The attitude of the bankers shows an insolent contempt for society, equalled only by limitless greed. Over the last five years Wall Street's five biggest firms paid more than $3 billion to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system.
In the years of boom huge profits were made by the banking and financial sector. In 2006 alone the big banks had approximately 40 percent of all business profits in the USA. This is an industry where top executives are rewarded 344 times more than the average employee in the USA. Thirty years ago the average CEO made around 35 times the pay of a typical worker. Last year, the average CEO of a top 500 listed company got $10.5 million in “compensation”.
Merrill Lynch & Co. paid its chief executives the most, with Stanley O'Neal taking in $172 million from 2003 to 2007 and John Thain getting $86 million, including a signing bonus, after beginning work in December. The company agreed to be acquired by Bank of America Corp. for about $50 billion on Sept. 15. Bear Stearns Cos.'s James “Jimmy” Cayne made $161 million before the company collapsed and was sold to JPMorgan Chase & Co. in June.
The $3.1 billion paid to the top five executives at the firms between 2003 and 2007 was about three times what JPMorgan spent to buy Bear Stearns. Goldman Sachs had the highest total, with $859 million, followed by Bear Stearns at $609 million. CEO pay at the five firms increased each year, doubling to $253 million in 2007, according to data compiled from company filings.
The same is true of other countries. In Britain the top banking executives receive enormous salaries and bonuses. Michael Geohogan of HSBC got £3.5 million in 2007 (£2.54 m. in bonuses); Andy Hornby of HBOS got £1.93 million (nearly £1m in bonuses); Eric Daniels of Lloyds TSB got £2.7m (£1.8m in bonuses); Fred Goodwin of RBS got £4m (£2.8m in bonuses); John Varley of Barclays got £2.38m (£1.4m in bonuses).
In the past the banker was a respectable man in a grey suit who was supposed to be a model of responsibility who would subject people to a severe interrogation before lending money. But all that changed in the last period with interest rates low and liquidity in plentiful supply. The bankers threw caution to the wind, lending billions for high margins to people who found they could not afford repayments when rates rose. The result was the sub-prime mortgage crisis that helped to destabilise the entire financial system.
Governments and central banks conspired to fuel the fires of speculation in order to avoid a recession. Under Alan Greenspan the Federal Reserve kept interest rates very low. This was praised as a very wise policy. By these means they postponed the evil day, only to make the crisis a thousand times worse when it finally arrived. Cheap money enabled the bankers to go on a leverage spree. Individuals borrowed to invest in property or buy goods; investors used cheap debt to invest in higher-yielding assets, or borrowed against existing investments; bank lending outstripped customer deposits and activities were kept off balance sheet.
Now all this has turned into its opposite. All the factors that pushed the economy up are now combining to create a vicious downward spiral. As the debt is unwound, the shortage of credit threatens to bring the economy to a grinding halt. If a worker makes a mess of his job, he will lose his job. But when the bankers wreck the entire financial system they expect to be rewarded. The men in smart suits who have made fortunes out of speculating with other people’s money are now demanding that the taxpayer bail them out. This is a most peculiar logic, which most people find very difficult to understand.
The bankers wish us to forget all this and concentrate on the urgency of saving the banks. All the pressing needs of society are to be put to one side and the wealth of society in its entirety must be put at the disposal of the bankers, whose services to society are assumed to be far more important than those of nurses, doctors, teachers or building workers. The governments of the EU and the USA spent in one week the equivalent of what /would be needed to relieve world hunger for nearly 50 years./ While millions starve, the bankers continue to receive lavish salaries and bonuses and maintain an extravagant lifestyle at the public expense. The fact that there is a crisis makes no difference to this.
Recently fifty top executives of the bankrupt Fortis insurance company spent 150,000 euros in a “culinary event” in the prestigious Louis XV restaurant of the hotel Monegasco de Paris, the most expensive in Montecarlo. The restaurant has the best selection of the finest wines in the world, according to the Belgian paper 'De Morgen', about 250,000 bottles, "most of them impossible to buy", in the words of the travel guide 'Lonely Planet'. To spend a night in this hotel costs between 500 and 1,000 euros in the low season, while a lunch costs more than 300 euros. The excuse was that this event had been planned months ago. But the Belgian and French taxpayers will pick up the bill right now.
The CEOs of another bankrupt company, the multinational, AIG, spent another 440,000 dollars in one week in hotel bills, when they went on a week’s holiday paid for by the Federal Reserve – that is, by the US taxpayer. This little holiday was organized shortly after the company collapsed. The Democrat chairman of the House Committee, Henry Waxman, showed a photograph in which the bankers appeared in a hotel in Monarch Beach, California, where the rooms cost 1,000 dollars a night. The rescue plan for AIG cost the USA $85 billion. The CEO’s took advantage of the taxpayer’s generosity to spend around $200,000 dollars on rooms, more than $150,000 on meals and $23,000 on the hotel’s health treatments, according to Waxman.
These few examples are an eloquent comment on the real attitude of the bankers.
