Standing on Their Shoulders

We spent the last eights days travelling around New England, seeing so many great spots in Portland, Maine, central Vermont and New Hampshire, Boston, Nantucket, Providence/Newport, Rhode Island, and southern Connecticut, on our way down for week of insanity in New York City. We met a lot of very nice people, ate too many meals of fresh and seasonal foods, and saw a plethora of extraordinarily beautiful nature. The leaves are changing (actually, they are returning to their true colors as they lose their chlorophyll) and the air is starting to feel like fall. If this trip was just for the people, food, and beauty, it would have been enough. But there was so much more.

As we drove and peddled through the various towns and hamlets along the way, it was impossible to miss the history oozing from this area. We saw Plymouth Rock, Lexington, the Touro Synagogue, the mansions in Newport, quaint colonial settlements, Harvard, Dartmouth, and Brown, and the Starbuck homes of Nantucket. We rode on the same paths travelled by the very people who created America, the brave pioneers who left the comfort of their homes in foreign countries to build new lives in a strange land. We particularly were moved as we walked through a number of very old cemeteries to read the various tombstones, memorializing the lives of generations of families, consumed by war, accidents, or sickness.

To see fresh flowers on grave markers of people who died in the early 1800’s or to visit towns with their welcome signs indicating their beginnings, marker s, e.g., “Founded in 1737”, you start to feel so small, so minor when measured with the perspective of all those years. Living in Southern California, where a house built in the 1950’s is considered old, allows us to feel our lives are really important. Travelling through New England, you realize how many generations came before us and contributed so much to enable us to enjoy the lives we live today.

I felt this deep sense of respect for all those people—not just the famous ones—who devoted their lives to building this country. Certainly we have strong feelings for the Founding Fathers who decided that a united group of states was worth struggling to create. But what about the ordinary men and women who came here to begin anew and build better realities? The ones who plowed farms, built bridges and roads, and opened general stores did so without any recognition or fame. Had these people behaved insularly, without any regard for the future, our country would not have flourished.

This trip has reminded me so deeply that we are all standing on the shoulders of those who came before us. We so seamlessly cash in on the dividends earned from the efforts of people we will never know.

One of my college roommates recently contacted me after he read a few of my blog entries. He pointed out the relevance of “Why Are We Here”, an examination of how bereft of importance our lives have become, as we live from day to day, week to week, year to year without regard for meaningful contributions. So consumed with consumption, so focused on the “here and now”, we rarely stop to think about what we are leaving as our legacies, what role we will play in making our world a bit better than when we inherited it.

So travelling around in New England has given me a nice gift. I have a new appreciation for yesterday’s heroes who lived their lives with a conscious feeling for the future, with the knowledge that the positive impact they made in their communities far outweighed any recognition of their efforts. Better lives for their children more than justified their personal sacrifices.

Perhaps we can start to live our lives with these principles in mind. Let us work to define who we are by how we improve the lives of those around us, by the deeds we do to build a better tomorrow. Let us find ways to live more simply—consume less of everything—and leave more for those not here yet. And let us be ever conscious that those yet unborn will one day need to stand on our shoulders. How strong and broad will those shoulders be?

Cruel and Necessary Punishment

In my last blog, I shared with you my anger over the economic situation our financial executives have forced us into over the past several months. Years of abusive business practices aimed solely at the enrichment of these so called “experts” have now resulted in the need for the federal government to inject billions of dollars of equity into institutions and provide hundreds of billions of dollars in bailout funds to buy up the troubled loans of banks. Congratulations to you stewards of our trust….thank you for taking our money and enriching yourselves to unheard of levels creating a failed financial empire that we must now fund.

Why be critical of business failure? Most people in business do not succeed. It is hard to form a business that will grow and generate a profit. So why be upset when these corporate managers find themselves running illiquid entities? Two reasons: Greed and the lack of remorse.

According to Reuters, the executive of Fannie Mae, just one of the players involved in this financial debacle, were incredibly well-compensated for being crooks. Daniel Mudd, president and chief executive officer of Fannie Mae, received more than $14 million in compensation from Fannie Mae in 2006 and more than $12 million in 2007; Robert Levin, chief business officer, received more than $9.5 million in 2006 and more than $8.4 million in 2007; Stephen Swad, chief financial officer, was handed more than $4.8 million in 2007; and Stephen Ashley, chairman, received more than $500,000 in 2007. This level of compensation is commensurate with success, not for breeding failure. If the money they were paid is fair compensation for the work they did, then let me have a job application. If you won’t hold me accountable, then I will take the job. I can do what they did working just a few hours a week.

So what about the failed investment banks? Lehman Bros., run into the ground by its executives after 158 years in business, rewarded their brain trust handsomely for finding a way to end a legacy. Chief Executive Officer Richard Fuld took home $34.4 million in 2007, while J.M. Gregory, Lehman’s chief operating officer at the time, made $26 million last year, according to the March 5 proxy. Thomas A. Russo, chief legal officer, earned $12.1 million. C.M. O’Meara, chief financial officer, made $3.7 million, and Ian T. Lowitt, co-chief administrative officer, was paid $4.9 million. According to Lynn LoPucki, a bankruptcy law professor who teaches at Harvard University and the University of California, “Bankruptcy law allows recovery of compensation paid to insiders if the company didn’t receive reasonably equivalent value”. It is strongly believed that lawsuits will be filed to recover the compensation from these executive criminals.

