I am starting a new series at Wall St. Cheat Sheet called "Rewarding Failure." Given the amount of rewards going to failures, it should be a perpetual series ...
This is the time of year when banks either shower stacks of green onto 100-hour-a-week workers, or dump lumps of coal on excessive ambitions. Ironically, this year's bank bonus season is rumored to rival that of the roaring bubbles. The question: with US unemployment at 17.3% and taxpayers mortgaging the future of the country to save a financial gambling scheme gone awry, exactly why are failures being rewarded?
First, not every broker or ibanker is a failure. Nor was everyone in finance involved with the Three-Card Monte scams in the credit and housing markets. I truly feel sorry for those hard working individuals who have served their companies in an honest and beneficial manner.
With that said, the future of the US is in a deep pile of dirty diapers if we willingly and knowingly continue to destroy capitalism by rewarding the behavior of failures. Plainly, if there are hundreds of thousands of bonus dollars to be made working for companies which legally cripple the United States of America, the best and brightest will continue to divert career paths from engineering, science, mathematics, humanities, etc in favor of the super fat paydays at mortgage brokers who lend without documentation, insurance companies which "insure" debt defaults yet have no collateral to pay, and other financial institutions which play intellectual games to divert resources and capital away from its most beneficial use to our society.
On this note, I must respectfully disagree with one of my favorite writers, Michael Lewis. In Lewis's article "The End," he argued 2008 marked the end of an era on Wall Street. Lewis asserted that:
I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents' world when you can buy it, slice it up into tranches, and sell off the pieces?
At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system. Then came Meredith Whitney with news ...
Well, as the current bank bonus season proves, Lewis will keep waiting. Unfortunately, rather than Whitney's comments marking the end of an era of excess, I think we merely had an intermission so the scammers could hit the Lou and regroup.
Ladies and gentlemen, after a couple brief years of "Where'd all the zeros go on my bonus check?", Wall Street has a new Cash Money Army. The ballerz are back and the 7,000 lb. bronze bull is still standing on lower Broadway.
In the coming weeks, banks and finance firms will report earnings. The taxpaying public and 17.3% unemployed will stare at those naked SEC filings that disclose employee pay at the institutions which water-boarded the economy.
This, my friends, is nothing short of watching failure get rewarded. And, if capitalism is supposed to help us efficiently distribute capital to the best possible use, then we are succeeding in the creation of an anti-capitalist economy.