The ructions in the world of finance have given us a chance to see the big-time CEOs up close at the Congressional witness table. It’s not a pretty sight.
Almost without exception they appear to lack charm, warmth or wisdom, confining themselves to biz-speak clichés. As the public faces of the largest and once richest institutions in finance and banking, they are a sorry lot.
The latest to appear is Bank of America CEO Ken Lewis. Documents released by New York State law enforcement authorities seemed to show that Lewis did not give the bank’s stockholders accurate information on the financial condition of Merrill Lynch before taking a vote on whether to buy the floundering brokerage house.
Lewis claims that Bush’s last secretary of the Treasury, Henry Paulson, told him to keep his mouth shut when Lewis said he was thinking of reneging on the commitment to buy Merrill Lynch. The Lewis version of what went down is disputed, but whatever went on between him and the government, his unknowing stockholders voted for a stinker of deal which has subsequently cost them dearly. (Lewis was ousted from his position April 29 at a B of A shareholders meeting.)
The historians of this sad and crazy era will eventually figure out who ordered whom to do what and why, but for now it can be said that Ken Lewis has done his bit to reinforce the idea that he and his counterparts on the foundering ships of high finance are a pack of liars. The system we are striving at such cost to prop up depends as much on the word of those running it as on profit and loss.
If the reputations and credibility of many in the highest private sector jobs are questionable, the number-one finance guy in the public sector also comes under suspicion. From the start, Timothy Geithner, the new Secretary of the Treasury, had little support from the left-liberal parts of the Obama constituency. As the first months of the new administration have brought more bailouts and subsidies to big business, Geithner has come under attack.
A recent front-page article in the New York Times by Jo Becker and Gretchen Morgenson laid out the Secretary’s associations, allies and backers. The authors did not have to spell it out for readers to conclude that Geithner, while honest in the narrow sense of the word, has been extremely helpful to his billionaire mentors and protectors.
Truth to tell, however, we are stuck with Geithner and the small army of shifty CEOs. The time to turn them out was last fall, when the Bush administration elected to avoid the old-fashioned cure–bankruptcy and massive liquidations–in favor of bailouts and insanely complicated devices for handling the oceans of bad debts, bad loans and bad bets which have brought the nation’s major financial institutions and the country itself to their knees.
The plan laid out was a Republican plan–a Bush plan–but the Democrats, including President Obama, approved it. Nobody wanted to try the truly difficult treatment, which would have crashed the system, which then could have risen again, debt-free. But a vision of jobs lost, homes foreclosed and businesses shuttered was enough to make people of both parties agree to spending trillions which we do not actually have to forestall such a disaster.
So the Paulson plan with its complexity, its TARP (Troubled Asset Relief Program), its TALF (Term Asset-Backed Securities Loan Facility) and its PPIP (Public-Private Investment Program) was embraced by all, even though nobody was sure how to run them. To this hour the mechanics and grease monkeys of finance and banking continue to try to make these acronyms into well-run, effective programs.
They have not figured out how yet, but ultimately they will, with what noxious side effects we won’t know until we suffer them. An alternative is to nationalize the whole mess. Change policies. Get rid of Geithner, Goldman Sachs and the other con men and create worldwide financial anarchy. But if nobody knows how to do what we’re doing now, we know even less about the practicalities of a new direction.