The Bankers' Bonuses
Everyone's mad at John Thain, the Clark Kent-lookalike CEO of Merrill Lynch. He sort-of-but-didn't ask for $10 million for making sure his company survived the financial apocalypse. Now people wonder if any Wall Street banker should get a payout.
I recently reread Den of Thieves, the tale of how federal prosecutors brought down Wall Street giants Ivan Boesky and Michael Milken, the emblems of the '80s takeover boom. It turns out that Boesky never actually said, "Greed is good," the line Michael Douglas uttered as Gordon Gekko in Wall Street.
What he actually said: "Greed is healthy."
Boesky was right, even if his conviction and jail sentence in a series of insider-trading scandals makes him a lousy spokesman for the cause. Don't think of greed as good or evil; think of it as an almost biological reality. Greed is part of the human makeup. The question is how we harness it for good.
A big problem with Wall Street is that its firms are no longer private partnerships, where bankers worried about the ongoing health of the firm. At public companies, that becomes the shareholder's problem, which led traders to take outsized risks. Hey, as long as they made their numbers and got their money!
Morgan Stanley wants to make its bonuses revocable, if a trader's profit-seeking strategies go afoul in future years. I'm not sure they have the details properly worked out — giving employees money and then taking it away might run afoul of employment laws. But it's the right kind of thinking. If we want Wall Street's avaricious crowd to think in the long term, we've got to pay them in the long term — and pay them well enough that they turn down other work. Otherwise, only really stupid people will work on Wall Street.
Many in the hometown of finance won't cry for bankers who don't get multimillion-dollar bonuses. But last I checked, they pump a lot of money into the New York economy. Sure, they've turned Manhattan into a soulless monoculture of glassy modernist condos with Starbucks in the lobby. Waaah, someone cleaned up all of the grit! You know what's worse than that? Empty glassy modernist condos with closed Starbucks that no longer offer lattes, let alone jobs with healthcare benefits.