Waxingandwayneing’s Weblog

September 20, 2008

Cruel and Necessary Punishment

Filed under: The Economy — waxingandwayneing @ 9:04 pm

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.

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2 Comments »

  1. I wholeheartedly agree and as I read through this post I picked out two paragraphs that summarize the disgust and contempt for this business “Style”.

    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.

    Comment by Eric Kirkhuff — October 9, 2008 @ 10:44 am

  2. Since September 29th, there are only two positions businessmen are in.

    Position – Out of the market

    Position 2 – Fetal

    Comment by Eric Kirkhuff — October 9, 2008 @ 10:49 am


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