The czars and kings of Europe could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement. The Davos mentality still cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions.
The annual winter parade of the puffed-up peacocks of privilege has come and gone at Davos. The dire state of the world once again showed the courtesy not to intrude upon the gathering of major élites from business and government, permitting them to descend in their private jets and frolic at the best-catered parties in Europe. Reality, as it generally does at the World Economic Forum each January, seemed to pass by, as well.
Last year, they missed the extent of the global financial meltdown – a big miss given that it is widely seen as the worst crisis in 70 years. This year, they had trouble seeing what reforms are necessary to prevent such calamities in the future – or even that any are necessary. In 2000, Enron CEO Ken Lay declared to his fellow Davos participants that his company was the “21st century corporation.” In 2003, the gathering was abuzz over U.S. Secretary of State Colin Powell’s rock solid assertions that Saddam Hussein controlled “hidden weapons of mass destruction meant to intimidate Iraq’s neighbors.” In 2008, former Treasury Secretary John Snow announced at Davos that any U.S. recession would be ”short and shallow.”
Reality, to those inclined to view it from the cloud-fringed temples of great heights or beyond the attended gates of deference and privilege, often appears fuzzy and ill-defined.
As it was with the monarchs of early 20th century Europe who presided over one calamity after another, those responsible for the failures and excesses that led up to the great financial crisis of the 21st century lack the vision to figure out the solution. The czars and kings of that earlier era could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement. The Davos mentality cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions that stems directly from the abuses, failures and negligence of those in charge of the world’s financial ship. Like myopic despots who seldom bothered to read history, and inevitably stumbled into catastrophe over its unheeded lessons, these modern misguided princes of finance have already forgotten the events of the past year and seem headed for further anticipated collisions with the future.
Instead of striking an uplifting tone that shows the titans of Wall Street and its counterparts (or, perhaps, counterparties) actually “get it,” the spirit of Davos produced the grating sound of ingratitude and obliviousness. Josef Ackermann, CEO of Deutsche Bank AG, talked about the “noble role” of banks and announced that the world should “stop the bank bashing, the blame game.” Mr. Ackermann was chairman of this year’s forum at Davos. Billionaire Stephen Schwarzman, a regular attendee at Davos, warned there could be costs to the public’s jaundiced attitude toward the banking system. “My biggest concern is that, as a result of either proposals or tone, that financial institutions are going to feel under siege and their [sic] going to retreat with their extension of credit,” he told CNBC. Lord Peter Levene, chairman of Lloyd’s of London, mocked government’s role in bailing out the financial system: “I’m from the government — I’m here to help. You guys in the industry don’t know what to do, so we’re going to fix it for you.”
How quickly they forget. Citigroup, Bank of America, Wells Fargo, Bear Stearns, Lehman Brothers, Merrill Lynch, UBS, RBS, Lloyds, Fannie Mae, Freddy Mac, AIG and so many more, were all crumbling under the massive weight of writedowns and losses and a withering credit market that only government was able to repair.
Change, especially for those in the Davos world, often comes not in the reform that reality demands, but in the fantasy that overly indulged egos command. Not surprisingly, there is a resistance in the world of high finance to adopting or supporting widespread financial reforms. A reliance upon extended methods of liquidity and a zero Fed funds rate seems ingrained in business plans. And in a culture where obsession with bulging bonuses still prevails, you have to wonder what kind of screwy financial Frankensteins are being assembled that may once again place institutions, and the public, at risk. Paul Volcker, please take center stage.
Perhaps the irony is not entirely lost on the world that while many of its citizens shell out for the misjudgments of these Alpine participants, they also pay, as taxpayers, shareholders and customers, for this annual march into the snow drifts of élite folly.
When it comes right down to it, there are few thoughts the big players mount at Davos that could not be distilled into a simple Tweet. Their use of technology and methods of transportation have changed, but in most other ways they are little different than the princes and grand dukes who trotted themselves out every so often to remind the people that they still existed, confusing – as receding fragments of supremacy so often do – vanity with relevance.
The World Economic Forum may have found its way onto YouTube. But in most respects it is still a silent movie involving people whose attire might seem modern but whose sense of originality and connection with much of the world is as unfashionable and out of date as the Hapsburg dynasty. One might have thought that the most costly financial crisis since the 1930s and the highest unemployment rates in decades would have produced a paradigm shift at Davos, too. Instead, the world was treated to an encore performance of over-hyped élites desperately struggling to cling to any vestige of credibility and respect. They have forgotten even the most recent past. They have shown little vision for of the future. This is not leadership. It is an outrage.
