Paying the price for greed

Lana
Lana Payne
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Bernie Madoff looked to be taking the path of least resistance last week.

And Wall Street should be thankful he did.

The former chairman of the NASDAQ stock exchange and New York money manager was to plead guilty to what has been described as the largest fraud in history, swindling people out of more than $50 billion with his Ponzi scheme.

To stand trial would have exposed his obscene greed and the greed of many of his investors, who couldn't resist Madoff's "get richer quicker" pitch.

Bernie Madoff looked to be taking the path of least resistance last week.

And Wall Street should be thankful he did.

The former chairman of the NASDAQ stock exchange and New York money manager was to plead guilty to what has been described as the largest fraud in history, swindling people out of more than $50 billion with his Ponzi scheme.

To stand trial would have exposed his obscene greed and the greed of many of his investors, who couldn't resist Madoff's "get richer quicker" pitch.

And a trial would have exposed Wall Street to even more scrutiny than it is already under.

Sticky fingers

It would have exposed even further the insatiable greed that is at the root of the financial crisis which led to the economic recession. This greed - or what playwright William Shakespeare once referred to as an "itching palm" - is causing immense human suffering around the globe.

Indeed, before this economic crisis is over, the fight against global poverty will have taken a horrific knock backwards.

According to a report prepared by the World Bank for this weekend's G-20 meeting of finance ministers, only 25 per cent of the world's most vulnerable countries have the resources to prevent an increase in poverty.

The economic crisis, says the bank, will this year push 46 million more people below the poverty line of $1.25 a day. An additional 53 million people will continue to struggle on less than $2 a day. This is on top of the 130 million to 155 million people plunged into poverty in 2008 because of soaring food and fuel prices.

The greed on Wall Street and the subsequent financial crisis are not merely a problem for the United States and its citizens. It has become everyone's concern.

It means even more of the poorest in the world, including children, will die as child mortality rates mount. The bank says an average of 200,000 to 400,000 more children a year will die if this crisis persists.

And yet in the face of this pain, suffering and death their greed has, and will cause, Wall Street bankers, investors and speculators still don't get it.

Pocket-stuffing kept going

Despite the global suffering, including the human carnage in their own country, U.S. bankers and CEOs proudly pocketed $18 billion in bonuses for 2008. They picked up their fat bonuses with one hand and government bailout money with the other. And saw nothing wrong with it.

In November, the CEOs of the Big Three automakers took private jets to Washington as they pleaded for government handouts.

And then last month, enough was enough. Not even the president of the so-called greatest capitalist nation on the planet could take any more of their indifference; their shameful sense of entitlement; their unmitigated selfishness.

U.S. President Barack Obama said that any corporation, bank or financial institution receiving government bailout money must cap executive pay. Greed would be tempered.

The president is by no means alone in his contempt for gross and excessive executive compensation.

There is a growing backlash against this excess in the United States and throughout the world. As job losses continue to climb - nearly 600,000 in the U.S. in January and 129,000 in Canada - unrest will grow. Ireland is a case in point: just last month, 100,000 workers protested government cuts to wages as banks were being bailed out with taxpayer moneys because of bad and risky decisions.

The International Labour Organization says as many as 51 million jobs could be lost around the world this year.

And despite the positive spin from Prime Minister Stephen Harper last week about Canada's economy doing the best among the worst, there are already plenty of hints that Canadian banking CEOs are worried the anger south of the border will cross over.

In an attempt to head this anger off at the pass, some of Canada's richest CEOs, including those working for Canada's big banks, have taken cuts in pay (they still are making millions of dollars a year in salary and compensation) and some have been forced to take a compensation cut by shareholders who want more of "a say on pay."

There is reason for outrage. The growing gap between the very rich and the rest of us has been getting bigger and bigger.

The top 100 CEOs, according to The Growing Gap Project, got a record pay hike of 22 per cent in 2007. They raked up $1 billion in average total earnings. By contrast, average Canadian workers got an increase of 3.2 per cent, barely keeping pace with inflation.

Canada's top 100 CEOs make 398 times more than the average Canadian worker, compared to 85 times more in the mid-1990s.

But in Canada our CEOs have been careful not to flaunt their wealth. As of yet, there has been no Bernie Madoff to act as lightning rod. But perhaps none of that will matter as they continue to collect their fat paycheques while people lose their jobs and if lucky qualify for employment insurance.

It's only a matter of time before that kind of disparity ends up boiling over onto the streets.

Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by e-mail at lanapayne@nl.rogers.com. Her column returns March 28.

Organizations: World Bank, Big Three, International Labour Organization Newfoundland and Labrador Federation of Labour

Geographic location: United States, Canada, New York Washington Ireland

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  • John
    July 02, 2010 - 13:14

    Nobody, without exception, should be paid more than one million dollars (bonuses included) for services rendered annually. That includes professional athletes and chief executive officers.

    It's the short-term (quarterly) aspect of the business world that drives commerce, and the goal of year-end bonuses, which conributed to this global crisis based solely on debt. It's a house of cards that had to come crashing down.

    Human nature being what it is -- greedy -- can this paradigm change? Well, that's the $64 question!

    Maybe boom and bust economic cycles are immutable. If so, the next bubble will occur in the form of high inflation resulting from the out-of-control running now of printing money backed up by nothing by the world's leading nations, led by the United States and their incredible deficits and debt.

    Ronald Reagan said that deficits don't matter; he was flat-out wrong. And it looked like America thought that it could do the equivalent of living off a credit card -- without paying the bill. Well, the chickens have come home to roost. The U.S.A. had better hope that China continues to purchase its Treasury notes.

  • John
    July 01, 2010 - 19:54

    Nobody, without exception, should be paid more than one million dollars (bonuses included) for services rendered annually. That includes professional athletes and chief executive officers.

    It's the short-term (quarterly) aspect of the business world that drives commerce, and the goal of year-end bonuses, which conributed to this global crisis based solely on debt. It's a house of cards that had to come crashing down.

    Human nature being what it is -- greedy -- can this paradigm change? Well, that's the $64 question!

    Maybe boom and bust economic cycles are immutable. If so, the next bubble will occur in the form of high inflation resulting from the out-of-control running now of printing money backed up by nothing by the world's leading nations, led by the United States and their incredible deficits and debt.

    Ronald Reagan said that deficits don't matter; he was flat-out wrong. And it looked like America thought that it could do the equivalent of living off a credit card -- without paying the bill. Well, the chickens have come home to roost. The U.S.A. had better hope that China continues to purchase its Treasury notes.