Analysis

Winnipeg Free Press - ONLINE EDITION

Tell-all banking crisis book says CEO looked out for No. 1

By: Eliot Spitzer

Posted: 09/28/2012 1:22 PM | Comments: 0

NEW YORK — Sheila Bair, former chair of the Federal Deposit Insurance Corp., one of the few heroes to emerge from the financial crisis, has written a marvellous new book, Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street From Itself.

Bair was in the room when the major bailout decisions were made, and she was one of the few pushing for real accountability from Wall Street and real protection of homeowners.

In the book, and this week on my "Current" TV show, she told an amazing vignette.

The infamous TARP funds were being discussed with the CEOs of the major banks, and they were all called to Washington for the critical meeting with the Treasury secretary. The financial world was literally teetering on the brink of disaster, and the first question asked by John Thain, the CEO of Merrill Lynch, was not about how the system could be saved, the economy preserved, the integrity of the banks upheld.

No. He asked if his compensation was going to be cut. This is the guy who spent more than $1 million putting new carpets in his office, paid for by shareholders — and then by taxpayers.

In a radio interview this week, Bethany McLean, a great journalist, made a really important point: Flawed compensation structures that gave bankers perverse incentives to take great risk at the expense of others were at the root of the crisis. She pointed out that we as a society did not, and do not, object to high pay when people perform. It is when they are compensated with huge paychecks and bonuses even when they fail — and then are compensated again and again that way — that we are troubled.

We do not object to Derek Jeter’s big paycheck or even Warren Buffett’s. They earned them.

The Thain vignette is so troubling because he did such harm and yet continued to feel so entitled, to express no sense of remorse, to not recognize that his stewardship had led to the troubles and that maybe there should be consequences. He and others on Wall Street personified the world of heads I win, tails you lose — or, put another way, of socializing risk while privatizing gains.

Have we learned any lessons? The critical point is this: We don’t resent success, we applaud it. We don’t begrudge others the earned fruits of their labour. But we do and should resent an attitude of entitlement without obligation. And that attitude is still pervasive on Wall Street.

Eliot Spitzer, former governor of New York, hosts "Viewpoint" on Current TV

— Slate

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories? Please use the form below and let us know.

* Required

In which story did you find the error? *
Please post the headline of the story or the title of the video with the error.
What was the error? *
Please post exactly what was wrong with the story.
What should we have written?
Please indicate your source for the correct information.
Who else should we interview to improve this story?
Please include any contact information you may have.
Can we contact you in the future for advice on stories about this topic?
Yes

No
First Name: *
Last Name: *
E–mail Address: *
This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.
Phone: *
This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.
Colour:
Are you blue? If you can see this, leave it blank and get some CSS support.
Enter the words that you see: * This is to prevent our forms from being filled out automatically.
You have failed to correctly identify the words in the box above. Please try again.

More Analysis

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.