As in previous years, we have included a YouTube film that gives an uncanny portrayal of the Davos mindset of another era.
Wise leaders know that it is never sensible to underestimate either the forces of nature or the power of public outrage. Washington and Wall Street are about to receive an important lesson in history.
The winds of change can blow in both directions. One year ago, they propelled Barack Obama into the White House on a current of support from every quarter of society. Today, the President finds himself pushing against mounting gales of outrage and discontent, leaving his popularity diminished and his agenda for reform in doubt. This is his first, but likely not his last, major encounter with what we have dubbed turbo populism. Fueled by the costs of two far-off wars, record deficits, unprecedented levels of CEO pay and historic rates of unemployment, what lies at the heart of this movement is a revolt over the power and perks of entrenched interests, whether they are found in Washington or on Wall Street. By the time it ends, more than just Mr. Obama and a very unimpressive candidate who lost her party’s bid to retain the seat held by Massachusetts Democrat Edward M. Kennedy and before that, John F. Kennedy, will have experienced some very Rolaids days.
Abuses on Wall Street and excesses on the part of its key players which led to the worst financial crisis in generations are also featured actors on this stage of seething discontent. The sight of bankers salivating over bigger bonuses has not gone over well among ordinary Americans, who continue to struggle with jobs losses, spiraling home foreclosures and a crushing national debt. Mr. Obama’s stalwart support for Ben Bernanke as head of the Fed and Timothy Geithner as Treasury Secretary, both now facing major questions about their roles in the bank bailout and whether they are too close to Wall Street to serve the needs of Main Street, have placed the President in an awkward position for one who campaigned so vigorously on the promise of change. Health care reform now seems to have been the victim of almost terminal mismanagement by the White House and by the Democratic leaders in Congress, who, in doling out deals to various senators in exchange for their votes, did exactly what Mr. Obama campaigned to change: the way Washington works.
Changing the way politics is done struck a populist chord on the campaign trail, where the forces of unease and the preponderant view that America was on the wrong track, gave momentum to Mr. Obama’s message. But now, that same misdirected train has turned to face the White House and a political process that so many of its dissatisfied passengers still find intolerable. What it seems many Americans, especially independent voting Americans, were banking on in Mr. Obama’s policies was that more hope would be focused on Main Street and less audacity would be displayed on Wall Street.
Over the past year, America and its admirers have witnessed the spectacle of business leaders who were paid hundreds of millions of dollars admitting that they did not see the coming storm clouds of their own creation. But they still kept the hundreds of millions. Men who were once trumpeted as financial titans and graced the covers of countless genuflecting magazines have been humbled in a way not seen since the 1930s. Former Citigroup CEO Sandy Weill recently confessed that he always thought the company, whose stock continues to languish in a $3.50 shell of its nearly $50 glory, was “impregnable.” He was apparently stunned by the extent of Citi’s meltdown. “I felt that we should be able to weather that storm,” Mr. Weill recently told the New York Times. No amount of miscalculation, however, prevented Mr. Weill from pulling in more than half a billion dollars in the late 1990s and early 2000s, or being appointed to the board of the New York Federal Reserve in 2001. Icons like General Motors and Chrysler have become financial wards of the state. Their descent to that status did not prevent those at the top from pulling in tens of millions in compensation, however. On the tenth anniversary of what was then billed as the deal of the decade, the merger of AOL and Time Warner is now seen as the marriage from hell, costing tens of billions in shareholder value, lost earnings and vanished jobs. Only last week, three CEOs of leading Wall Street firms admitted to a Congressional inquiry that they were as surprised as anyone when the credit crisis struck in 2008. The trio of Jamie Dimon (JPMorgan Chase), Lloyd Blankfein (Goldman Sachs) and John Mack (Morgan Stanley) were not compensated like anyone, however. Collectively, they were paid more than $300 million over the past five years.
Leaders often fail to heed the growing signs of change and disaffection when they are fond of basking in the reflection of their own egos instead of looking at where reality commonly resides.
The betrayal of elites, or at least the promise of their much-vaunted magic, both in business and in the political arena, the scale of the abuses and excesses of the few and the costs they inflicted on the many, the pervasiveness of leaders who place the claims of special interests over cries for public good – these are among the backdrafts and jet streams that have unleashed the winds of turbo populism. And like the concept of stakeholder capitalism, a term we coined more than 20 years ago to mark the growing dissatisfaction of institutional investors and pension funds with the self-aggrandizement of management and the somnolent tendencies of boards, this latest wave of populist outrage will be coming soon to a boardroom near you.
