“I don’t know karate—but I know cr-azy.”
The Washington Post’s Steven Pearlstein finally said the F-word.
While Congress and the Treasury mull over approaches to the financial crisis with exotic names like “cram down,” “claw back” and “disgorgement,” and tax AIG executives “1000 percent” on their $160 million in bonuses, Pearlstein posed a potential solution in simpler terms.
He said what we should be hearing from every leader in government from President Barack Obama on down: “the Justice Department would surely have been within its rights to launch an extensive civil and criminal investigation into whether those bonuses were granted as part of an ongoing conspiracy to defraud shareholders.”
Any other description is making the situation more complicated than it needs to be.
See, most of us out here on Main Street don’t know the ins and outs of naked short selling. But we know that if you go to any sports book in Vegas and bet $100 on Morehead State to win it all, the casino takes your money up front. We don’t know how to engineer a credit default swap. But we know that when the dealer offers “insurance” against a blackjack, the odds say it’s a sucker bet. We didn’t know that banks were borrowing $30 or $40 for every dollar they had on hand, but somehow we all knew a long time ago that “no matter what a stripper tells you, there’s no sex in the champagne room."
But Wall Street either doesn’t know or doesn’t care. So it’s time for Main Street to help Wall Street learn a little “street” justice. We don’t know karate, but we know this much:
1. Lose Geithner Now
Obama can’t start getting rough with other people’s people until he makes an example out of one of his own first. For all we know, Treasury Secretary Timothy Geithner is a seminarian, a math whiz and a trained ninja assassin. But it doesn’t matter anymore. The perception on all sides is that he’s ineffectual and tainted because of his tenure at the New York Fed. Anytime my wife looks at the TV and says, “I’m pretty sure I could take him,” that’s not a good sign. Oh, and by the way, he failed to pay his taxes right before taking over the federal department responsible for collecting—wait for it—taxes. He’s got to go.
2. Don’t Pay Them
What are they going to do, sue? If what everyone says is true—that the federal government now has an 80 percent ownership stake in AIG, then at a minimum we should be able to stall out any further bonus payments until all faulty re-insurance deals have been scrubbed. It’d be worth the money to make these guys fly in from London and go to court to try and get paid. What’s their case, anyway—that they’ve got a contract? Sully Sullenberger and the pilot’s union have a contract, too, but every year they renegotiate their pension benefits just to keep the airlines afloat—and they actually do their jobs.
3. Gut Check Time
Both President Obama and congressional leadership on both sides of the aisle have to grow a proverbial pair and let go of the idea that there is something per se wrong with the government intervening in the affairs of a corporate entity that the taxpayers already own.
There’s nothing “socialist” or anti-market about withholding bonuses in tight times. It happens all the time. What is inherently anti-capitalist and non-market based is people getting paid commissions for doing deals that they know are suspect in the first place. Money for nothing and meaningless transactions sounds a lot less like high finance and a lot more like a Soviet-style, five-year plan.
We all share a portion of the blame for our societal addiction to the good life. But “a hungry mob is an angry mob.” This recession might be easier to take if folks knew that some of the people who caused it were feeling some of the pain.
For now, it doesn’t matter a whole lot that AIG is just one example out of thousands of corporate execs getting paid excessively while failing to produce, or that $160 million in bonuses is a drop in the bucket compared to the $787 billion bailout. The president and congressional leaders have to relieve some pressure before things get out of hand.
Before the government can heal any wounds, it’s going to have to inflict a few of its own.
It might be time for a little payback.
David Swerdlick is a regular contributor to The Root.
David Swerdlick is an associate editor at The Root. Follow him on Twitter.