This is a story that seems all too familiar, but it's worth repeating each time it happens: trillions of dollars in retirement and savings are gone, millions of jobs will be lost, we're facing a severe economic crisis that could go on for a number of years, and we could be in for a debilitating deflationary period. All thanks to a bunch of greedy CEOs in the financial world -- who, it turns out, have made off with a king's ransom... at your expense.
The details come this morning courtesy of that left-wing rag, The Wall Street Journal. Reporters Mark Maremont (who I worked with many moons ago in the belly of the beast, Business Week), John Hechinger and Maurice Tamman write that:
The credit bubble has burst. The economy is tanking. Investors in the U.S. stock market have lost more than $9 trillion since its peak a year ago.
But in industries at the center of the crisis, plenty of top officials managed to emerge with substantial fortunes.
Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis. Four of those executives, including the heads of Lehman Brothers Holdings Inc. and Bear Stearns Cos., ran companies that have filed for bankruptcy protection or seen their share prices fall more than 90% from their peak.[emphasis added]
You want to swallow a staggering number:
The study, which examined filings at 120 public companies in such sectors as banking, mortgage finance, student lending, stock brokerage and home building, showed that top executives and directors of the firms cashed out a total of more than $21 billion during the period.[emphasis added]
$21 BILLION. $21 BILLION. $21 BILLION.
You want to know where the revolution should start? How about at the home of Dwight Schar, chairman of NVR Inc., a Reston, Va., home builder -- you know the folks who brought you the housing bubble:
Mr. Schar's own home these days is an 11-acre oceanfront compound in Palm Beach, Fla., with a tennis court, and two pools, purchased in 2004 and 2005 for $85.6 million from billionaire investor Ronald O. Perelman, according to county officials. Through a spokesman, Mr. Schar declined to comment.
Think all the people whose homes are now underwater or have lost their homes would like to just set up a tent on Mr. Schar's 11 acres since they have nowhere else to go?
Or how about instead R. Chad Dreier, 61, chairman and chief executive of Ryland Group Inc., a Calabasas, Calif., home builder, who, The Journal's analysis shows, made $181 million during a five-year period:
Next door to his 4,900-square-foot hilltop house in Santa Barbara, Calif., a Dreier private company owns an office building that houses Mr. Dreier's collection of baseball cards, sports memorabilia, gems, minerals and other items. State records say he owns several cars, including a 2004 Porsche coupe worth $448,000. Mr. Dreier has donated at least $6.5 million to Loyola Marymount University.
Dreier's company is a good barometer:
After posting huge profits during the bubble years, Ryland has reported hefty losses since last year amid plunging home sales. Its stock price is down 85% from its 2005 closing high.
Or, better yet, take the folks at First Marblehead who made a fortune preying on people needing student loans:
Students take out the loans if they've exhausted the cheaper government-backed variety. As with subprime mortgages, those with poor credit histories must pay higher interest rates.
Nice business, apparently:
Chief Executive Daniel Meyers, a 46-year-old former arbitrage and derivatives trader, received almost $96 million in cash compensation and proceeds from stock sales over five years. Lee Jacobson, a First Marblehead spokesman, notes that Mr. Meyers co-founded the company in 1991 and didn't sell any shares until First Marblehead's October 2003 initial public offering.
In 2004, Mr. Meyers bought a Spanish-style villa in Newport, R.I., the summer retreat of industrialists a century ago. He paid $10.3 million for the estate, on 45 acres with sweeping views of the Atlantic. Mr. Meyers tore down the villa and is constructing a five-building, 38,000-square-foot compound called Seaward with a carriage house, a guest house and a caretaker's cottage. Mr. Meyers also owns a 66-foot sailing yacht, which he recently raced to a win at the famed Newport Regatta.
New Century Financial was right in the game, handing out loans to people who simply stated that they could afford them--with no documentation:
Over four years, the three executives received cash compensation and stock proceeds totaling $74 million, including estimates of their 2006 pay cited in a report by a court-appointed investigator after the company filed for bankruptcy protection. Mr. Cole, who was CEO for some of the period, lives in a 9,200-square-foot oceanfront home in Laguna Beach, Calif., that has a tax value of $30 million.
This is robbery. Most of it was legal robbery -- playing very fast and loose with the rules, ignoring basic standards of business practice and taking advantage of lots of people who were desperate, often because their paychecks haven't shown any income growth in years.
Maybe we can't jail these folks or take away their mansions, yachts and other toys. But, how about the old tar-and-feathering option?