Morgan Housel makes the delightful if infuriating observation that bank execs take credit — along with fat paychecks and even fatter bonuses — on the way up.
On the way down, its always seems to be someone else’s fault:
Robert Rubin, a former Treasury Secretary, joined Citigroup in 1999 as chairman of the executive committee. He was paid $126 million over the next eight years for his experience and wisdom to guide the bank’s management toward success.
When the bank nearly collapsed in 2008, Rubin pled ignorance. After writing a 2003 memoir largely devoted to explaining how extreme circumstances ruin banks, Rubin explained in 2009 that he “did not recognize the serious possibility of the extreme circumstances that the financial system faces today.”
Nine-figure pay on the way up; a fluke and someone else’s problem on the way down.
Tom Maheras, another former Citigroup executive, was paid $97 million in the three years before Citigroup imploded, ostensibly for his skill. After a division he oversaw hemorrhaged losses from subprime mortgages, Maheras told Congress that his division’s fateful decisions were “based in part on a careful study from outside consultants.” Even as markets unraveled, “I continued to believe, based upon what I understood from the experts in the business, that the bank’s holdings were safe,” he said.
Ninety-seven million in pay on the way up; someone else’s fault on the way down.
Its no surprise that people rationalize their own self-interest. Its only human nature. However, that does not mean investors and/or taxpayers should have to subsidize the stupidity.
“Clawbacks” need to be a legal term that corporate execs must become more familiar with . . .
It’s Your Fault
Fool.com, February 3, 2015