Tuesday, December 23, 2008

Be Of Good Cheer!

After reading through the Times-Dispatch this morning I am feeling real good about this holiday season. Of course, the lead article about Circuit City’s continuing plunge was a bit of a downer. But you can’t just look at the big headlines. You have to read and analyze and then synthesize to get to the really good stuff.

I start with Zach Reid’s front page piece “Why we feel compelled to give.” After interviewing VCU’s Everett L. Worthington, Zach concludes that we American’s truly believe it is better to give then receive. (Of course, Zach didn’t see my family’s Chanukah party on Sunday where an entire generation of our future engaged in a joyful orgy of receiving.) So, keep in mind that we Americans are a giving people.

Also on the TD front page there is an Associated Press story with the headline “Banks keep quiet about bailout cash.” For those of you who were not paying attention, last fall (about the time that the Republican National Committee was warning us that Barack Obama’s policies would lead to socialism) the high officials dealing with the economy in our Government came out with their “the sky is falling” prediction. Apparently, or so they said, the financial crisis in this country was so severe that Western Civilization was about to go under. (Why they felt that the economy was basically sound until that point they didn’t say.) The only way to save us from a disaster that would make the Great Depression of the 1930s look like a Sunday school picnic was to buy all the bad debt that our big banks were saddled with. Under this rescue plan, the big banks would get a big infusion of cash that they could use to make more loans and the Federal Government would own the bad debt. The tax payers would be protected because some day that bad debt would become good debt and we would be paid back. The price tag--$700,000,000,000 (seven hundred billion dollars). (By comparison, NASA runs the entire space program for about twenty billion dollars per year, the entire Environmental Protection Agency runs on less than five billion per year, the Department of Veterans Affairs costs about forty two billion per year.) Well, despite this maven’s warnings (700 Billion Tax Hike To Pay For Bailout), the Congress provided the $700 billion to save our free market economy. Sometime after the congressional action, the Secretary of the Treasury decided that instead of buying up the bad debt he would just give the money to the banks.

Well, according to the article, when the AP asked the banks what they had done with the money, they refused to answer. Apparently their view is that the money is now theirs and they don’t have to tell anybody what they are doing with it. They may be loaning it, or they may be keeping it on deposit, or . . . (continued on page 8).

Another AP article “Bailed-out banks’ execs got $1.6 billion.” This article indicated that the 116 banks that have received federal rescue dollars this fall gave their top executives a total of $1.6 billion in salaries, bonuses and other compensation during 2007. The article pointed out such gems as:

1- The president and CEO of Goldman Sachs received compensation of $54 million in 2007. The top five executives of Goldman Sachs were compensated at $242 million. Before Goldman Sachs’ blip fell off the radar, it explained its executive compensations as essential to retain and motivate executives “whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels.” Goldman Sachs received $20 billion in federal rescue money on October 28;

2- The CEO of Merrill Lynch received compensation of $83 million last year. This executive who was formerly with Goldman Sachs came to Merrill Lynch in December of 2007. For his one month’s work for Merrill Lynch he received $57 thousand in salary, a $15 million signing bonus and $68 million in stock options. Merrill Lynch received $10 billion in federal rescue money on October 28.

After reading these three articles and blending them in my mind, I am feeling really good. First, we Americans are a people that love to give. Second, we must look at the $700 billion not as a bailout (or something else nasty like that) but as a gift to the banking industry. Third, the banking industry will use this gift to provide adequate compensation to their top executives. Now, I don’t have to worry that the children or grandchildren of these execs might have to do without this holiday season. So, everybody comes out ahead. We taxpayers satisfy our urge to give. The corporate execs get enough money to make it through what would otherwise have been a sad holiday season for them.

In rescuing the wealthy we Americans did some real good. Some might ask why we don’t make a similar rescue effort for those in our society who are truly suffering this holiday season. The answer is simple—doing that would amount to socialism.

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