If one is not a rather deliberate optimist, of late it is rather hard to see that the sky is not fallen under foot. Chrysler is laying off thousands for somewhat unrelated reasons to the multitude of other firms laying off for mortgage related miscalculations. Of course, the way these things fall out, it is so easy to deride Stanley O' Neal, the former head of Merrill Lynch, for his one quarter of possibly understated losses, than it is to knock the years and years of mismanagement and mismanagers of the airline and car industries, or even others in the financial industry.
Stan is held up for a particular type of beating, namely because he let the firm drift into highly risky methods of making money while at the same time failing to be appropriately clubby with his underlings. One usually does not like to factor race into the ridicule, and when you have written down $8 billion, and with possibly more losses to follow, it's easy to leap to levels of anger not quite appropriate to Merrill's 3rd quarter loss of $2.5 billion or so. One might think, from the outcry, that Merrill has been unprofitable for the year thus far, or for the length of O'Neal's reign. One might also think that the head's of Citibank, Countrywide Financial, and Bear Stearns were never born.
One can read around and see the suggestions that O' Neal should not be allowed to depart with his stock grants intact, that he should somehow forfeit past pay, though all those investors in and out of the stock- the little people now complaining- invariably gained. Indeed, as of now, the stock remains above where it was when he first took charge.
But the comments have been withering, with those who know better in the industry applying a gleeful smirk to their criticism. Those less informed, the average individual, inclined to dislike the massive payouts of Wall Street to begin with, and without the knowledge of why Wall Street is even necessary or how much financial firms grease the economy, are quick to say that O'Neal is akin to Enron's Skilling and should have his pay revoked by government action. People, generally, being mentally hyperbolic and economically retarded, cannot tell the difference between legitimate business risk and outright fraud and are fully willing to judge a person's entire career via a snapshot of activity, or... by color of skin.
There are the veiled comments that suggest that nobody should be surprised at the loss, given affirmative action, and O'Neal's race, and this despite the evidence that the entire financial world was on its bum in the 3rd quarter of this year. If you disqualify O'Neal based on 3rd quarter results, you must logicially disqualify all the profits as well, and from every period, as the methods that created profits were largely the same.
Nobody blinks too much of an eye when the CEO of Bear Stearns, James Cayne, is portrayed by the Wall Street Journal (on Thursday in an article by Kate Kelly ) as being an avid pot user who found it easy to be down south playing in bridge tourneys as the firm went through its contortions rooking investors inside its two collapsed funds now under government investigation. Or that one of the two funds was so highly leveraged, that it in fact probably impacted other firms (like Merrill Lynch) as their values dropped to zero.
And even in an article that purports to critique Cayne's running of Bear, it is chock full of enough ego floating characterizations that one could, if Cayne, walk away thinking, "Yea baby, I'm a tough talking, weed smoking, chick getting, Mother Merrill F***ker" (as one can question whether the assets Merrill seized for debts owed could be offloaded at sufficient value).
That's how it goes. Stan takes the hit, and the new CEO, when someone has the courage to step up, will take the glory as assets are eventually revalued (upwards) or all the errors are corrected. Obviously Merrill was hitting on all cylinders in most of its businesses, and in previous years, but people have memories that are locked on the present.
They also have minds that are fixed on O'Neal, when in fact, there is every indication that a bunch of financial firms are scrambling to mask, delay, and otherwise ghost away potential losses on assets that should probably be accounted for in more obvious fashion. But why focus on the forest when one tree is so interesting.
Nor will anyone currently castigating O'Neal lower the bar a bit, and hold the mirror to masses. One could argue that we are in the state we are in NOT because money was easy, or because Wall Street miscalculated how to value CDO's, but rather, because the average man on the street was far too greedy, and when handed the opportunity to buy a home beyond their means, grabbed the bull by the horns with all their might and gored themselves.
Of course, when you read the sad sack homeowner profiles in USA Today or your local paper, all the suffering homeowners, in over their heads and struggling to pay, claim personal ignorance and fraud on the part of their mortgage lenders. Apparently the ability to know your means, your income, and your monthly payment capabilities escaped the masses like a plague in reverse.
O'Neal will survive, and find something to do in eighteen months or so when his non-compete clause runs out. He was allowed to retire (fired) in part for approaching Wachovia for some kind of merger deal, among other options presented to the board. Cayne hopped his plane to China to exchange capital with a foreign firm via billion dollar mutual investments. Cayne will likely continue on, talking tough, telling folks to "Keep your Irish Down", as he calmly nagivates Bear Stearns next disaster from the comfort of his smoke filled bridge table. But let's hope not.
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