On the other hand, maybe they’re actually quite smart. Some of these executives justified their huge paychecks a few years by pointing to the big profits of their institutions. Now that the bubble has burst and the profits have become losses, some of these guys have arranged for the taxpayers to get stuck with the bill. They walk away with their golden parachutes paid for by waitresses and truck drivers in Boise and Wichita.

Are Investment banks like carrier battle groups, with massive capital investments and hard-won institutional knowledge and difficult-to-recreate systems, or are they more like law or architectural firms, nice buildings full of smart people with specialized knowledge and the right rolodexes?
I suspect it’s somewhere in-between, but more on the law firm side of things. If that’s the case, then who cares if they fail? Their competitors would be glad to step in and take over their less risky lines of business, their workers remain well-connected dealmakers, and their principals can always start another firm. Sure, it’ll be rough in the Jet and custom pool market for a while, but it looks like aviation is in for a rough ride anyways. (P. Diddy can’t even afford to fly his plane)
When Cantor Fitzgerald was devastated on 9/11, it didn’t destroy the bond market; when Arthur Andersen blew up, it didn’t wreck the accountancy market. I say let ‘em fail.

For corporate CEOs, it’s all upside, no downside. With current executive compensation – even base compensation, much less the size of the golden parachutes out there – it only takes a few years for execs to be rich enough that they don’t need more money.

Fuld (CEO of Lehman) took home $466 million from 1993 to 2007. If he’d resigned at the end of january, the 8.6 million shares he holds would have netted him an additional $567 million (assuming he could have disposed of that many at that price). Today, they’re worth a little less than $2 million.

If he ends up terminated, he’s only going to walk away with around $60 million (stock, pension, deferred compensation).

So, what was the downside for him to have done what he did? $500 million over 15 years for taking a thriving company and bankrupting it?

Where do I sign up?

You “just” face the risk to not earn 1 000 000 all years long but let’s see what happens if you got another 5 000 000 each year variable. How worse can it be to retire after just 3 years?

The smart guys have taken their share and probably started seeking greener grounds next stuff. It would be very interesting to know how large the fluctuation in the investement banking sector hade been. I doubt it’s all to high currently but I may be wrong.

Regards
Friedrich

The GSEs happily bought $1 oranges for $1.25, and would have gladly kept doing so in the name of “expanding home ownership.” Those who thought a government-sponsored, risk-ignorant aftermarket made sense in the 21st century should be shot.

Thanks to to job redundancies and economies of scale, Merrill Lynch will end up with around 24000 jobs eliminated. http://www.reuters.com/article/bondsNews/idUSLF8371520080915?pageNumber=2&virtualBrandChannel=0

In addition, due to their high salaries every job on wall street creates additional 3-4 jobs via trickle down effect. So you are looking at close to 100,000 job losses after this acquisition. Well, the alternative (Merrill going bankrupt) would have been worse.

Now would be a bad time to try to sell a house or a jet to a Merrill or Lehman executive…