Sometimes, change comes in battalions, as it did with the campus upheavals of the 1970s and the swelling protests demanding an end to the war in Vietnam. Other times, it arrives clothed in the moral authority of a single man, as it did with Mahatma Gandhi and Rev. Martin Luther King Jr. Occasionally, it will come in the form of a Tea Party or just one too many credit card holders fed up with paying interest rates of 30 percent when the bank is getting money courtesy of the Fed at zero percent.
Wise leaders, as history has shown, do not wait for a call from Western Union before they get the message the people are trying to send. They know that it is never sensible to underestimate either the forces of nature or the power of public outrage. Both have the occasional tendency to sweep aside pillars of man-made glory and monuments to entrenched interests as if they were mere castles of sand.
Welcome to the era of turbo populism.
Never in the history of modern business leadership have CEOs been paid so much to achieve so little at such cost to so many.
At the opening hearing of the Financial Crisis Inquiry Commission held in Washington this week, key players in the worst financial meltdown since the Great Depression admitted they did not see it coming. The chairmen and CEOs of JPMorgan Chase and Goldman Sachs, Jamie Dimon and Lloyd Blankfein, and the chairman of Morgan Stanley, John Mack (who used to be its CEO as well) all testified that they were surprised at what happened. They now agree they were overly leveraged and did not handle risk with the respect it deserved. Mr. Dimon apparently never contemplated the possibility that housing prices would stop rising, much less decline.
It seems that Messrs. Dimon, Blankfein and Mack had as much vision in anticipating the downturn, and the folly of some of their assumptions about growth, as over- extended buyers of subprime mortgages had. Except that Dimon, Blankfein and Mack were not struggling low-income homebuyers who took on one too many bedrooms. They were among the highest paid executives on the planet whose word commanded deference and awe among much of the investing public, the media and an ever-admiring circle of policymaker-groupies.
Over the five years leading up to the subprime debacle in 2008, these three men were collectively paid more than $310 million. For the year 2006 alone, when so many of the seeds of disaster were being sewn on Wall Street and among its top banks, Mr. Dimon was paid $57 million and Mr. Blankfein $38 million. When Mr. Mack rejoined Morgan Stanley in June 2005, he was awarded stock worth $26 million on day-one, and a further $13 million in compensation and benefits for his first five months of work. In December of 2006, Mr. Mack was awarded a bonus of $40 million on top of his $1.4 million salary.
As they were being paid these sums, much of the world was increasingly convinced that these were proper incentives to ensure alignment with shareholder interests. They earned every penny million, it was thought. The prevailing view, especially among the wishful thinking and the non-thinking alike, was that such men were really superheroes whose ability was so unique and so far beyond those of ordinary mortals, the fact that their feet touched the ground when they walked was seen merely as one of their many generous concessions to convention.
They were not alone, of course. There have been hundreds of CEOs who have happily participated in the greatest transfer of wealth of its kind –a transfer that, for all the soaring salaries, bonuses and stock options, has ultimately seen the worst economic crisis since the 1930s, the highest job losses in generations and a stock market performance over the past ten years that has produced virtually zero gains, except for the titans and bankers who managed to cash out before the fall.
The 21st century began with a series of corporate scandals involving companies like Enron, WorldCom, Tyco and Hollinger. It ended its first decade in the throws of the worst financial failure in modern time. One thing stands out to mark the beginning of this period and its end: the folly of executive compensation. In 2002, we warned Congressional committees: “The most corrosive force in modern business today is excessive CEO compensation. Such lofty sums tempt CEOs to take actions that artificially push up the price of the stock in ways that cannot be sustained, and to cash out before the inevitable fall.” The extent of that corrosion and fall is apparent today. The consequences in taxpayer dollars soar into the trillions. The costs in human terms remain beyond calculation, as does the loss of confidence in corporate leadership.
More than just Lehman Brothers, a few banks and a couple of Detroit automakers went bankrupt in this period. The trust of workers, the middle class and pensioners in corporate management and governance has also collapsed. There may be a seismic ruin of jobs, dreams and foreclosed homes on Main Street. But on Wall Street, where people like Mr. Dimon, Mr. Blankfein and Mr. Mack still command adulation for their leadership and vision, the Fed-supported, taxpayer-rescued towers of finance give hope and comfort to those still requiring generous bonuses to get through their Tiffany-challenged day. The magnitude of their gains this year, less than 18 months from a once- in-a-lifetime experience looking into the abyss, promises also to set new records, which, like housing prices, is something Mr. Dimon thinks should go only one way, too. Recently, he announced that he was sick and tired of the criticism being leveled against Wall Street on the compensation front.
