Mo' Money, Mo' Greed & Corruption
The American dream: a spouse, a few children, a lucrative job, a nice home, and of course, some material luxuries. Those who are able to realize this goal have my respect and they should be proud of their accomplishments. However, my beef arises with the very few Americans who greatly surpass this dream. Yes, I mean the multi-millionaires and billionaires of America.
The wealthiest one percent of our nation owns half the financial assets and 38 percent of the total wealth. They have more money than the bottom 90 percent combined. The next richest nine percent also have more money than the bottom 90 percent combined. These people are so filthy rich they can literally burn hundred dollar bills and laugh about it. But that's not why I'm upset; that's merely capitalism at work. Capitalism is important because it provides a framework for people to aspire for more. But the downside is that an entirely different class is produced. Although small in numbers, this class of people has an infinite amount of power. I get really upset when I see these people, who are already beyond the definition of rich, committing fraud or perpetuating unfair political policies that keep them and their friends so wealthy. This extreme greed and corruption are the targets of my attack.
I interned with Merrill Lynch and Smith Barney/Citigroup over the summer and I soon plan to begin my full-time career on Wall Street as well. When I started reading the Wall Street Journal last spring, I began to notice that every day's headlines included a scandal of some sort. Most people have heard of Enron, a company that inflated financial reports consistently until the "bubble" collapsed, revealing the truth and sending the company down the drain. Innocent Enron employees saw their retirement accounts dwindle away to almost nothing. If you follow financial news, then the name Tyco should also ring a bell. Tyco International’s two top executives have been accused of looting $600 million from the company's accounts. The CEO, Dennis Kozlowski, squandered much of this money on excessive luxuries, like a $6,000 shower curtain for his penthouse apartment. He also spent $2 million of Tyco's money on his wife's fortieth birthday party. The party was on the Mediterranean island of Sardinia and featured fireworks, ice sculptures, flaming messages in the sky, a private Jimmy Buffet concert, and many other extravagances. Kozlowski is currently on trial in New York. The list of companies involved in this sort of corporate fraud is long, and includes MCI/WorldCom, HealthSouth, and several other Fortune 500 firms.
The financial services industry people who work with these corrupt companies are also far from innocent. In April of this year, the Securities and Exchange Commission (SEC) fined ten top Wall Street firms a total of $1.4 billion because of improper analyst research activities. Analysts are highly paid researchers who focus specifically in one industry, or even on one company, and give recommendations on whether to buy, sell, or hold a certain financial security. The SEC found that over the last five years or so, many analysts were unfairly rating companies based on their bank's relationship with that company. For instance, if Microsoft did a lot of investment banking business with Goldman Sachs, then Goldman's analysts would give Microsoft a better rating than it actually deserved. The reverse was happening as well, where companies were penalized by analysts for not fostering better relationships with the analyst's bank. It’s too bad that the victims, investors who were harmed by these activities, will see only about $400 million of the settlement.
There is also the issue of insider trading, where an investor who has “inside” information or knowledge about a company illegally profits from trading that company’s stock. Martha Stewart is probably the most publicized figure from an insider trading scandal. Stewart and her broker are currently awaiting trial after being accused of illegally trading shares of ImClone Systems with insider tips from ImClone’s founder and CEO, Sam Waksal. This summer Waksal himself pleaded guilty to insider trading, admitting he had told his daughter to dump thousands of shares of ImClone’s stock just before a damaging report was released. He was sentenced to more than seven years in prison. But don’t think he’ll be sharing a cell with drug dealers and murderers. He was brought to a special white-collar prison.
Anyone in the finance field knows of Frank Quattrone, the star investment banker at Credit Suisse First Boston. He was probably the biggest banker during the late 1990’s surging bull markets; in one year alone he made $120 million. This year, after learning that he may be the subject of an investigation by the SEC regarding investment banking practices, he sent an email to his entire staff instructing them to “clean up their files.” Quattrone was charged with obstruction of justice, but a few weeks ago his case resulted in a mistrial. Hopefully he will be retried soon.
Most of the scandals coming to the surface over the last month involve mutual fund trading. A mutual fund is a diverse portfolio of stocks that is run by portfolio managers. Investors can buy and sell shares of a mutual fund just like stocks. The scandals that have been recently discovered show that several brokers and traders have been allowing certain investors to buy or sell shares after the markets close, allowing them the benefit of additional financial data and knowledge. These “market timing” scandals involve premier mutual fund companies like Putnam Investments and Strong Financial. Brokers at Prudential Securities here in Boston are also currently under fire for market timing infringements.