This is really simple to me. If I hire a professional painter to paint my house and the work is shoddy, I get my money back; I didn’t get what I bargained for with this individual. You don’t do your work, you don’t get paid. These executives did shoddy work and now need to pay us back: Matter closed.

The second reason I am so irritated at this situation is the lack of remorse of these executives. Have you heard any of them simply say, “I’m sorry”? Have any of these pompous managers issued any apology for what they have done—for the mess they created? If they have, I haven’t heard them.

As I analyzed the practices of these failed executives, I began to see the similarities between them and drug dealers. Motivated by greed and unconcerned about the consequences of their efforts, both these financial executives and drug dealers prey on society as leeches, providing no benefit to anyone but themselves. Getting people to get hooked on drugs or mortgages they can’t afford creates an artificial economy.

So, my solution is simple. If a police bureau arrests a drug dealer, they can seize his property and use those assets for the benefit of the agency. Money, cars, houses are all fair game for seizure. Ill-gotten gains must find a new owner. Let’s make these financial executives subject to the same rules convicted drug dealers face. Make them return all of the money they were paid to do their jobs. Let’s also force them to return assets they acquired during their tenure—the cars, the houses, all of the perks. If they refuse, fine. Then send them to prison for at least 10 years. And not the country club facilities we sent the Enron or Tyco boys to. Make them room with Bubba, who can teach them a thing or two about screwing others.

If we fail to aggressively deal with these crooks, then we are permitting future criminals to repeat these egregious acts. Would you deal with a misbehaved child by letting her off from bad behavior without administering punishment commensurate with the act? I would hope not. Then why deal with adults differently? It’s time these bad boys were put in time out—permanently.

“I’m as mad as hell, and I’m not going to take this anymore!”

In the 1976 film, “Network”, actor Peter Finch expresses his outrage over being fired and ends up firing up a nation similarly frustrated over life’s inequities.  Declaring to the country, “I’m as mad as hell, and I’m not going to take this anymore!”, Finch becomes the unwitting spokesman for a frustrated populace.  An apathetic public is energized by a television anchor pushed beyond his boundaries.

How much outrage must we feel before we say, “Enough is enough?”  With the events of this week–the bailout of private investment houses and the injection of massive amounts of precious capital into the financial system–isn’t it about time we feel the need to open our windows and shout Peter Finch’s mantra?

I am not critical of the intervention taken to stave off a probable collapse of the financial system.  Although you cannot blame the surgeon for amputating a gangrenous leg, you should be upset that the patient’s situation got to that point. Far-reaching measures are needed to address such a serious situation, yet anger is still a valid emotion that the matter occurred.  When will we en masse express the viceral frustration with these buffoons for getting us into this mess?

These so called “experts” promoted these financial programs with such cavalier recklessness and egotistical bravado, enriching themselves along the way to previously unheard of levels.  Mortgage executives and investment agencies created a lending environment that required a limitless level of mortgage loans to feed an insatiable demand for collaterlized debt securities.  The result of this unbridled demand caused loan origination standards to abandon the basic principles of lending:  Can the borrower and will the borrower repay the loan?  Instead, the system took on the strategy of a drug dealer–interested only in getting others dependent on his product than in the long-term detriment of dependency.  With mortgage brokers popping up on every corner with the sole purpose of feeding new loans to a thirsty investment community, we all sat back and watched the market get strung-out and compromised.

So, instead of stopping the flow of drugs, I mean loans, that should never been made, so many of us looked the other way while unqualified families became homeowners, driving up real estate prices to unsustainable levels.  Real estate brokers made fat commissions for deals that sold themselves, while mortgage lenders paid fees to poorly trained producers so happy to bend rules and fabricate financial data to just close those loans.  Others along the way also enriched themselves from artificial means, yet none as much as the investment house executives and quasi-government agencies.

These selfish fatcats knowingly seized upon a vulnerable marketplace.  Veiled behind the premise of providing a necessary flow of funds to the lending community, these executives promoted a system that provided them with massive amounts of compensation for the generation of assets they knew would eventually be found out to be grossly overvalued.  Instead of stopping the practices that lead to these realities, these crooks cared primarily about the short-term and their growing wallets.

My solution is rather simple.  Now that the government has decided to use our funds to bail out the system, we must do what we can to return to the basic premise of any business transaction: the matching of risk and return.  This week, many people have criticized the imbalance of the current financial debacle, with the public sector now absorbing the risk, while the private sector enjoyed the profits.  I recommend that we make all of the executives of the affected financial institutions pay back all of their compensation, since they feel no willingness to absorb the effects of the risk they created.  Those executives unable or disinclined to repay the benefits they realized should first be paraded down Main Street–make them feel the shame of what they have done by publicizing their names in newspapers–and then sent to prison.

If you think this sounds harsh, then enjoy your life of complacency.  Remain silent as the big boys continue to screw you without permission or regret.  If you are as pissed off as I am, then get up, walk over to your open window and yell, “I’m as mad as hell, and I’m not going to take this anymore!”  Then, after you scream, send an email to your congressional representative and share your outrage.