You Got Screwed, CEOs Made a Fortune

This is a story that seems all too familiar, but it's worth repeating each time it happens: trillions of dollars in retirement and savings are gone, millions of jobs will be lost, we're facing a severe economic crisis that could go on for a number of years, and we could be in for a debilitating deflationary period. All thanks to a bunch of greedy CEOs in the financial world -- who, it turns out, have made off with a king's ransom... at your expense.

The details come this morning courtesy of that left-wing rag, The Wall Street Journal. Reporters Mark Maremont (who I worked with many moons ago in the belly of the beast, Business Week), John Hechinger and Maurice Tamman write that:

The credit bubble has burst. The economy is tanking. Investors in the U.S. stock market have lost more than $9 trillion since its peak a year ago.

But in industries at the center of the crisis, plenty of top officials managed to emerge with substantial fortunes.

Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis. Four of those executives, including the heads of Lehman Brothers Holdings Inc. and Bear Stearns Cos., ran companies that have filed for bankruptcy protection or seen their share prices fall more than 90% from their peak.[emphasis added]

You want to swallow a staggering number:

The study, which examined filings at 120 public companies in such sectors as banking, mortgage finance, student lending, stock brokerage and home building, showed that top executives and directors of the firms cashed out a total of more than $21 billion during the period.[emphasis added]

$21 BILLION. $21 BILLION. $21 BILLION.

You want to know where the revolution should start? How about at the home of Dwight Schar, chairman of NVR Inc., a Reston, Va., home builder -- you know the folks who brought you the housing bubble:

Mr. Schar's own home these days is an 11-acre oceanfront compound in Palm Beach, Fla., with a tennis court, and two pools, purchased in 2004 and 2005 for $85.6 million from billionaire investor Ronald O. Perelman, according to county officials. Through a spokesman, Mr. Schar declined to comment.

Think all the people whose homes are now underwater or have lost their homes would like to just set up a tent on Mr. Schar's 11 acres since they have nowhere else to go?

Or how about instead R. Chad Dreier, 61, chairman and chief executive of Ryland Group Inc., a Calabasas, Calif., home builder, who, The Journal's analysis shows, made $181 million during a five-year period:

Next door to his 4,900-square-foot hilltop house in Santa Barbara, Calif., a Dreier private company owns an office building that houses Mr. Dreier's collection of baseball cards, sports memorabilia, gems, minerals and other items. State records say he owns several cars, including a 2004 Porsche coupe worth $448,000. Mr. Dreier has donated at least $6.5 million to Loyola Marymount University.

Dreier's company is a good barometer:

After posting huge profits during the bubble years, Ryland has reported hefty losses since last year amid plunging home sales. Its stock price is down 85% from its 2005 closing high.

Or, better yet, take the folks at First Marblehead who made a fortune preying on people needing student loans:

Students take out the loans if they've exhausted the cheaper government-backed variety. As with subprime mortgages, those with poor credit histories must pay higher interest rates.

Nice business, apparently:

Chief Executive Daniel Meyers, a 46-year-old former arbitrage and derivatives trader, received almost $96 million in cash compensation and proceeds from stock sales over five years. Lee Jacobson, a First Marblehead spokesman, notes that Mr. Meyers co-founded the company in 1991 and didn't sell any shares until First Marblehead's October 2003 initial public offering.

In 2004, Mr. Meyers bought a Spanish-style villa in Newport, R.I., the summer retreat of industrialists a century ago. He paid $10.3 million for the estate, on 45 acres with sweeping views of the Atlantic. Mr. Meyers tore down the villa and is constructing a five-building, 38,000-square-foot compound called Seaward with a carriage house, a guest house and a caretaker's cottage. Mr. Meyers also owns a 66-foot sailing yacht, which he recently raced to a win at the famed Newport Regatta.

New Century Financial was right in the game, handing out loans to people who simply stated that they could afford them--with no documentation:

Over four years, the three executives received cash compensation and stock proceeds totaling $74 million, including estimates of their 2006 pay cited in a report by a court-appointed investigator after the company filed for bankruptcy protection. Mr. Cole, who was CEO for some of the period, lives in a 9,200-square-foot oceanfront home in Laguna Beach, Calif., that has a tax value of $30 million.

