Those Poor Bankers

[Economy] An anonymous commenter responded to my post about bankers justifying their big bonus checks only weeks after the industry successfully milked Congress for a huge taxpayer-funded bailout:

What if Larry's firm wasn't bailed out by the government and he made budget? He did his job: Why should he not be compensated as before?

Main Street seems to have a misconception about Wall Street bonuses. Bonuses aren't gifts: they are the major part of the overall compensation package and people work very hard for them. Wall Street traders in general are underpaid on their salaries and the firms use the bonuses as both carrot and stick. When you do well, bonuses are up, and vice versa. That is the contract.

If Anonymous hasn't seen the classic psychodrama Whatever Happened to Baby Jane?, I highly recommend it. In one memorable scene, the paraplegic Blanche Hudson (Joan Crawford) tearfully protests, "You wouldn't be able to do these awful things to me if I weren't still in this chair!"

To which Baby Jane (Bette Davis) Hudsons' wonderfully callous response is: "But cha are, Blanche! Ya are in that chair!"

In this allegory,
Blanche represents the crippled banking industry,
Baby Jane symbolizes the taxpayers,
and Elvira is, oh, let's say, the illegal immigrants.
Whatever. But nobody can carry off an eye-roll
like Bette Davis can carry off an eye-roll!

Anonymous started out his/her whole post with a big subjunctive "what if." What if Larry's firm hadn't been bailed out? (But it was, Blanche!) What if I, as a taxpayer, weren't faced with paying off a series of multibillion-dollar bailouts for the rest of my life? (But I am, Blanche!)

But, if I weren't, would I still complain about hordes of bank executives cashing bonus checks that dwarf my own annual salary? Well, let me think about it. Even before the bailouts became necessary, I often griped about the widening income gap that separates normal people like us from the few, the proud, the elite superrich.

So let's, for a moment, close our eyes and imagine a world in which the taxpayers hadn't been ... uh, "asked" to step in and bail out a bunch of wealthy fatcats for their hubris, shortsightedness and arrogance in looting the treasury for eight years and crashing the almighty economy. I'm visualizing as we speak. (Om mani padme hum...) The vision is a bit fuzzy, but reception is clearing up by the moment ... better now ... almost there ...

... aaaaand, here it is, crystal clear: that imaginary world where the bailout doesn't exist. And here I am in that world thinking about bloated corporate salaries and bonuses. And, why ... it almost seems ... well, yes! Of course I would complain. After all, they're only a bunch of semiliterate, entitled frat-boy MBAs who regard salaries in the low six figures as "slumming."

Frankly, I was a big fan of democracy while it lasted, so the fact that a small coterie of wealthy elitists were able to take the reins and dispose of the middle class in a few short decades kinda chaps my hide. Yep, sure I'd complain about those bonuses.

But--returning now to reality--there's a whole world of bitterness between that hypothetical kind of complaining and the long and loud, resentful, heartfelt bellyaching of which I find myself capable now that I've been elected to actually foot the bill for those MBAs' bonuses.

Even if, as Anonymous says, the bonuses are really to be considered part of the bankers' and traders' "compensation packages," what of it? If that's the case, then, in effect, I have suddenly assumed responsibility for paying some random corporate suit's cable and gas bills.

It's as if I've suddenly adopted an Ethiopian child, but he's got nicer clothes and a higher standard of living than mine, and he doesn't ever write or send pictures, and I don't even get a hug from Sally Struthers. If we ever were to meet (ah, that subjunctive mood again!), it's doubtful that we'd find anything in common to talk about.

But, if I'm going to have a pet stockbroker, I'd appreciate it if he'd drop by once in awhile--at least to do something useful like scaring mice out of the kitchen or barking at the mail carrier.

Traders are under a lot of pressure to not only do well but to increase production by at least 10% yearly. Perhaps a better model would be to increase the salaries and decrease the bonuses so that there is less drama and more stability on incomes.

Sure, sure, they've got stressful jobs. Don't we all. I'd like to see how my pet trader holds up in a copy editor's slot on a production day prior to publication of a special issue. Then we'll see how he handles "stress." Once he earns my paycheck, he might think twice about appropriating 30 percent of it to fund 15 minutes of his next two-week trip to Tuscany.

To sum it up, Anonymous, many of us working stiffs are willing to believe that these bailouts are necessary. It seems reasonable that, through scrupulous and selective use of this huge infusion of cash, the best minds in the various economic industries could find a way to jumpstart the economy. After all, we want the country, and the world, to get back on good financial footing as soon as possible. That's why we didn't riot in the streets when the Emergency Economic Stimulus Act went through.

But, as long as the bankers and traders and MBAs are in that chair--as long as we're not only suffering from the results of their bad decisions but even cheerfully subsidizing them--they'd best accept our largess with a bit of gratitude, dump that attitude of entitlement and reign in their most conspicuous personal habits for awhile.

