Who is responsible for the recession that the people of America find themselves in? One could say we all are, but I would venture to say some way more than others? Bear Sterns is only the latest symptom of a sickness: getting one over on someone else, and then, when it backfires, crying out for governmental help. The multinational titans who turn red at the word "intervention," were the first to call out for help from Dubai, the Fed, and anywhere else. And the Bush administration, always a lover of the business elite, obligingly baild them out in the name of saving 'our collective shirts.' But what is to prevent the cycle from repeating itself? What will stop Multimillionaire executives from playing Russiona Roulette again with the people of America?Here is a little of what Friday's New York Times had to say:
How can one feel sorry for James Cayne? The potential losses of the chairman and former chief executive of Bear Stearns must rank up there with the biggest in modern history. The value of his stake in Bear Stearns collapsed from about $1 billion a year ago to as little as $14 million at the price JPMorgan Chase offered for the teetering bank on Sunday.
Still, Mr. Cayne was paid some $40 million in cash between 2004 and 2006, the last year on record, as well as stocks and options. In the past few years, he has sold shares worth millions more. There should be financial accountability for the man who led Bear Stearns as it gorged on dubious subprime securities to boost its profits and share price, helping to set up one of the biggest financial collapses since the savings-and-loan crisis in the 1980s. Some might argue that he should have lost it all.
But that’s not how it works. The ongoing bailout of the financial system by the Federal Reserve underscores the extent to which financial barons socialize the costs of private bets gone bad.
Compared to the cold shoulder given to struggling homeowners, the cash and attention lavished by the government on the nation’s financial titans provides telling insight into the priorities of the Bush administration.
Indeed, the pain that is being inflicted on financial-industry executives as a result of their own actions and decisions is not proving much of an encouragement. Rather, the knuckle-rapping seems only to encourage bankers to make up for any losses they may suffer by finding another way to navigate their companies, the financial system and the economy into the next maelstrom — from Internet stocks to what the industry calls zero-down, negative amortization, no-doc, adjustable-rate mortgages.
The costs of such a lopsided system of incentives are by now clear. Better regulation of mortgage markets would help avoid repeating current excesses. But more fundamental correctives are needed to curb financiers’ appetite for walking a tightrope. Some economists have suggested making their remuneration contingent on the performance of their investments over several years — releasing their compensation gradually.
That’s an idea worth studying. Certainly, trying to put specific limits on bankers’ salaries is a nonstarter. But until bankers face a real risk of losing their shirts, they will continue blithely ratcheting up the risks to collect the rewards while letting the rest of us carry the bag when their punts go bad.