Photo: Chris Arnold, NPR
As if the Wall Street bailout couldn't get more obscene, Wall Street executives are now lobbying for huge fees from the government to manage some of the assets they're selling to the government; in other words, the taxpayer will take the risk, but Wall Street will get the fees. From The New York Times:
Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it... Other firms hope to be hired to manage the assets that Treasury acquires, a job that could earn them $1 billion a year, even if they charged fees that were modest by industry standards. Among them are the asset management companies Pimco and BlackRock. Morgan Stanley, the investment bank, is also vying for the work.
Paying Wall Street exorbitant (if volume discounted) fees is something only a true crony-capitalist could come up with. Paulson, Bernanke, and probably even Bush know that there is another model that works extremely well: the relatively modestly paid money managers employed by major educational institutions and pension funds.
The leader of this bunch is Yale's David Swensen, who has delivered an average 16.3 return on the university's endowment since he started running it 20 years ago -- outstripping every other university endowment and almost all private investment funds, growing it during that time from $1.3 billion to $22 billion.
Here's the kicker: Swensen works for $1.3 million a year (a very modest amount when you consider that someone of his talent could be making tens or even hundreds of millions working in the private sector). Swensen has said that he wants to stay at Yale for the remainder of his career, but I suspect he could be persuaded to change his mind if we was reminded of Yale's famous slogan: For God, for Country, and for Yale.
As much as we Yalies love our alma mater, we know what comes first. Swensen might even be willing to serve as a "dollar-a-year" man, working pro-bono for the greater good (though paying him a few million to save us billion in fees might not be such a bad idea either). So, Mr. Paulson, if you're really interested in doing something other than purely making your Wall Street buddies even richer, it might be time to pick up the phone and call New Haven.