Not Getting It

Gabriel Sherman's New York Magazine piece on the lamentations of the banking class is truly a monument to chutzpah. It is remarkable the extent to which many do not seem to get it -- that Americans do not feel, for the most part, that they owe anything to a sector that has lately enjoyed profits and compensation well above the historical norm while building an economy based on illusory wealth and stagnant incomes for much of the labor force, and which is now being kept afloat with trillions of dollars worth of public money. They do not get it at all:

"No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?" e-mails an irate Citigroup executive to a colleague.

"I'm not giving to charity this year!" one hedge-fund analyst shouts into the phone, when I ask about Obama's planned tax increases. "When people ask me for money, I tell them, 'If you want me to give you money, send a letter to my senator asking for my taxes to be lowered.' I feel so much less generous right now. If I have to adopt twenty poor families, I want a thank-you note and an update on their lives. At least Sally Struthers gives you an update."...

Their anger takes many forms: There is rage at Obama for pushing to raise taxes ("The government wants me to be a slave!" says one hedge-fund analyst); rage at the masses who don't understand that Wall Street's high salaries fund New York's budget ("We're fucked," says a former Lehman equities analyst, referring to the city); rage at the people who don't "get" that Wall Street enables much of the rest of the economy to function ("JPMorgan and all these guys should go on strike--see what happens to the country without Wall Street," says another hedge-funder).

For the safety of everyone involved, I hope they do not much express these opinions outside of Manhattan. And this should also serve to illustrate the problem with the idea that Wall Street can self-regulate. There is a complete lack of perspective here. Which is perfectly natural; everyone internalizes the views of those they're constantly around, particularly those directly related to how one earns a living. When that becomes a belief that it's very important for the American economy that Wall Street continue to earn over 40% of all corporate profits, then clearly some kind of intervention is warranted.

But to be fair to Wall Street, it's not just them facing a wake up call:

Top officials at Chrysler Financial turned away a $750 million government loan because executives didn't want to abide by new federal limits on pay, sources familiar with the matter say.

The government had been offering the loan earlier this month as part of its efforts to prop up the ailing auto industry, including Chrysler, which is racing to avoid bankruptcy. Chrysler Financial is a vital lender to Chrysler dealerships and customers.

In forgoing the loan, Chrysler Financial opted to use more expensive financing from private banks, adding to the burdens of the already fragile automaker and its financing company.

Megan McArdle speculates that Chrysler may have been concerned that Fiat would balk at a deal with a company shackled by pay limits. That's possible, but one would also think Fiat would prefer its new partner not take unnecessarily expensive financing.

Personally, I find this all very disconcerting. A round of all-out class warfare would be good for no one, and I generally agree with the idea that markets ought to set compensation levels. The brazenness with which executives are disregarding public concern over these issues is just adding fuel to an already uncomfortably hot fire.