Not terribly long ago all that was wrong with Wall Street was embodied in the character Gordon Gekko as portrayed by actor Michael Douglas in the smash hit movie, "Wall Street."
For those who missed the film, Gekko was a suave, sophisticated, amoral and insensitive worshipper of money, lots and lots of money, to be fleeced without compunction or concern for legal consequences from unsuspecting sheep who invested in his manipulative schemes. In other words, he was a sociopath who adequately resembled nothing so much as the fictitious monsters created by the likes of Frank Norris, Lincoln Steffens and Ida Tarbell for their early 20th century muckraking exposes about the exploitive evils of American enterprise.
Now the ugly image of Wall Street is reflected in a broadening pool of Gekko imitators whose failures, mismanagement and greed to one degree or another have driven the nation’s financial institutions and markets into the steepest decline since the Great Depression. It would be difficult to find a better example of this callous insensitivity than fired Merrill Lynch chief executive John Thain, although even a short search would probably produce a sizable number of rival poster boys with some yet to come.
What makes Thain’s case stand out is its lack of complexity and its utter disregard for propriety. It is simply a textbook case of bad judgment that everyone can understand.
Only a few days before his financially reeling institution was to be taken over on Jan. 1 by the Bank of America at the government’s urging, Thain passed out bonuses worth untold millions to Merrill executives. He reportedly argued that he personally should receive as much as $40 million. He ultimately reduced his demands and ended up with nothing. But even the request should have been enough to raise serious questions about his fitness even for one who had been a Wall Street darling by earlier avoiding the fate of Lehman Brothers. This is especially disgusting because the takeover of the nation’s largest brokerage is about to cost taxpayers billions of dollars to help the once prosperous bank survive. Merrill Lynch’s fourth quarter losses topped $15 billion.
To compound this outrage, we are told that Thain spent somewhere around $1.2 million to redecorate his office, including an $87,000 rug and a $68,000 credenza. Now that alone is enough to raise the ire of every hard working American, particularly those who have lost their jobs in the recession. The New York state attorney general, meanwhile, has launched an investigation of the entire matter.
But that, of course, is after the fact. What obviously has been lacking in the years leading up to this dire situation has been government oversight that discourages such behavior before it takes place. President Obama has laid out plans to reactivate a stricter regulatory role. Included will be tougher federal rules for hedge funds, mortgage brokers and credit rating organizations and more intense oversight of the financial system generally. Some of the proposed action can be accomplished by federal agencies while legislation will be needed for other parts.
It’s about time. For the last decade it has been apparent that something was terribly wrong with a system permitting obscene pay scales. Enormous year-end bonuses and amazing fortunes built from merely manipulating stocks and other instruments in complex transactions were the norm. Even top officials of companies not doing terribly well received golden parachutes and incentives totally out of line with their achievements. It seemed incredible that anyone could be worth that kind of money no matter how proficient he was alleged to be.
Gordon Gekko would have been right at home in the atmosphere that led up to this disaster. With any luck, the new push to clean up the mess and get the nation’s economy on track will also change the face of ruthlessness and greed to a more benevolent one. But then again maybe nothing can completely change a system where a little bit of Gekko lives in the hearts and souls of all the players.
(E-mail Dan K. Thomasson, former editor of the Scripps Howard News Service, at thomassondan(at)aol.com.)