These are forceful accelerants to the rise of Turbo Populism, the term we coined on these pages and will be speaking more about in the future.
Had the world the benefit of a modern Churchill capable of battling the monstrosity of betrayal and failure these titans of excess have wrought, he would surely have given voice to a mood that is thundering across the land from kitchen tables and church pews to swelling unemployment lines and Twitter postings: Never in the history of modern business leadership have CEOs been paid so much to achieve so little at such cost to so many.
This is a reality that escaped the CEOs who appeared before the Congressional committee this week. They do not escape our sense of outrage.
The latest flap over taxpayer payments to Goldman Sachs confirms the culture of secrecy upon which the Fed in Washington and its New York counterpart are dependent. They like the dark, closed-curtain life that bankers prefer, where the sunlight of public scrutiny is seldom an invited guest. It is a culture to which Mr. Geithner adapted well.
There is a legend that the Great Sphinx once promised a young prince in a dream that he would gain a kingdom if he would clear away the sand that had almost entirely covered over the watchful guardian’s stone body. But the mystery of the Sphinx pales in comparison with its modern equivalent, the Federal Reserve System, which is enrobed in sands of obscuration and opaque practice that hide its true meaning and actions in the world. This is an institution that rarely seems what it is and is seldom susceptible to being seen in its true light.
The most recent evidence in this regard came from a series of emails that show officials of the New York Federal Reserve tried to keep multi-billion dollar payments to Goldman Sachs and other huge banks, made through insurance giant AIG, secret. The mystery deepens when it is recalled that Timothy Geithner, currently U.S. Treasury Secretary, was at the time president of the New York Fed. We were among the first to raise the propriety of these payments nearly a year ago.
It is asserted by senior New York Fed officials that Mr. Geithner had no influence in the outcome, as he had removed himself from any decision-making. Influence comes in a variety of shapes and sizes, however. As its CEO, Mr. Geithner set the tone and culture for the New York Fed during his five-year tenure. If he didn’t actually hire the staff who made the decision about the payments to AIG et al., he was involved in assessing their performance. They were his kind of people. It is unlikely they would have done something they knew he would disapprove of or that would have been likely to cause him trouble in his new post. That is not the way organizations work.
Then there is the issue of the Fed’s governance, which, as we have observed on numerous occasions before this latest revelation, resembles more a committee of the Society of Freemasons than an actual supervisory body. On this board during Mr. Geithner’s reign sat such luminaries as Jamie Dimon, CEO of JPMorgan Chase and Richard Fuld, CEO of Lehman Brothers. Jeff Immelt, head of giant GE, was also a director. Mr. Geithner was hired by top Wall Street players to serve Wall Street’s interests. From that point on, the success of banks and the satisfaction of those who ran them was the center of Mr. Geithner’s universe. He showed no discernible concern throughout his entire term over the run-up leading to the housing/mortgage bubble, the rise of unprecedented levels of risk and leverage, or the complexity of collateral debt obligations. When problems arose and breakdowns began, when hedge funds were collapsing, and right up to or even beyond the fall of Bear Stearns, did Mr. Geithner launch an internal examination of possible failures in oversight and regulation? Did he urge the directors of the New York Fed to review that organization’s governance practices? The answer on both counts is NO.
Mr. Geithner’s role at the New York Fed in many respects is no mystery at all. The mystery is why professional regulators actually think it is credible to assert that even though he was president of the New York Fed, he had no more role in a key decision to re-channel taxpayer funds ostensibly intended for AIG to Goldman Sachs and other counterparties than the man who operates the boiler in the Fed’s basement.
The riddle people need to be looking at is how it is that, as the new Treasury Secretary, Mr. Geithner was apparently shocked at the abuses and excesses that had occurred on Wall Street and in the banking industry, but as a major regulator of that sector, the same abuses and excesses were occurring on his watch, apparently without objection.
The contradictions and unanswered questions about Mr. Geithner and the New York Fed are, of course, part of the wider mystery, as we have noted, about what happens at the 20th Street Northwest, Washington headquarters of the Federal Reserve System.
