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Wall Street CEOs: Putting Shareholders Before Taxpayers
During Wednesday's hearing before the House Financial Services Committee, Citigroup chief executive Vikram Pandit offered a curious mea culpa in response to criticism triggered by his firm's plan to buy a new corporate jet after receiving $45 billion in bailout money:
We did not adjust quickly enough to this new world, and I take personal responsibility for that mistake. In the end, I canceled delivery. We need to do a better job of acknowledging and embracing the new realities.
So Pandit says Wall Street needs to get real, but the seven other Wall Street CEOs who joined Pandit in testifying on the Hill showed little indication they knew how to get in touch with that new Wall Street reality. When Representative Brad Sherman (D-CA) asked the executives if they would continue to own or lease corporate jets, all but one—Lloyd Blankfein of Goldman Sachs—said they would.
Next Sherman asked the CEOs if they would institute a policy to withhold dividends from shareholders until the $125 billion they received in bailout funds from taxpayers is repaid.
Only Pandit, Ken Lewis of Bank of America, and Ronald Logue of State Street Corporation said they would pay taxpayers before shareholders.
The new reality on Wall Street is that taxpayer money is keeping the firms afloat, though some firms, such as Goldman, arguably could have weathered the crisis without TARP funds. CEOs like Pandit say they're aware they have to change their priorities. But don't the taxpayers deserve more than empty words? Like, maybe, our $125 billion back?
How can they justify paying
How can they justify paying shareholders dividends before repaying the taxpayers for their survival. I thought that dividends were supposed to be the shareholder's share of the profits.
Jets are not just a luxury
CEOs of large companies travel a lot. They need to be able to get places quickly, and they need to be able to work in transit. When the car company execs went before Congress, groveling, with stories of driving all night to get there, I thought, Who benefits from this? Maybe companies could choose aircraft that are more utilitarian and less expensive, but the aircraft need to be fast, they need to have decent range, and they need to be large enough to carry the number of people who travel together often. This over-reaction to the jet issue has caused a whole other industry - private aviation - to be dumped in the crapper. Meanwhile, busy executives, who should be spending their time getting their companies back on track, are standing in airport security lines getting their armpits wanded.
Puddle hoppers?
Private aviation is one thing. Cushy jets is another. I'm all for people traveling in the most efficient way but in the current economic climate, that way must make fiscal sense TODAY, not only by yesterday's norms.
Value of time
With all of the technology available for working remotely, why does a CEO need to travel often?
Why should a CEO's time be considered more important than anyone else's time?
Wouldn't it be good for those fat cats to mingle with the masses once in a while?
Right. They absolutely
Right. They absolutely *need* $50,000,000 aircraft in order to perform their jobs efficiently (as they've *clearly* been doing for many years). Just like they absolutely *need* $1,200,000 office renovations. Because how could they *possibly* perform at their best if they are surrounded with the best, most expensive leather, mahogany, foods, and wines. After all, they're aren't plebeians like the rest of us who can make do quite well with cloth, pine, burgers, and beer.