Doesn’t all this make you wonder about regulatory practices? Why are all of these scandals allowed to happen in the first place? Well, the SEC can only do so much to govern the entire industry. The New York Stock Exchange (NYSE) is also supposed to help with regulatory responsibilities, but the NYSE itself has come under recent scrutiny. Dick Grasso, formerly the Chairman and CEO of the NYSE, was accused of playing a large role in setting his own retirement compensation of over $140 million. Under the public’s magnifying glass and incredible pressure, Grasso was forced to resign in September. The interim CEO is currently working on changing the entire structure of the NYSE.
So far I’ve only talked about corporate executives and Wall Street employees, but I feel just as strongly about the American government. For example, look at President George Bush’s tax cuts. How can he say he isn’t targeting only wealthy Americans when the tax cuts are based on stock dividends? Who receives dividends? People who own dividend-paying stocks receive scheduled dividend payments. Who are these stockholders? They are the middle and upper classes, with the scale leaning heavily toward the upper one percentile. But don’t think Bush is helping the middle and upper classes equally. The average taxpayer saved $233. But the average taxpayer with an income over $1 million per year saved $45,000. Vice President Dick Cheney saved $100,000. Microsoft’s Bill Gates saved $100 million. These numbers clearly illustrate who Bush intended to help. While claiming that the tax cuts would help stimulate the economy by way of increased disposable income, Bush was actually campaigning. The president is currently trying to raise $200 million of private campaign contributions—who do you think is contributing? The very same group that saved thousands and millions of dollars from his tax cuts.
Let us not forget Iraq. I supported the deposing of Saddam Hussein and his corrupt, dangerous government. But then there’s the issue of reconstruction. President Bush requested over $80 billion for rebuilding efforts, which was recently approved by Congress. Bush and his colleagues claim that giving American companies the contracts to rebuild Iraq will help further stimulate our economy. As with the tax cuts, this may be partially true, but there’s much more hiding under the carpet.
Look at the companies the government is employing. Bechtel, based in San Francisco, has been given a contract valued around $1 billion. Bechtel’s CEO serves on the president’s Export Council. A better example is Halliburton, an oil and gas services company headquartered in Dallas. Isn’t it ironic that Dick Cheney used to head this company? Also, he still receives deferred compensation and will until 2006. No wonder Halliburton has the largest government contract in Iraq. They were essentially handed a blank check, which has been valued around $7 billion. Talk show host David Letterman joked, “President Bush is asking Congress for $80 billion to help rebuild Iraq…and when you make out that check, remember there are two L's in Halliburton.” So don’t be fooled into thinking that all this money will be going to American soldiers and the Iraqi people. Much of this cash is being recycled back into the pockets of CEOs and wealthy shareholders.
So do I hate rich people? Definitely not. But I do hate to see people greedily stealing thousands or millions of dollars from their companies. I hate to see Wall Street research analysts, brokers, and traders committing crimes to make extra cash that they don’t even need. I hate to see a conservative Republican in the Oval Office giving his buddies tax cuts while abandoning the lower classes, the people who truly need the most help. I can’t stand to see Bush and Cheney hand their friends billion-dollar contracts in Iraq that are paid for by our tax dollars.
A common saying is that money is the root of all evil. I believe that for the most part, this is true. Money has the ability to change people, especially when it is equated with power. For much of this wealthy class, it becomes a game—more money equals more power and respect. When times get tough, they ignore laws and morals and proceed to cheat, lie, and steal to make sure they stay ahead of the game. This is exactly where my problem arises. While they’re “playing” this game, millions of Americans are living in poverty. Many people even live on the streets, trying to survive until their next meal. Some rich people have done extraordinary things with their money through philanthropy and charity. I wish that every wealthy American would follow this same path of giving. I would like for this selfish “game” to finally end. Will it happen anytime soon? I know that it won’t. But I do have the power to control my own actions. I have set high goals for myself with my career and in my life. Coming from a disadvantaged background I know that I will better appreciate whatever wealth I attain. Whether or not I make it to the top one percentile, I am certain that I will never forget the struggles that millions of Americans endure.
|
