Rajeshwar: Keep the mob from the bankers

Of all the calumnies to emerge from this financial crisis, the worst has been the condemnation of Wall Street bankers, traders and speculators as overpaid parasites who contribute nothing to society. The mob says these men and women, who have worked hard their entire lives, deserve nothing at all, simply because it does not approve of their career choice. Such a system is madness and debases the fundamental nature of the American Dream.

The American Dream is the pursuit of happiness and success. Why blame AIG executives for being paid so highly when we would all gladly accept any bonus our employer paid us? It is not human nature that these employees with children, families and financial obligations would turn down money handed to them by their bosses, nor should we expect them to.

Workers are not paid a wage based on their value to society but based on their value to their employer. Last time I checked, Urban Outfitters sold “packaged air” (an empty box) as a gag gift. The employees who thought up such a concept should be rewarded by their employer for bringing in the profits, although they contributed nothing to the overall societal good. Professional athletes earn salaries far in excess of their societal contribution. Alex Rodriguez will earn $27.5 million this year; good for him. I might not have paid him as much, but I respect his ability to convince the Yankees he’s worth it.

But the angry mob does not understand what exactly happens on Wall Street. It’s easy to understand that Alex Rodriguez can hit a baseball in ways no other American can. It’s harder for those uninitiated in the world of finance to understand that behind the complex financial derivatives and securitized mortgages, there’s real work to be done, and it’s not at all easy.

In many ways, the financial sector epitomizes the American Dream. It is notoriously meritocratic, with first-years working long hours to impress their bosses and earn their end-of-year bonuses. America’s recent dominance in finance has been a pillar of our continuing position as the lone world superpower at a time when our manufacturing industries are being exported to countries that will do the job for less.

Most importantly, finance is a fiercely competitive industry. Star traders and executives do not make their salaries because they are greedy but because each firm has a multitude of competitors. If Goldman does not pay enough, its employees might defect to JP Morgan instead. It’s for precisely this reason that the Yale Corporation pays David Swensen and his deputy, Dean Takahashi, more than double what it pays President Levin. Swensen is astonishingly good at his job, and he could earn substantially more money on Wall Street. Strong competition is at the heart of the capitalist system that makes possible the American Dream.

The difficulty of investing aside, the social benefits of Wall Street are substantial. When Americans put savings into mutual funds and depend on their 401(k)s for retirement, they are trusting their savings in the hands of highly trained and highly paid investment professionals. Wall Street has fueled and fed the American Dream for decades. The current turbulence in the market indicates in part a failure of some Wall Street institutions to understand and properly quantify the risks they were taking. But in no way should it reflect negatively on the existence of these firms or the performance of the vast majority of their employees.

This current madness of mobs threatens the prosperity promised to us by the American Dream. There should be no ceiling on this prosperity, and no one should be excluded from it. Wall Street has become the villain through the misguided envy of Americans.

For years, Yalies have referred to entering the finance world as “selling your soul.” But the American Dream has always involved the pursuit of happiness, which necessarily includes Freedom from Want. No one should be reviled for choosing a financially stable lifestyle; such people should not be scapegoated for the financial catastrophes that have befallen us.

The mistakes of Wall Street — the failure to acknowledge risk — are mistakes central to our humanity. The failure to acknowledge risk is not Wall Street’s failure alone. Millions of Americans thought their home values would rise eternally. Millions of Americans underestimated the perils of credit card debt, and millions of Americans overestimated their job security. The men and women of Wall Street do not deserve the vile contempt and hatred spewed at them. The American Dream should not die here.

Julian Rajeshwar is a junior in Jonathan Edwards College.

Comments

  • Y12

    I don't disagree with you, but I'd just like to point out that the problem that most of these angry people have with the AIG bonuses is that they come from government bailout money, i.e. tax dollars from the public.

  • Andrea Spencer

    Dear Julian, was this article in aid of your application to becoming a future parasite?? Let's get something right here without the bailout of the US taxpayers AIG would have gone to the wall - it was rescued because it was deemed too large to fail and the subsequent effect on other parasite institutions and the rest of the economy.

