by taxpayers.
  • Some of the worst CEOs are living quite large. Former Lehman Brothers CEO Dick Fuld divides his time between a Greenwich, CT mansion, as well as a 40 acre ranch in Idaho, and a home in Florida, since running his 158-year-old firm into the ground — and selling his Park Ave apartment for $25.87 million in 2009. Charles Prince has a 3,839 square-foot home in Nantucket, MA, and Park Avenue digs. O’Neal held on to his Park Avenue address, too. Ken Lewis is cooling his well-heeled heels in a Naples, FL home overlooking the Gulf of Mexico.

This is happening in the context of a huge economic recovery for the rich.

There’s a bit of good news on that last item. The SEC has finally proposed rules for disclosing CEO-to-average-worker pay ratio, which the Dodd-Frank Wall Street Reform and Consumer Protection Act requires of publicly traded companies.

Meanwhile, the most Americans are stuck in the recession that’s officially “over.”

If Americans are angry about inequality and Wall Street bonuses, it’s not due to anything like the racist hatred that fueled lynching. Americans have plenty of legitimate reasons to be angry about Wall Street bonuses and CEO compensation. Mr. Benmosche just gave them another one.

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