This is robbery. Most of it was legal robbery -- playing very fast and loose with the rules, ignoring basic standards of business practice and taking advantage of lots of people who were desperate, often because their paychecks haven't shown any income growth in years.

Maybe we can't jail these folks or take away their mansions, yachts and other toys. But, how about the old tar-and-feathering option?

Comments

[FreedomCorpse]

I knew it 7 years ago when the CEO of the company I worked for, invested about $1.5 million of his own money in the company, persuaded 'venture capitalists' to invest $20 million, got the company rolling and up to $500 million in market capitalization, then he bailed with 6 million stock options for a nickel a piece excercise cost and walked with $36 million...­. all for 3 years of 'work'. 40% of the work force got laid off shortly thereafter and most of the jobs went to India.

[BBackSoon]

Remind me how the French would take care of this? It is time for these Robber Barons to leave a little for the rest of us. I don’t begrudge the Rich their wealth but when they build it by taking dollars out of my pocket, which upsets me.

[jacqand]

We've been had.
http://www.fool.com/investing/dividends-income/2008/11/14/i-think-we-just-got-mugged.aspx

[jensax]

I've sent an open letter to the paper asking for my share of the bailout. These billionaires need to be reined in. ...

[americaforme]

Three strikes your out, doesn't apply here! Wow! how many years jail do you get for a bank Heist?More millions a bank robber steals, dosen't he get additional time? How about these guys and their billions? It should be an automatic life sentence. Perhaps their concious is seared,and they dont get it that they are thiefs.

[tomas0808]

I hope someone goes Travis Bickle and offs one of these guys. They need to know that you can't get away with that kind of crap. Maybe Obama will make a sport of it while we're waiting out the Depression.

Tonite folks, the sentencing of so n so, who ripped off the American people for thirty billion dollars. He gambled with your lives, now he's going to have to gamble with his own. We have three curtains. Behind one of them, a prison sentence. Behind another, a life sentence at hard labor. Isn't that ironic? He never worked a day in his life and now he might have to work for the rest of his life! (crowd applause). And behind the third curtain, a Guillotine!!! (crowd goes wild)

Okay Mr.so n so. Choose!!!!!

[tomas0808]

The one downside about living in a civilized society (although that will be under debate soon, I'm sure) is that we just can't drag these ........ou­t into the street and guillotine them.

If all the billions they ripped off become worth nothing more than paper at least we might be able to see it.
The world has a way of bringing people down to earth.

[JBS]

tomas0808 sez: "The one downside about living in a civilized society (although that will be under debate soon, I'm sure) is that we just can't drag these ........ou­t into the street and guillotine them."

Hmmmm? I don't see why not.

[exkiodexian]

I agree with the last statement about tarring and feathering. It is now time for physical action.

[LeftRight]

I actually got a call last night asking me to refinance my 30 year fixed rate to an ARM with no income verification! I informed the nice young man making minimum wage on the other end of the phone that I was not interested, and that if I got another call regarding the matter that I would be notifying the FTC about the matter....­.

[Shortyfuse]

Thanks for naming names. I hope you do not mind if I copy and put this in my archives.

[Shortyfuse]

We never expected any other outcome.

[Henry]

Republicans believe this is the way it is supposed to work. Know Phil Gram phd in republican economics. I think he said "money is the mothers' milk of politics". Like peter said, there is nothing subtle about what we have witnessed. At 9/11 we were directed to take a vacation to disneyworld. During the occupation of Iraq we need a tax break to stimulate the economy, Communist China will finance the "tab" in Iraq. And... the best for last, the Grandfather from Goldman comes for $700 bil while the Fed lends (or gives away) another trillion. And.,,, we have a conservative christian government. ha ha ha

[peterg76]

It's not like they were trying to be subtle about it.

[vasil]

No, not at all. They were screeming from the top of their lungs: this is it , we can do anything we wish for and nobody can stop us !!!!!