    Am I mistaken or wasn't the outcry about BONUS payments for 2008? Correct me if I am wrong but isn't a bonus something paid on top of one's salary? So let’s stop the sob story right here. Let's face it none of these men (if you ever ventured onto a trading floor you'll notice that there are very few women but that's another story entirely) is going to lose their estate in the Hamptons or that duplex on 15 Central Park West, ok granted, maybe a few cutbacks on private jet use and skipping skiing in Klosters this year. Hardly hardship compared to millions of Americans - who have worked hard all their lives and have just lost their jobs, their homes, their live savings, seen the value of their 401(K) dissolve into nothing (need I go on?). As for the Rodrigues argument - it’s a weak one. He can demand these wages because he is better than most players - he commands a salary and his bonus is performance related - if the Yankees do not reach the playoffs he is not getting the bonus element related to that. If he'd never hit a home run again - I doubt he could still command the current salary. If AIG et al had not had that bailout money - they would be where Lehmann Brothers found themselves in September - all thanks to the "excellent" work of their "highly trained" investment individuals.

  • Y09

    Dear Banshee, i.e., "Andrea Spencer,"

    Your shrieking just proved the point of the entire op-ed. Take a step back and realize that people like you are not analyzing the problem rationally and proposing policy solutions to fix the financial crisis, not your personal vendetta against these executives.

  • Hiero II

    I've never liked Ayn Rand.

    But now I understand why objectivism makes so much sense.

  • Anonymous

    Did you really just suggest that enormous pay and bonuses constitute "freedom from want"? There's a bit of a gap between food stamps and millions.

  • Concerned

    Andrea, my dear -

    They might not teach you this at Q-Pac, so I feel obliged to lend you a hand. We need to think about these things called "contracts".

    AIG had signed contracts with these executives. These contracts stipulated that the various executives would receive bonus money for various reasons. The failure or success of AIG itself is independent of many of these individuals' performance. (Only a very small proportion of the bonus-receiving execs were even remotely related to securitized mortgages, and most were quite responsible, honest people.) To ignore contracts would put AIG in a very precarious legal position.

    You lose ;)

  • John

    You people are so shortsighted. Why are the bonuses a problem if the trillions in bailout money was ok? First of all, many of the "parasites" receiving the bonuses agreed to work for $1 or a small fraction of their salaries after AIG assured them that they would still reveive performance bonuses. Furthermore, most of the people involved in the credit default swap abandoned ship like rats and left everyone else behind. I'm not saying the everyone left at AIG is a good person, but many of those who remain and received bonuses are responsible.

    Finally, it was completely within the administration's power to kill the bonuses. If AIG had gone bankrupt or if a bill had been passed ahead of time, there wouldn't be much issue. Hell even negligence would be preferable to what actually happened. Chris Dodd, our darling local senator put a clause into the stimulus bill specifically allowing for these bonuses after the administration and Geithner pressured him (so he claims).

    Now, congress is whipping up a mob to "fix" a problem they created. That's irresponsible and dangerous. God forbid this gets worse and people figure out what all these geniuses in the government and these banks have in common (ivy league educations) and come for us next. I suppose, Adrian, you'll feel differently then about the mob taking their well deserved justice.

  • @#5

    The point of Freedom from Want is that people always Want more. And they should be Free to pursue that.

    My Wants include a new Macbook. Sure, it might be better spent on homelessness in New Haven, but I am Free to spend my money however I want.

  • Anonymous

    While people are right to be outraged about the bonuses for the so called talent, we need to remember that this money is 1/10 of like 1% of the bailout money. Also, these were made by contracts. DEAR LORD, if the government takes action to tax at a high rate or abolish these bonuses we will see our government continue to get stronger and more invasive. These are contracts, and the government's move abolish them would set a concerning precedent. Rahm Emanuel is already talking about implementing a sort of draft for 3 months of basic training required for 18-25 yr olds. The fact that obama is so popular is dangerous. At least if Bush did something outrageous the people would call for his removal. But Obama is so popular that people will hardly notice as his administration usurps more and more power, slowly and deceptively. Obama himself seems like a great guy, but some of his advisors like Rahm bring me great concern. Let us all pray that everything goes well.

    God Bless America

  • 10

    "Correct me if I am wrong but isn't a bonus something paid on top of one's salary?"

    You're wrong. Ever since sometime in the 1900s, a bonus has been considered part of many workers' (not only in the finance world) salaries. These are often calculated as a percentage of their base wages, and sometimes (as in the case of AIG) even pre-written into a contract.

    It's funny how liberal Yale is defending the bankers. Is it because somehow overnight we turned into smart Yale?

  • Alcibiades

    I don't think Julian was ever liberal. But he is smart.

  • hiero IV

    I don't think Julian was ever rational. But he is definitely writing comments on here as an unregistered user.

  • Hiero V

    I don't think Julian was ever rational. He can't be properly defined as the ratio of two integers.

  • questionculture

    Gotta love the comments section. You get more information here than the spin provided by most journalists. Highly decentralizing effect. Can’t imagine they keep these comment sections up too much longer…