At the moment, I'm trying to keep track of two different financial meltdowns -- and frankly, I'm not sure if that is such a good idea. I may need to seek counseling for excessive media exposure.
On the one land we've got Sir Fred Goodwin, and on the other, we have the AIG bonus reapers. And although both stories have been bubbling along since the early fall, the pots (of gold, that is) have bubbled over this week.
For those of you not entirely familiar with Sir Fred, he is the guy who nearly bankrupted the Royal Bank of Scotland through his aggressive bank (and debt) acquisition. The UK government may soon own a 95% stake in the bank, having used billions of tax-payers' pounds to shore up the substantial losses. On his way out last fall, Goodwin made good on his name -- and somehow managed to win an infamous £693,000-a-year pension. More salt in the collective public wound? He gets to draw it, starting now, at age 50 -- for life, and despite the fact that he only worked for the bank for 10 years. Although our Prime Minister has repeatedly asked the deposed banker to give back some of his ill-gotten gains, Sir Fred has declined to do so. (Perhaps he is planning on decamping to the Cayman Islands or the Bahamas sometime soon?) Apparently, he doesn't even need a tax haven -- because the latest word is that he has withdrawn 3 million pounds from his pension pot AND RBS (i.e, the taxpayer) has paid the 40% tax on it for him. Somehow, I find that bit most galling. He gets the full 3 million, while it costs the government twice over. If he does leave Great Britain, it will probably be because of all of the people, little and large, baying for his blood. The man is going to need a fortress of self-justification to protect him. I do wonder if he feels like a glorious picnic was spread before him, only to be ruined by swarms of midges.
In American news, AIG has finally managed to unite the Democrats and Republicans -- who are falling over themselves to condemn the recent bonus pay-out of 165 million dollars. Although this amount is mere chump change compared to the overall 200 billion bail-out given to the American International Group, it has become the lightning rod for collective anger. Two main points, really: the 165 million was distributed amongst only 418 people, 52 of which had already left the company; and, it was said to be a "retention bonus" for certain employees in the financial products unit -- the very unit whose dicey derivative deals brought the company down. As Maureen Dowd put it so pithily, Isn’t that like giving bonuses to the arsonists who started a fire because they alone know what kind of accelerants they used to start it?
Although various people are still going on about the sacredness of contracts, Sigmund was taking the firm view (in our kitchen last night) that the time has come to renege. Surely bankruptcy changes the rules a bit? Thomas Friedman suggests, in a very measured The New York Times editorial, that the best way out is for the A.I.G. bankers to take one for the country and give up their bonuses. But is that likely? Are the bankers suddenly going to discover a conscience and do the right thing? Do they actually think they've earned this money, or are they so deep into "wealth without work" thinking that they have lost of all concept of "fairness" and "equality?" Auto workers and teachers -- surely modestly paid professions, at best -- are now agreeing to compromise their individual contractual rights in order to benefit the greater whole, but the rich are looking mighty reluctant to come off their gilded perches. Mrs. Madoff, I'm talking to you. The gulf between Haves and Have-nots has grown apace -- and not been helped a bit by that showy new category: Have-mores. Has our society become so skewed that we are beyond anything but the survival of the most selfish?
There was an interesting editorial in this weekend's paper: Look no further than inequality for the source of all our ills. Author Will Hutton suggests that "more unequal societies are socially dysfuntional across the board." Drawing from a recently published book called The Spirit Level, Hutton suggests that human beings are "social creatures" foremost: the "esteem of others is central to our well-being" and "we have a deep inbuilt sense of fairness." When the rich are beyond regarding the poor, the poor become less inclined to want to play along with any kind of social contract. The conspicuous consumption of the rich and the knife crime of the poor are two sides of the same coin. Or, put another way, is there any real difference between a rich man's tax dodge and a poor man's benefit fraud?
I read this editorial as I was finishing the 2008 Booker Prize winner, The White Tiger, and the fierce and filthy descriptions of the deep inequalities of Indian society seemed to illuminate the points that Hutton was making. The narrator of that story describes himself as a "social entrepeneur." Although he does build up a small business -- in the traditionally entrepeneurial sense -- Balram believes that his true accomplishment is escaping from the mental "Rooster Coop" which enslaves the majority of his countrymen and women. Balram presents his revenge on the social norms as a victory, but the novel does a brilliant job of exposing the perils of living for nothing but extreme self-interest -- no matter what the size of your bank account.
For years, it seemed like we were more or less inured to the increasingly more competitive and surreal bonus culture . . . but now it appears that the bankers, with all of their self-justifications, are looking a bit unclothed. The payouts are leading to paybacks . . . and the bonus reapers better watch theirs.