Here, details about the collateral that is accepted by the Fed, which institutions are using various Fed-sponsored programs, and what really happened to the $29 billion in Bear Stearns so-called collateral, are kept under wraps. The Fed is desperately attempting to fight an access request under the federal Freedom of Information Act made by Bloomberg News for details surrounding the central bank’s $2 trillion loan program it launched to bail out financial institutions in the wake of the Lehman Brothers collapse. A court hearing on the matter was held today.
Last month, Fed chief Ben Bernanke bristled at Congressional proposals to have the Government Accountability Office audit monetary policy decisions, even half a year after they have been made. Then there is the free money that the Fed has tossed at the banking sector, with a funds rate that is lower than at any time in U.S. history. Add to that the fact that never before have so many trillions been committed or spent to bail out, prop up, guarantee and support the banking industry.
The culture of the Fed in Washington and its New York counterpart is one that thrives, indeed, is dependant upon, secrecy. They like the dark, closed-curtain life that bankers prefer, where the sunlight of public scrutiny is seldom an invited guest. The Fed draws many of its staff and members from that world, and when they leave it they often return to work for banks and financial institutions as consultants and advisors. It is the coziest of clubs, and one that many of the players are anxious not be disturbed.
Whether the Fed and all the steps it has taken will withstand the gales of turbo populism outrage (our terms) remains to be seen. If you believe the legend carved in stone in front of the statue nearly four millennia ago, had Tuthmosis IV not cleared away the sands from the Great Sphinx, he would have lost a desert kingdom. If the U.S. taxpayer and all those who depend upon American capitalism do not clear away the sands of secrecy and obfuscation that the Fed has come to represent, their losses will be even greater.
Catastrophe seems to have a more forgiving master in the Senate banking committee than in the pages of history. The captain of the Titanic was not given another chance at the wheel. And unlike Mr. Bernanke, he had the decency to hit an iceberg only once.
The Senate banking committee voted 16 to 7 today to confirm Ben S. Bernanke for a second term as chairman of the U.S. Federal Reserve System. It is unfortunate for E.J. Smith that he went down with the Titanic in 1912, because, if you follow the committee’s logic, it would have reappointed him to captain another ship if it had had the opportunity.
Mr. Bernanke was part of the crew who allowed the housing and liquidity bubbles to build in the first part of the 21st century. As Fed chief, he missed the early warning signs of the impending financial collision completely, predicting that any problems would be contained and not spill over to the real economy. Watertight compartments did not work for Captain Smith, either. Only a few months ago, Mr. Bernanke told Congress that unemployment would not reach 10 percent in the U.S. He was an early supporter of the TARP, the nearly trillion-dollar fund which he and others sold to Congress on the basis that its quick passage was vital to the survival of the economy. Turns out it was not really about toxic assets, which the Fed never bought, but about propping up the capital of major Wall Street players -an idea that already skeptical lawmakers likely never would have bought. Captain Smith was known to be of the view that his ship was too big to sink. His modern financial counterpart has given new meaning to the concept that certain institutions are too big to fail. It is worth pondering whether the philosophy, practices and vision demonstrated by Mr. Bernanke will end in a similar calamitous outcome.
At a time when opaqueness and lack of openness are widely regarded as being forceful contributors to the near economic collapse of Wall Street, Mr. Bernanke has adopted that model himself in the Fed’s anonymous transactions at the discount window and its handling of bank collateral, which is the original cash-for-clunkers program. He was quite happy to have taxpayers kept in the dark about the AIG bailout, which fast-tracked added billions into the coffers of Goldman Sachs and other banks. After the details became public, he offered the implausible excuse that it was not possible to negotiate a better deal and make Goldman take a “haircut.” The world’s most powerful central banker can’t take on Goldman, but Mr. Bernanke tells the banking committee he is up to taking on a bigger role as the nation’s financial super regulator.
There is a widely held view in some circles, especially in those given to the folly of excessive public spending (which view is oddly shared by those on Wall Street and in corporate America who are driven by the vice of excessive compensation) that the Fed under its current chairman has navigated recent choppy financial waters with skill and courage. In their view, Mr. Bernanke saved the banks, brought the economy back from the brink of a depression and performed a number of other miracles that place him somewhere between Albert Einstein and Mother Teresa–Wall Street version. Perhaps these are less the outcome of brilliance and wonder than they are of a Fed printing press capable of producing unlimited dollars and support for a spending and debt binge that soars into cosmic frontiers where no Fed has dared to go before. In that imaginary world, anything is possible–for a while.
