Washington Is the Problem (Interview With Fred Smith)

Wall Street Journal ^ | OCTOBER 25, 2008 | STEPHEN MOORE

[gleeaikin]

I think it is important that McCain has highlighted GREED as a major cause of all these economic woes. Businesses used to be concerned with producing goods and services that would appeal to consumers. They were responsive to consumers and their stockholders. At that time (35 years ago) the top CEO’s were earning about 40 times as much as their low level workers. They could live a very comfortable life, but still realize they were part of a larger world.

Then the money finagling ethos entered the picture. Buy companies sell off the assets, grab the gold and get out. More recently, all manner of money games such as caused the S & L meltdown, and currently the mortgage meltdown. Selling homes at teaser rates to people who could not afford them, bundling the mortgages and selling them overseas . Again grab the gold and get out. Take no responsibility. Currently top CEO’s have been earning at a ratio between 400 to 1 and 1,000 to 1. Ken Lewis, CEO of Bank of America in Charlotte, NC detests the Manhattan money and its ethos. After making the merger with Merrill Lynch, he promised shareholders to cut costs “by a staggering $7 billion before taxes.” Not impossible considering big savings he has wrung from mergers and acquisitions of Countrywide and Fleet in 2004. He “is especially anxious to attack Merrill’s pay scales. ‘Merrill was paying typical Wall Street pay,’ he says. ‘Their staff people were making a lot more than our staff people. That won’t last. We intend to pay market instead.’” (From “Fortune”, 10/13/08.)

I have heard that McCain also proposed that the heads of companies that our tax money is used to rescue should earn no more the President of the USA, currently around $400,000. “Fortune” also reported that “According to the Economic Research Institute, CEO compensation in 2007 increased 20.5% to an average $18.8 million in February, while corporate revenues increased less than 3%.” Is it any wonder that companies are collapsing right and left.