“A man with a briefcase can steal more money than 100 men with handguns.”
– Don Corleone, The Godfather
If envy sets off class warfare in the United States, we just want to be on the winning side.
– Bill Bonner, Markets and Money
People were hopeful in the Reagan years…and still are…because they believe in the power of
money. After a disastrous 100 years dominated by politics, money seemed like not only the lesser
evil…but a genuine good. Money could lift people out of poverty. Money could cure illnesses.
Money could make people happy. Gradually, almost the whole world came to have faith in
money…and then, have too much faith in it. Shareholders, for example, came to believe that the
right financial incentives – otherwise known as a huge pile of money – could turn workaday
corporate hacks into super-achievers.
One of the most interesting and informative books we have come across lately is one from Barry
Dyke called the “Pirates of Manhattan.” The book shows how Wall Street insiders separate the
masses from their money.
The most obvious way, of course, is by paying themselves a lot of shareholders’ money and calling
it “compensation.” For example, at one point, the book shows that a Mr. E. Stanley O’Neil was paid
a total of $38,121,766 from Merrill Lynch in 2005. What was he doing that justified that kind of
money? Well, as subsequent events would show, he was doing nothing to add shareholder value.
Instead, he guided the great ship right into an iceberg.
So far, the losses reported on Wall Street are staggering. But rumors of much larger losses are
being whispered…and at least one source we read suggested that the firms may be
bankrupt…crushed by total system-wide losses of more than $3 trillion.
But don’t worry about Mr. E. Stanley O’Neil. He was the first one in the lifeboat when the ship
began taking on water. And what a luxury lifeboat it was! His severance was reportedly worth
about $250 million…not bad for a man who had just wrecked one of the greatest financial firms of
And now, Mr. O’Neil is in the news again. Alcoa has hired him.
Colleague Byron King blows a gasket:
“Alcoa names Stan O’Neil to its board? What? Huh??? The $160 million man? Mr. ‘Not Enough
Internal Controls’? Mr. ‘Whooops, we lost billions’?
“You have got to be kidding me. And what does a job-slashing financial hatchet-man know about
making and selling aluminum?
“Talk about a charmed life! O’Neil drives Merrill Lynch into the iceberg, and floats off with a $160
million farewell kiss. Now he lands in a cushy director slot for one of the largest primary metals
manufacturers in the world. Huh? What does he know? Who does he know? What photos does he
have on his digital camera?
“With this kind of treatment for managerial failures, American capitalism is doomed.”
Markets and Money