Sunday, September 28, 2008

Wall Street’s Disconnect with Main Street

Wall Street’s Disconnect with Main Street

“Nobody has ever taught you how to live out on the street
and now you're gonna have to get used to it.”

-Bob Dylan

I didn’t know if I agreed or disagreed with the initial $700 billion Wall Street bailout until Treasury Secretary Hank Paulson confirmed that he opposed capping pay for corporate executives.

Paulson said that it was “punitive” and would “discourage institutions from participating in the program.”

According to Hank, a corporate president would let a company go broke, its employees get fired and its investors lose all their money before the executive would give up their limousines, yachts and stock options.

The scary thing is that Paulson sincerely believed it. It was based on his knowledge of his fellow Wall Streeters.

Paulson is the Treasury Secretary. If his original proposal passed, Paulson would have been more powerful than the President of the United States.

And totally clueless.

If Paulson is so out of touch on executive pay, the rest of his program might be based on faulty data too. We went to war in Iraq based on faculty data. Just once, I would like for the government to do its homework first

Outside of Hank and his buddies on Wall Street, no one is in favor of perks for executives. It is an issue that might cause people to march in the streets.

Paulson seems disconnected from that fury. He is also disconnected from those who make their living on Main Street.

I’ve run a business all of my adult life, just like my dad did. My children run one now.

We all understand one principle. If we go broke, we go broke. I’ve never had a loan that I did not personally guarantee. If my businesses go down, they take everything.

My father lived to avoid the “take everything” moment. Just like I have. No matter how much money you have, a business owner never gets that “take everything” moment out of their minds. It is part of their psyche.

It’s obviously not part of the Wall Street psyche.

I’m not a typical Wall Street basher. I love capitalism. I’ve been involved in the financial business for 26 years and believe in the markets. I have many friends on “the street” and I feel for those losing their jobs.

I don’t feel for the top dogs leaving with millions.

The attitude that Paulson stated, that executive compensation is more important than the overall health of a company, is pervasive on Wall Street. It is a primary reason for the crisis.

Somewhere along the way, those companies forgot two things:

1. They are investing other people’s money.
2. Their stockholders trusted the company to make them money.

The people who run the Wall Street companies aren’t owners like those on Main Street. They work for thousands of stockholders.

The executive’s first responsibility should be their customers, stockholders and employees. The limo and yacht shouldn’t make the list.

If the big dogs on Wall Street had been owners, like us on Main Street, they would have watched their bottom lines a little harder. They might have kept an eye on investments and been more cautious.

They might have avoided the crisis.

Wall Street executives never feared the “take everything” moment. It wasn’t their money they were risking. The people at the top knew they could retire with millions.

They acted like they were at a casino where someone else was supplying the chips.

Now they want a new player in the game, the taxpayer.

The recently defunct companies had common bond, I never invested in them. I knew some top management and they came across as arrogant jerks. They treated me like a yokel from a small town.

Management arrogance the surest way to ruin a business. No matter how big or small. My dad used to say “for those who think they are smarter than the game, the game has a way of catching them”.

If the Wall Street leaders have any shot of turning their businesses around, someone needs to teach them how to live out on the street.

The way we on Main Street do.

You can read Don McNay’s award winning column at or write to him at McNay is the Treasurer for the National Society of Newspaper Columnists.

No comments: