Citigroup, Goldman Sachs, Wall Street and the Tolling of the Bell For America's Meritocracy
In late 2007 and the early days of 2008 Citigroup announced they were cutting 4200 jobs. This happened shortly after Vikram Pandit, while just six weeks on the job as Citigroup's CEO, was awarded a $26.7 million stock bonus and $3 million in stock options. It also happened as the bank was set to announce that, by the end of 2007, it was already holding $18 billion in mortgage backed toxic assets. It also happened at the time the share price had already been halved while being led into the abyss by its management team that had included its previous CEO Charles Prince, who was given a golden parachute of $10.7million in stock and a $13.2 milion cash payout. Not to be overlooked, the cheer leading along the slippery slide to disaster of Robert Rubin encouraging Citigroup to adopt a mindset to become an aggressive proprietary trader/speculator, with all of its disastrous downsides and with billions more yet to be lost. Rubin was of course the former Secretary of the Treasury and before that Chairman of Goldman Sachs and collected more than $100 million from Citigroup for his wizened guidance.
As I wrote in January 2008, "While these 'executives' were wallowing in 'gravy' Citigroup had the effrontery to announce almost simultaneously that it was cutting 4200 jobs! 4200 families in distress. Shameless is hardly too strong an adjective... Citigroup had become the poster child of so much that is wrong, and much of what is happening throughout corporate America."
Of course things deteriorated dramatically since then. By early 2009 the job cuts at Citigroup climbed beyond 75,000; and what happened at Citigroup was only the beginning of the one-sided unfairness that has become the shameful norm in the way we now do business.
Now it is no longer Citigroup and the then 4200 layoffs, but millions throughout the land that have lost and are losing their jobs and their futures; families and communities overwhelmed with foreclosures and far too many losing hope along with their homes. This while the likes of Goldman, Morgan Stanley and their brethren on Wall Street are dancing off richer than ever before, (consider just a short time back the likes of Lee Raymond, retiring CEO from Exxon with a $400 million golden parachute culminating a career whose grim achievement was to preside over the largest cog in an industry whose rapacious profits resulted from Americans paying over $4.00/gallon for their gasoline and many unable to meet the cost of heating their homes)
As mentioned then, and more assuredly applicable now, that American capitalism was becoming and has now become rotten at the core. Gone is the American capitalist impulse's unique sense of fair play and adherence to a level playing field accessible to all. That formidable confidence in our system as being a 'meritocracy', uniquely American in its nature, very nearly void of envy and resentment. The kind that made a Bill Gates not only possible but probable. Here was a land that nurtured, admired and celebrated his exemplary vision making him rich and all of us as a society, richer. A land that is now being overwhelmed and whose creative vision and sense of fair play is being destroyed by vested interests that have successfully stacked the game to such one-sided advantage that it now has lost all credibility and crushed our confidence in the meritocracy that was so deep seated in the American grain and served as a beacon unto others.
In January 2008 this post observed "The Citigroup bell has tolled". Today struggling with some $350 billion in government bail-out loans and guarantees covering hundreds of billions of toxic assets, indeed the "bell has tolled" for Citigroup.
And now, sadly, the bell is tolling for the spirit and brilliance of what once was American capitalism and its sense of fairness and free enterprise. What has come to pass is obscene and a healthy society cannot allow it to continue.
Dean Baker: Does Citigroup Need China?
The decision by China to stop buying U.S. government debt may not harm the economy's recovery, but it could be devastating to the recovery efforts at Citigroup.
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Marx said that the primary reason people did not rise up was "false consciousness". A belief in their class status that was NOT supported by their objective situation.
We embody this principle wholeheartedly here as 90% of the people swear they are middle class, when they either are not or are fronting on borrowed money.
Until we address this we will not change anything. Powerlessness is so shameful a concept in our culture that we blame the victim for just about everything. If we blame the victim then how can you get the people as a whole to admit they've been victimized? You can't ,and they won't.
Students in business schools are taught that their interests are aligned with the ownership class, people are sold on the idea of 401(k)s making them a part of the ownership class, and NLRB rulings over the year have further and further pushed the line downward between management and workers. Even small business owners are convinced to join the Chamber of Commerce an organization that only looks after the mega corporations. It is critical that we begin to inform people about their ties to the working class. I have stated over and over and do so to students that if you are dependent upon your job for survival you are working class, because you have much more in common with other workers than you do the ownership class. If you make your living off of your stocks and bonds and the interest and dividends from these then you are a member of the ownership class, and perhaps it makes sense to vote only for your self-interests. However, for the rest of us I do not understand the corporatist voting record that we see.
You are so right on. I'm fanned.
I agree.
What we have all witnessed is the total complete failure of the managerial class of the United States. As a class it is now a mob of total complete dunces who cannot run a drive thru at McDonalds. I am sure everyone here could tell story after story of MBA dunces and clueless paper Ph.D. tragedies they have encountered along the way.
An undergraduate degree in Business Administration should be completely outlawed as a degree in society. People should study classic world literature to learn how to think in life. To get an MBA degree a person must be required to have at least five years of actual hands on real world experience on a shop floor process somewhere making something real that benefits the human race. Those whom the gods would destroy they first make mad with power. Judgment day has come upon us as a society. We did not have the right stuff at the highest levels of our business and commerce. So this is how the United States ends...not with a bang but with a wimper led by utter morally bankrupt clueless morons and dunces.