(Brandon Burt)

Putin on the Ritz

[Media] As reported in the U.S. financial media, Russian P.M. Vladimir Putin's seemingly brutal response to computer CEO Michael Dell's comments at the World Economic Forum was either another example of Putin being a dickhead or, more charitably, the regrettable result of a cross-cultural miscommunication.

Russian P.M. Vladimir Putin:
Hunkier than you thought.

Obviously, it takes an unusually perceptive and insightful observer to make sense of such an event. And who better to turn to for a perceptive, insightful report than the rah-rah, all-hail-the-free-market American media?

According to Fortune, Putin is a mean, mean man with a "tough, demeaning streak." He rebuked Dell's praise of Russia's technological prowess and even his selfless, generous offer of help with a "withering" "slapdown":

"We don't need help. We are not invalids. We don't have limited mental capacity."

Such an unexpected reaction demands a multitude of wild interpretations by people holding varying economic philosophies--especially those who weren't actually in Davos, Switzerland, at the time. Here are some of my picks:

The Indignant Free-Market Fundamentalist Explanation

What an ingrate! After all, Dell was only offering to help. Belligerent unwillingness to take advantage of win-win synergistic solutions will be Russia's downfall.

Tut-tut.

The Thoughtful Capitalist Approach

When you think about it, economists, businessmen and politicians live in their own rarefied, artificial, abstract worlds. So when corporate executives and politicos gather at an event organized by bean-counters--all speaking through interpreters in different mother tongues--it's amazing that they manage to communicate at all.

Maybe it was all just a misunderstanding stemming from Russia's regrettable ignorance of How Things Are Done in the modern business world. Despite Putin's blistering indictment of the U.S. financial situation, Dell was not shaken. After all, Dell wouldn't be where he is today without that good, old-fashioned, optimistic, American can-do attitude! Sparkling visions of fresh, new markets danced before his eyes and he asked, "Now, come on, Vladimir. How can we help you develop your nation's IT sector?"

This was not the patronizing, unfavorable assessment of Russia's technological prowess Putin thought it was. It was just standard, feelgood, let's-be-friends sales jargon, akin to "Now, what do I have to do to put you in this '92 Toyota Tercel today?" People in the U.S. are accustomed to tuning out and toning down this kind of sales pitch, but Russia's capitalistic culture is still in its infancy: Putin simply doesn't have any frame of reference for all that Dale Carnegie happy crap.

The Paranoid Wingnut Viewpoint

Who's to say Putin really misunderstood? He's no idiot; in fact, he could be an evil genius. What if he only pretended to misinterpret Dell in order to signal Russia's intention to exploit the United States' weakened economic situation? And, boy, wouldn't France and all those other America-hating socialist countries in Europe just love that?

Putin's Actual Speech

Any of the above interpretations may seem plausible if you rely on secondhand reports in financial publications. However, if you take the time to read Putin's opening address and view the exchange with Dell, a very different picture begins to emerge.

Putin's got it goin' on for a P.M.: Who knew?

Now, some reports describe Putin in his speech as a "born-again capitalist" embracing the unregulated free market with all the fervor of an 11th grader who just completed a unit on Atlas Shrugged. But aren't they overstating the matter just a tad? Those who have particularly strong memories of the Cold War seem unable to let go of the fear that Russia could, at any moment, fall back into its old ways--so when the leader of a former Soviet state speaks knowledgeably on economic issues, it still seems like an earthshattering event.

It's been nearly 20 years since the collapse of the USSR, and the Red Menace is unlikely to rear its ugly head anytime soon. A critical mass of world leaders is settling on balanced, regulated capitalistic economic policies, fitted with European-style democratic-socialist political models. Being outliers, American lasseiz-faire economists--who are taught to have very strong convictions--must find it disagreeable to operate within today's world. But, until they master their emotions long enough to recognize that they no longer hold the dominant view, they're liable to misinterpret events such as these. That's why so many U.S. financial publications get it wrong.

In his speech, Putin addresses the global economic crisis, stating his disdain for the popular, new international party game Pin the Blame on the Americans. Even so, he couldn't resist reminding everybody that, only a year ago, Bushies at the conference were still crowing about the "cloudless prospects" of the fundamentally sound U.S. economy. Ouch!

Putin says this crisis is the result of a highly stratified division of wealth in "certain countries, including highly developed ones," as well as the "excessive expectations" of both corporate interests and consumers. (Sound like anybody you know?) Still, he warns against the abandonment of "responsible macroeconomic principles" and excessive protectionism. Both unrestrained governmental deficit spending and "adventurous stock-jobbing"--which, presumably, are what got us into this mess--are equally damaging.

