Let us eat cake.
Lehman Brothers’ Richard Fuld is angry:
Fuld said he took “full responsibility” for the bankruptcy of Lehman Brothers and “felt horrible” about it.
But Fuld said he has yet to understand why the federal government helped to bail out the AIG insurance company and other investment banking firms, but did not do so a few days earlier to save Lehman Brothers.
“Until the day they put me in the ground, I will wonder,” Fuld told the Congressional panel, seeming to seethe with anger.
“This is a pain that will stay with me the rest of my life.”
It’s really stunning. I am all for capitalism, free markets, even wildly disparate distributions of wealth — of which, believe me, I have precious little. You have to read through this whole article, however, to see what to me has always been at the heart of this little game: Wall Street has, for a long, long time now, been utterly out of touch with the real value of money… the value of what it provides… and any sense whatsoever of,
well,
reality.
He’s angry? He’s … in pain? [Read the rest of this entry.]
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9 comments
I don’t think that it’s a good idea to take seriously the words of a man who has the collapse of a 158 year old $700 Billion company on his conscience.
There are times when you don’t expect a man to be rational, and I think that this is, reasonably, one of them.
Three words:
Other. People’s. Money.
With regard to CEO pay, Thomas Sowell likes to pooint out that a bad CEO can cost a company literally billions at the bottom line. Sometimes it is a bargain to get rid of them for "only" millions.
Moreover, since a good CEO can enhance a bottom line by so much, it is neccessary to offer such salaries in order to attract top talent. Which, as an aside, is perhaps why politics rarely attracts our best and brightest.
Finally, from my perspective, I don’t see that the Fed "saved" any investment banking firms. Unless "saved" means "purchased by another entity with some borrowed funds from the fed."
I think ctl is correct, this guy has a lot weighing on him and now may not be the best time to pay much attention to his rantings.
Oh, he’s a big boy. He’s entitled to be taken at his word.
Ron Coleman’s last blog post..Defending the indefensible
Personally, I’m wondering if the whole "salary model" for hired CEOs shouldn’t be changed. I have no problem with top CEOs who add vast value to companies making huge bux, but if they pump up their companies with risky plays that tank hugely, these guys should lose megabucks too. As it is now, there appears to be few CEO pay approaches where they get rich no matter what their companies do.
There’s waaaay too much "agency problem" issues with that. A CEO who helps a company make a billion a year for five years and then loses 20B in year 6 walks off rich, while the company he led is likely dead. If there were some sort of clawback mechanism in his pay package, he may be more willing to mitigate risk.
Nobody at that level would ever be pauperized by a clawback, but it would be nice if they had at least some sort of haircut before moving off to the beach.
This isn’t so much a regulatory problem as much as a problem with corporate governance.
foobarista’s last blog post..Political discussions, trust, and logical argument
He’s entitled to be taken at his word.
I don’t know what this means? Do you take every politician at their word or do you make judgements on their character? Fuld is emotional, angry and speaking out. I am sure his feelings are sincere but that hardly makes him the Official Spokesman of "Wall Street"
Considering that corporations are legal fictions given many of the rights of actual people, I wonder if CEOs that make above a certain amount of money+benefits while helming a publicly-owned entity shouldn’t be held liable for murder charges if their company completely tanks (i.e. ‘dies’) on their watch. It would certainly encourage a certain level of fiscal conservatism on the part of major corporate entities…
(Yes, I know this is a stupid idea. But you’ve got to admit it’s an amusing mental image on some levels.)
Elisha Feger’s last blog post..Fatal Wisdom - Principles of Humanity
Ron,
So you don’t think that presiding over 26,000 people losing their jobs is the sort of thing that would legitimately make a grown man cry?
Or is it just your theory that no tragedy should be great enough to cause an adult to speak emotionally?
I would point out that there’s an argument to be made that a CEO may well make decisions that are absolutely necessary and absolutely cost money and cause major losses to the bottom line, but which were the right choices in the long run. He may even be made the goat by people who benefit from his choices but credit him only for the bad results.
So would you take the risk of torpedoing your career as an executive who will take risks and do hard but necessary things if you know you and your family can be destroyed?
All of that said, I actually do think CEO compensation really is too high, and this is not allowed in other countries with functioning and profitable capitalist systems. Or at least it was last I heard. It would seem to me that SOMETHING can be done and it’s not a binary black/white question.
I’m not sure how that applies to Ron Coleman’s question directly though; clearly, to my mind, this guy is very wealthy, and is still very wealthy, but he is still quite distraught. Why would that be? Because he lost some money? Or is it maybe he really did love his company and really did want to see it succeed and really did think that if other companies got help, his people shouldn’t have been ignored?
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