Lesson Learned: Drawing the Line from Bailouts to Anarchy

I was working in management for a Fortune 500 financial services corporation in 2008. My boss had just hobbled from a meeting where his butt was kicked the length of football field.

You would have thought he (a financial planning regional manager) was responsible for the bevy of bad loans the company had written.

He was a good man – sort of a ‘George Bailey’ amongst the sharks. Glassy-eyed he looked at me and said something I will never forget:

“Always remember, Robert,” he lamented, “no good deed ever goes unpunished.”

So here we are in the midst of Occupy, well, Virtually Everything. There is considerable violence in Oakland as well as in number other cities. On November 5th, we all ‘celebrate’ National Bank Transfer Day.

In the infamous words of Sharon Osbourne, has the world gone barking mad?

As much as I believe in capitalism and the inherent concept that government has absolutely no right to determine how much an individual may earn, I must admit a certain disdain for bankers, brokerage houses, and insurance companies. Actually, it is more than disdain; it’s more like a sucker punch to the gut that worsens the more I search for logic within the walls of our nation’s financial institutions.

Exactly what line of reasoning are bank executives utilizing when their institutions are bailed out by tax payers (never forget – it not really a government bailout, as much as it is a public bailout) only to level fees to help make up for lost profits? It’s probably the same thinking that leads many of these executives to accuse the public’s desire to be homeowners for their own lack of judgment and greed.

Government, the Occupy Wall Street movement, and National Bank Transfer Day all miss the mark in interpreting the real scoundrel in all this – the bailout itself.

In the haste of both political parties, the ill-conceived notion of TARP (Troubled Asset Relief Program) was born in 2008 and signed by President Bush. The concept and purpose is actually not as complex as many media outlets made it seem. Additionally, the stake to taxpayers was often exaggerated.

However, what was ignored and not properly debated was the role of government in our lives and the degree to which we maintained capitalism in the midst of bailing out private institutions.

The results of this are various movements and misguided anarchists. While in the interim, everyone seems to lose focus of its victims – the middle class and poor. Those people, bank executives argue, purchase the Fords and Chevys in this country but are the same folks they freely squash with fees and small print.

We could debate at length the merits of bailing out major institutions, easily identifying the rights and wrongs of such an undertaking. But one thing is very clear – when financial institutions are saved and refuse to ‘pay it forward’ to the general public, resentment builds. It boils over to the point of demonstration, violence and anarchy.

Unfortunately what is lost in this debacle is a sense of camaraderie between shareholders, key stakeholders, and the American people. If, and it’s a big if, the banks, brokerage houses, and insurance companies (we can also include FNMA and FMCC in this group) respect the American people and the plight of their average customer, they have a bizarre way of displaying it. This is exemplified by outrageous fees charged by these companies as well as their arrogant public relations policies.

Prior to bailout, certain steps should have been taken by our leaders in government. First, internal investigations of corporate compensation and share distribution needed to be reviewed. Agreements should have been made on executive pay. Additionally, as part of TARP, recipient organizations should have agreed not to lay-off employees. Granted, economies of scale are paramount in a business, but financial institutions should not have been allowed to have their cake and eat it as well. The federal government needed to ensure the safety of employees within the walls of these companies. Let the shareholders go after the fat cat executives who put these institutions in their flailing position in the first place if they wanted to cut compensation costs.

These two proposals could have easily reduced the tension of the general public.

Of course, neither one of these actions happened.

Instead, the banks simply began to conduct business as usual. Executive pay is back in the spot light and tens of thousands of hard working middle class Americans will be out of work.

What’s the lesson? In a capitalistic economy, bailouts simply grant a free pass to those more than willing to utilize the system to their advantage.

Ungrateful -absolutely. But then again, no good deed goes unpunished.

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