Putin puts forth a number of practical suggestions--a systematic method for writing off bad debts, the elimination of "virtual money" and the adoption of transparent national monetary policies--as necessary steps toward recovery. (His proposal that the world's reliance on a single reserve currency be abandoned in favor of a system of multiple reserve currencies no doubt prompted the E.U. delegation's bowler hats to bob up and down in polite, approving nods. Meanwhile, visions of greenbacks being burned for heat by the truckload must have triggered a volley of tiny vomit-burps in the mouths of nervous U.S. bean-counters.)

Putin finished up his speech by pimping Russia's natural-gas industry as the ultimate future supplier of clean energy to the E.U.--once the necessary infrastructure is in place, of course.

Dell's Offer of "Help"

In the video recording, Dell doesn't seem to offer praise and assistance--or even a sales pitch--so much as he seems, by his tone of voice, to needle Putin, challenge his free-market cred and possibly even belittle Russia's sense of pride in its technological achievements:

Mister Prime Minister, you spoke of the dangers of excessive government involvement, and I found myself really struck by that comment and surprised to hear that comment. Six months ago, I would have never imagined hearing that comment from yourself, but I have to say I completely agree with you. [Rrrrowr!]

Now, to my question: When I look at the IT sector, you’ve made some pretty considerable progress, bringing computers into schools, bringing government services online, bringing better Internet access across Russia. But when we look at the level of scientific and technical talent, there is still room to further utilize the IT sector. [Meeeow!]

So, my question to you, really, is: How can we, as an IT sector, help you broaden the economy as you move out of the crisis and take advantage of that great scientific talent that you have?” [Fft! Fft! Hsss!]

Maybe Dell was only nervous, overawed and overcompensating--or maybe this is just a flat recitation of a prepared, memorized question which only seems to come across as arrogant, accusatory and patronizing. But, if he said this to me while I was in a particularly defensive frame of mind, I'd assume he was calling me out.

Putin's Response

According to Russia Today *, the conference translator got all confused by Putin's "metaphorical language" regarding invalids, etc., and what he really meant to say was this:

"We’re not someone in need of help. We’re not invalids. Help is something that you should give to poor people, to people with limited capacities, to pensioners, to developing countries ..."

Well, same diff. You say "pensioners," we say "retards." (What the hell is a pensioner anyway? 'Round these parts, we work our old folks until they die. Serve's 'em right for not investing in the stock market. Hell, if you hold out on food, housing and health care long enough, sometimes you can even get them to dig their own graves! Takes a long time, though, with no shovel and those crazy arthritic fingers.)

Basically, though, Putin was saying that Russia expects its economic partners in Europe, America and Asia to treat it on equal footing--instead of acting like condescending bastards. At the same time, he made a not-so-subtle jab at the United States' dysfunctional inability to care for its disabled, elderly and poor.

The Lesson to Be Learned

Now, I'm not a big Putin fanboy. Like most Americans, I actually know very little about him (except that he's a mean, mean man!) But he didn't seem all that terrifying during his speech. Just pragmatic, and about as opportunistic as any American businessman.

Not only am I not an America-hater--I'm an America-lover. I love this big ol' country of ours. I want us to succeed. Once we were "a beacon unto the world." We stood for something: the good, human values of dignity, freedom, equality, optimism, opportunity and a fair reward for hard work and innovation. I want us to be that beacon again.

We can do much better than we've been doing. The economic elites are still so frozen in Cold War-era anti-red propaganda that, instead of dealing with the way things are, they keep trying to find a substitute player to fill the Soviet Union's villainous role. And, all the while, our workforce is languishing while the rest of the world reaps dividends we don't even know exist.

Instead, our MBA programs have turned out a generation of emotionally insecure, irrational, stridently hyperreactive corporate drones who are incapable of understanding--much less competing on--the world economic stage. Our economists cling to statistical models based on assumption that are so outdated and flawed, they might as well have been reading tea leaves and casting chicken bones for the past 10 years or so. Our financial journalists--at least the ones who are still old-school enough to bother checking original sources--are too superstitious to interpret their sources accurately. The rest get their information directly from the blogosphere and Wikipedia.

The American economic elites are suffering from a Cold War hangover, and this hair-of-the-dog remedy they've been using for two decades doesn't work. The rest of the world is already up and at 'em. It's time to sober up.

(Brandon Burt)

* [Addendum: Media critics have questioned Russia Today's objectivity in view of its close ties to Russian government. As far as I can tell, it seems to be a state-funded news organ, in some kind of loopy, roundabout way, although some of its bureaus claim to enjoy some degree of editorial freedom. PBS or Pravda? Who knows? So you might want to take Russia Today's stories about Putin with a grain of salt.]

Girlfriend needs a manager!

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