Wall Street

Crossposted on Young People For

I was perplexed as I read a recent NY Times article on the House approval of $700 billion economic bailout package. Numerous questions ran through my mind: How did we get in this mess? Is $700 billion really necessary? More recently, will $700 billion do the trick? The more basic questions: What does $700 billion look like, and where will it come from?

Maybe someone can explain to me how the United States, a country that prides itself in a capitalist system and promotes laissez-faire/letting the market take care of itself, can all of a sudden call on the government when the free market becomes a prisoner of itself. Moreover, how can the bailout be justified as CEOs of failing banks and lending companies are provided with a golden parachute?

The kings of Wall Street has gotten off easy vis-a-vis golden parachutes and the recent bailout, while Main Street's problems with foreclosures is rewarded with a $700 billion bill for Wall Street's mistakes.

The Center for American Progress made the following juxtaposition of the housing crisis on Main Street with the golden parachutes on Wall Street:

2,203,295: Number of foreclosures reported in 2007. That’s a 75 percent increase over 2006 numbers.

12 months: Number of consecutive months of declining house prices, as of December 2007.

…While CEOs of the companies that led us down this path have been let go with golden parachutes.

Countrywide’s founder and CEO Angelo R. Mozilo

$704 million: Countrywide Financial Corp. net loss in 2007.
11,000: Number of workers Countrywide laid off between July, 2007, and January 29, 2008.
$37.5 million: Approximate value of cash severance payments, consulting fees, and perquisites (including private airplane use) that Angelo Mozilo, founder and CEO of Countrywide, gave up after Countrywide’s merger with Bank of America.
$23.8 million: Estimated value of Mozilo’s company retirement plan in December 2006, the last year for which data are available. Mozilo did not forgo these benefits.

Merrill Lynch’s former Chairman and CEO E. Stanley O’Neal (ret. Oct. 30, 2007)

$161.5 million: Value of securities and retirement benefits that Stanley O’Neal walked away with from Merrill Lynch when he retired. O’Neal did not receive a traditional severance payment.
$7.8 billion: Merrill Lynch net loss for all of 2007.

Citigroup’s former Chairman and CEO Charles Prince (ret. Nov. 4, 2007)

$17.4 billion: Citigroup write-downs on subprime related direct exposures in 2007.
$9.83 billion: Citigroup’s 2007 fourth-quarter loss.
$40 billion: Approximate value of Prince’s retirement package, shares, and options in Citi stock upon his retirement in November, 2007.

So, how much are the heads of Wall Street hurting, and when will the time come when Main Street Americans are rewarded with a $700 billion bailout without the latter being negatively labeled as "welfare"/"government handout", or even, socialism?