The repercussions of the recent debacle on Wall Street are still being felt by those involved. JP
Morgan announced that its Chief Investment Officer Ina Drew, one of the
highest-paid
executives at the bank, had decided to "retire from the firm." Despite
her impressive resume, neither she nor JP Morgan can explain how the company lost
over $2 billion. Some predict that it could lose up to a billion more
before the year is out. She will
be succeeded by Matt Zames, a long time trader who has considerable
experience with
risky financial bets. He was formerly employed at Long-Term Capital
Management, a hedge fund whose 1998 collapse plunged the world into
economic turmoil. Despite his uneven performance in the recent past,
Zames has an impressive record in generating profit. Fumbles are not
counted as much as touchdowns on Wall Street. It might be a fall from
grace but not much else. Even though Drew lost her job, she is not going
to have to do without, No one on Wall Street will.
When Wall Street CEOs or Chief Investment Officers lose their job in the wake of poor performance, i.e. massive financial loss or mismanagement, they do not face financial uncertainty. Their egos might be bruised but their lifestyles are not in jeopardy. When Peter Kraus was pushed out of Merrill Lynch after spectacular losses, he received $25 million. When Martin Sullivan, CEO at AIG was let go he took $47 million with him. Stanley O'Neal left Merrill Lynch in 2007 after losing $8 billion when the sub prime mortgage market collapsed, he took $160 million with him. When former AIG executive Joe Cassano was pushed out in 2008 he took $315 million with him along with another $34 million in bonuses. The $1 million in monthly pay he was offered as a "consulting fee" was eventually cancelled in the resulting backlash. The rest of the money he kept. Like other CEOs and financial officers, Cassano lost vast amounts of money during his tenure.
The list of CEOs, chief financial officers, and top level executives who have lost their jobs in the wake of huge financial losses is as impressive as it is long. Equally impressive is the amount of money they took with them when they left. Despite their blunders and miscalculations, despite their grim countenance and statements of contrition, despite their noble admission of error and lapsed judgement, none of them are going to have to do without. None of them are going to have to sell their homes or sweat paying the bills. Don't worry. Unlike millions of other Americans, the executives and bankers that lose their jobs will be just fine.
As long as a person is perceived to be capable of making other people money, they will always be in demand. People like money. They like easy money even more.Wall Street is easy money. Best of all (or worst of all depending on your perspective) to the extent that brokerages are used, it is also money gained without effort. Indeed, it is almost magical. Therein lies the problem. People invest in the belief that the money they put up will be increased. Many investors have come to expect quick and large returns on their money. Many brokers strive to meet those expectations and are willing to go to almost any length to do so. After all, the better they meet those expectations, the richer they become. I would have written "limit" but there really are no limits, not yet anyway. An investment officer might lose his job. He might even lose a few million in bonuses and options, but he will not lose his lifestyle.
Until brokers and investment officers have more on the line than their egos, any barrier erected to curb their activity will be flimsy. You do not have to threaten them with prison. All you have to do is make it necessary for them to find a new job in another line of work. That would require not allowing them to leave in luxury for doing a lousy job. It would mean hiring someone at a salary befitting a person who lost a billion dollars at their last job. As for the rest, for the life of me I cannot think of a single thing a person can do that is worth being paid $1 million a year short of curing cancer or inventing a perpetual motion machine. But then I do not have as large an ego as many Americans, certainly not as large as the captains of Wall Street. Well, perhaps that is not quite true. It could be because I do not measure my stature by income or possessions. I will have to leave it my biographers to sort out.
When Wall Street CEOs or Chief Investment Officers lose their job in the wake of poor performance, i.e. massive financial loss or mismanagement, they do not face financial uncertainty. Their egos might be bruised but their lifestyles are not in jeopardy. When Peter Kraus was pushed out of Merrill Lynch after spectacular losses, he received $25 million. When Martin Sullivan, CEO at AIG was let go he took $47 million with him. Stanley O'Neal left Merrill Lynch in 2007 after losing $8 billion when the sub prime mortgage market collapsed, he took $160 million with him. When former AIG executive Joe Cassano was pushed out in 2008 he took $315 million with him along with another $34 million in bonuses. The $1 million in monthly pay he was offered as a "consulting fee" was eventually cancelled in the resulting backlash. The rest of the money he kept. Like other CEOs and financial officers, Cassano lost vast amounts of money during his tenure.
The list of CEOs, chief financial officers, and top level executives who have lost their jobs in the wake of huge financial losses is as impressive as it is long. Equally impressive is the amount of money they took with them when they left. Despite their blunders and miscalculations, despite their grim countenance and statements of contrition, despite their noble admission of error and lapsed judgement, none of them are going to have to do without. None of them are going to have to sell their homes or sweat paying the bills. Don't worry. Unlike millions of other Americans, the executives and bankers that lose their jobs will be just fine.
As long as a person is perceived to be capable of making other people money, they will always be in demand. People like money. They like easy money even more.Wall Street is easy money. Best of all (or worst of all depending on your perspective) to the extent that brokerages are used, it is also money gained without effort. Indeed, it is almost magical. Therein lies the problem. People invest in the belief that the money they put up will be increased. Many investors have come to expect quick and large returns on their money. Many brokers strive to meet those expectations and are willing to go to almost any length to do so. After all, the better they meet those expectations, the richer they become. I would have written "limit" but there really are no limits, not yet anyway. An investment officer might lose his job. He might even lose a few million in bonuses and options, but he will not lose his lifestyle.
Until brokers and investment officers have more on the line than their egos, any barrier erected to curb their activity will be flimsy. You do not have to threaten them with prison. All you have to do is make it necessary for them to find a new job in another line of work. That would require not allowing them to leave in luxury for doing a lousy job. It would mean hiring someone at a salary befitting a person who lost a billion dollars at their last job. As for the rest, for the life of me I cannot think of a single thing a person can do that is worth being paid $1 million a year short of curing cancer or inventing a perpetual motion machine. But then I do not have as large an ego as many Americans, certainly not as large as the captains of Wall Street. Well, perhaps that is not quite true. It could be because I do not measure my stature by income or possessions. I will have to leave it my biographers to sort out.
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