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Wall Street Compensation and Accountability Gone Off The Rails

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We are all subject to making right and wrong decisions. But in the world as most of us know it, we are held accountable for the decisions we make. What has become so grating about the financial sector is that all too often these rules do not apply. Win or lose, it is the shareholder or taxpayer that is left holding the bag whereas the financial players come out whole irrespective of the consequences of their decisions.

In an illuminating article for the New York Times, Andrew Ross Sorkin ("A Financial Mirage In the Desert" 12.01.09) while recounting the Dubai financial implosion informs us that an $8 billion dollar Citigroup loan was made to Dubai on December 14, 2008 and is now at precarious risk of default. This loan was made by Citigroup after they had received tens of billions under the TARP program weeks before. As we all know, the TARP program was instituted to support bubble offshore economies such as Dubai (Really!?), while the pressing needs of our downward spiraling domestic economy for capital/liquidity were secondary to the world class ambitions of our leading bankers.

Clearly, given his comments, part and parcel of the process that went into making this bone-headed decision was the role presumably played by Citigroup's then Chairman Win Bischoff, who was quoted at the time, "This is in line with our commitment to the UAE market in general and reflects our positive outlook of Dubai in particular". Duh?! Here was a disaster in the making not only for its lack of incisive due diligence, but the very nature of arranging this bizarre offshore loan when the domestic economy was crippled and in desperate need of funds.

Certainly Prince Alwaleed bin Talal could not have possibly been thinking of his very significant deeply underwater investment holdings in Citigroup when quoted, "These banks are very mature banks, and they have to differentiate between a corporate loan and a sovereign loan," Alwaleed, said yesterday in an interview on Bloomberg Television. "When things go sour, you can't have some banks in the West going to Dubai and saying 'oops' and crying wolf and saying, 'You should have guaranteed those loans.'"

In the real world, anyone party to such wrong headed thinking would find themselves on the street looking for a job. But not our friends in finance. I do not know the level of Mr. Bischoff's remuneration but I would venture to guess the Dubai loan will be swept under the rug by his friendly compensation committee wherever, and he will have walked away with the many millions that had been set aside for him. After all, it's really only taxpayer money. Heads I win, tails you lose would be the appropriate moniker.