Disturbing Behavior

It is a fine thing that most Americans do not hate or want to dispossess the rich.   In fact most Americans WANT to be rich.  One of the unfortunate by-products of the financial crisis is the change, at least at the margin but probably more widespread that being rich, is bad.   As liberal Representative Barney Frank (D-MA) remarked recently to a Wall Street executive hauled before his committee: "Get it through your head, people HATE you."  

Washington politicians, with the conservatives and free market disciples on the ebb or silenced, are doing their level best to encourage that this is a valid opinion.  It starts with Messiah Obama who last week termed $18 billion dollars in Wall Street bonuses 'shameful'. 

The President followed this up with an executive order this week decreeing that going forward the senior executives of any firm receiving 'exceptional financial aid' would be limited to a salary cap of $500,000 a year.  This is almost certainly pure political grandstanding because the implications for this order, if leakproof, is staggering.  It would lead to further drastic cuts in compensation than has already occurred AND it would accelerate the drain of talent fromm firms who need help to those who do not.  And as anyone who works on or adjacent to Wall Street will tell you, a limit at the top will be an excuse to cut comp down the line.

And I'd remind the President and his minions that about 33% of that $18 billion goes to fill federal government coffers and that the top 1% of all earners pay about 60% of the income tax.   Wreck the folks who are doing well and your revenue drops and you risk making that permanent if you disincentive wealth creation.

Washington, on both sides of the aisle, is happily peddling the story that greedy Wall Street executives caused this crisis.  While their unconscionable lending practices were the precipitating cause, the risible actions of the ratings agencies, horrid decisionmaking by citizens in general and a bipartisan government' unwillingness to regulate the worst practices are more to blame.  

But encourage people to hate the rich and it will come back to haunt this country.

By the way John Thain deserved the multi-million dollar bonus he did not get.  He recognized the risk that Merrill had and when only two buyers showed up willing to buy Lehman, he intercepted Ken Lewis, saved Merrill and probably contributed mightily to the Lehman bankruptcy.