Outlaw degrees in arts, ethnic studies and philosophy first.
people are getting degrees in which they have no hope of getting marketable skills.....for the most part..there are exceptions but for most part they will never see their return on investment.
!?! Perhaps make it so that they must have this explained to them so as not to commit fraud. But to outlaw that which truly makes us civilized because it isn't financially rewarding?!?!
Maybe we should - as was done in the 30s - make art financially rewarding to the benefit of us all.
One of the problems is that these types of degrees have been for the most part outlawed through the corporatization of the University and the adoption of the business model. Universities have abandoned programs that lead to higher levels of learning and thought in favor of skill based, trade programs that are better suited to community colleges. I teach in a business school, but some of the most intelligent students and professors I have met come from these very programs you mention. Further, every time I ask my seniors in the b-school how many of them would have received a different degree if it were not for the job market, about 80-90% of students say they would have. This current system is a good way to create a lot of unhappy adults.
it is now public knowledge that capitalism is merely the institutionalized theft of the citizens money by the fed and congress.
Meritocracy in American corporations is a complete falsehood. What they do is pick some one, work him to death, steal all his ideas, and fire him becasue he would not have been able to do any of it without them anyway. That is how they think, and I suspect it's always been that way more or less. Those with the gold make the rules.
How uncomfortable are we going to have to get?
Is change really possible?
Where is the tipping point that will break this caste system?
Or, should I just tuck my tail between my legs, go home, watch T.V. and suck my thumb? What about the rest of you?
I don't know. I'm asking.
Our society worships materialism. Until we have leaders who are genuine, intelligent, fearless, and respectful of humanity, things will get worse for US citizens.
True. Americans believe that material things define them and there lies a deep rooted problem.
Sad but true. Today very few understand the concept of Honor. Winning trumps honesty. Ego and greed has seriously American capitalism. Both Republicans and Democrats are to blame. We should learn from German capitalism. I have lived and worked in Germany and have friends there. We can learn a thing or two about how to make capitalism work for all Americans and not just the top 1%.
What about our "merit" universities? Their graduates are the ones, by and large, who got us into this mess. As long as our talented young people continue to see finance as the most direct route to the good life we will continue to be an economy top-heavy with bankers. Bank deregulation was a miserble failure for all but the few who cashed in. We need bankers to go back to being boring, and young people to study something that brings value.
you are going to dicate what course of study they want to take for their career...ridiculous.
We live in a boom and bust society where artificially inflated booms make a very few, very rich. And when the walls come tumbling down, they're still rich, but others are out of house and home. I recently interviewed a 55 year old former Citigroup employee for my upcoming book, "Baby Boomer Bust?" -- he was in telecom, about three years away from retirement. Since half his 401K was in Citigroup stock, when it went from $50-$2, his retirement dreams ended. And, then to add insult to injury, they laid him off in Oct 08.
The problem with our economy is it is way too Wall St. -centric. It used to be that CEOs were company "men", lifers. Today they are a transient class of CEOs, who move from company to company, collecting stock options and bonuses. All they care about is making the quarterly numbers so they can stuff their pockets. Sometimes, sub-optimizing the short term, hurts the long term. In olden days, CEOs identified with their companies, they acted in its long term interest and pledged just as much alliegance to the company's employees, vendors and communities as they did to their shareholders and Wall St. We need to get back to that model.
The result? A country where 1% of the population controls 34% of the wealth -- leaving only 66% of the wealth for the other 99% of the pop. No wonder why people can't afford health care and life's necessities
Very good observation: the top 1% owns 34% of all the wealth. LatAm's Oligarchy wished they had it so good.
Right on. Very good analysis. All your points make sense because it's happening right now.
There has never a fair playing ground in capitalism, it's the law of the jungle the bigger animal eats the smallest that is why it failed, this is the kind of language capitalist have used for 100 years to make you nostalgic about something that never really happened, they need yo to keep thinking that it was better before and we will fix it again by getting you to invest back in them.
I've been saying this for some time. Capitalism is deeply flawed and it's not working in our society today. The country has grown too big, we need a system with a combination of socialism and capitalism. If capitalism continues down this road in our society, the United States will collapse like all other greats before her.
You lost me at Bill Gates' vision. Microsoft has been as rapacious in the tech sector as Goldman Sachs has been in finance. Otherwise, a good article.
And he had plenty of government help to get where he is.
But ultimately the world has been revolutionized for the better b/c of Bill Gates. I'm not sure that same can be said about Vikram Pandit and such. They, to me, seem more to just redistribute wealth up to the richest people.
How sad to recall that millions of American men and women went to war in 1941 - 1945 to preserve this nation for a time when corporate executives and carpet baggers would empty the treasury and be rewarded with huge bonuses for their 'meritorious service'.
I'm afraid that the situation is making cannibalism seem civilized.
The problem is greed and power effects all .. those that have power to those that obtain it even for good... of course you have to believe that evil exsist's to believe there are evil people.. Love your neighbor, as yourself.. you dont steal, use, abuse... but then again that would be a Christian world view.. . I just wish Atheist would go to their own hospitals..... is there a Madelyn Murray O'hare Medical Center. anywhere... ?
kleptocracy!
oligarchy!
plutocracy! or plutarchy!!
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