If you or I had been found culpable in the recent financial market meltdown, we would have been have been hoisted up on our own petard! This we know to be true. We cannot understand why those, under the guise of To Big to Fail, have not only escaped judgment day, but seem to have been rewarded for it. This alone explains what is so wrong with our power structure today. It is one thing to have trouble in the financial markets. It is a whole other thing to have the culprits rewarded for it. Transparency is one thing, accountability is another. Those responsible must be held accountable. Allocating authority without responsibility is simply an opportunity for abuse. And we have been abused. Hopefully the new Wall Street Reform legislation will protect the American people from ever having to revisit such an abusive event like this ever again.
With the cost to the American taxpayer averaging $5,000 per every man, woman, and child, it is safe to say that efforts to prop-up the financial markets has been exceptionally expensive. Coming in at $700 Billion for TARP and an additional $825 Billion for ARRA funding, the total of $1.525 Trillion is close to mind boggling. Perhaps these actions were a necessary evil until the ship could be righted, but expensive none the less. I take great comfort that within the new Wall Street Reform bill steps have been taken to drive a stake through the heart of the Too Big to Fail notion. No business should harbor the thought that despite inept leadership they are above it all. We do not reserve this right even within our military for crying out loud, and they’re a pretty specialized organization, right? Just ask General McChrystal if you think I’m wrong about how this should have turned out. Nobody is bigger than the problems they create or that they can’t handle.
Executive mismanagement is mismanagement. Executives are not paid to plan to fail. They are paid to anticipate failure and to plan against it. Failure to do your job earns you a ticket to the street; it doesn’t earn your salary, a bonus, a golden parachute, or a lucrative separation package. It should just earn you a trip to the unemployment line. How anyone can put forth the notion that these executive are too valuable to lose, that they might jump ship to go to the competition, is beyond comprehension. The correct answer from a business standpoint would be a screaming “Then let them!” I know there is nothing I would like to see more than my competitor taking on incompetents, you couldn’t slap the smile off of my face the moment they did.
Executives are supposed to be adept at risk management. Risk should not be some obscure philosophical ideal; it should be an event that in reality can totally mess up your life. What is scary is that this is not what happened. Those who had taken extraordinary risks have damaged individuals, the nation, and even the world by their malfeasance. Risk premiums are designed to cover for additional risks assumed by making more speculative investments, not to cover gross incompetence and outright greed. The risk premiums earned on these speculative investments should have covered the costs of failure; if they did their jobs right. If the people responsible for this market meltdown resent the new Wall Street Reform legislation because it ties their hands going forward, I would suggest that they consider what it would have been like if they had been put in handcuffs like they should have been! I can only hope that the age of “Too Dumb to Survive” is finally upon us.