Wall Street demanded, and Mr. Bernanke dutifully provided, a zero Fed rate that is the banking community’s equivalent of billion dollar bills pouring out of helicopters. And they are making billions more from it. New York State officials announced today that Wall Street is poised to report record profits for the first three quarters of 2009. The $50 billion in profits is almost two-and-a-half times the previous 2000 record (another year associated with a bubble). Bonuses will be 40 percent higher than last year. Such numbers are a direct result of the Fed’s easy money policy. It is not surprising that it can also buy untold support for the chairman who made it possible.
Question for the Senate: How exactly do you go from being on the edge of the worst Wall Street crisis since the Great Depression to record bank profits in little more than a year? Could it have happened if Mr. Bernanke had not supplied a very expensive taxpayer-bought getaway car?
The Fed and Wall Street have become an endlessly accommodating club of insiders that Mr. Bernanke has shown he is ill-disposed to disturb, especially after his collision of miscalculation last year with that other iceberg known as Lehman Brothers. He has been willing to enter into the policy arena and indicate to Congress his disapproval of the House provision authored by Congressman Ron Paul for regular, though delayed, audits of the Fed’s monetary policy, but he has offered not a word of criticism over the New York’s Fed’s governance, for instance, which functions as a self-perpetuating clique of Wall Street bankers electing their own in furtherance of their own interests. Another well-regarded champion of current financial reform in the Obama administration, under a President whom we admired and supported even before his nomination, seems to share the same view. Treasury Secretary Timothy F. Geithner was president of the New York Federal Reserve Bank for several years prior to assuming his current duties. There is no indication that he was ever troubled by the singular Wall Street view that the New York Fed personified, which accounts at least in part for the economic devastation that has ensued under its supervision over the past few years.
It is likely that the full Senate, except for a handful of members on both sides of the political spectrum, will also vote to confirm Mr. Bernanke. Whether members of the Senate will be around when the U.S. economy collides with the mountain of inflation and another Fed-induced debt bubble that are advancing toward them, and whether the Fed under Mr. Bernanke will even see the products of its myopic policies as they approach, is uncertain.
What is clear is that catastrophe seems to have a more forgiving master in the U.S. Senate than in the pages of history. The captain of the Titanic was not given another chance at the wheel. And unlike Mr. Bernanke, he had the decency to hit an iceberg only once.
What the regulars at this fabled Swiss resort did not appear to grasp is that the breezier than usual air this year was the cold wind of change brought on by the bitter storm of betrayal and personal devastation that millions around the world have felt as a result of Wall Street’s greed and the failures of those expected to regulate it.
The Davos Style from Another Era
The annual procession of the pantheon of the overrated, otherwise known as the World Economic Forum, concluded this week.It ended with a bulletin:The forum’s members have not quite figured out how to get themselves (and us) out of the worst economic crisis since the Great Depression.
But Davos was never about ideas or innovation. And it has never been about vision. This is a group that can’t see ahead even a few months, much less the years they would like to profess.Today, it is about the desperately discredited attempting to flee the apocalypse of their own creation. Fearing, as others have during times of transition when the touchstones of power and privilege were crumbling and a new order was beginning to arise in their place, these CEOs and princes think that if they just stick together they might be able to survive. Somehow they hope that the trillions that have vanished on their watch, and the trillions more that have had to be injected into their companies to avert Armageddon, will recede from the public consciousness and their previous status of unquestioned deference and unchallenged compensation will resume. This is what the Davos crowd took from President Barack Obama’s inaugural address (loosely borrowed from Jerome Kern’s song of the same name) that it is in such times that America picks itself up, dusts itself off and starts over again. A more contemporary songwriter might advise this group that you can’t always get what you want.
Having been escorted to the brink of ruin by the leaders who insisted they had all the answers (and made most of the rules), the public is not soon likely to entrust its fate to multimillionaires whose idea of tragedy is to be left off the A-list party circuit at Davos, and whose notions of governance and oversight are reflected in the fox-guarding-the-hen house board structure of the New York Federal Reserve, where, for instance, Richard Fuld Jr. was a director until the collapse of Lehman Brothers. What the regulars at this fabled Swiss resort did not appear to grasp is that the breezier than usual air this year was the cold wind of change brought on by the bitter storm of betrayal and personal devastation that millions around the world have felt as a result of Wall Street’s greed and the failures of those expected to regulate it.
Two years ago on these pages -and much longer ago in other media- we talked about how visionless and out of touch this group had become. It is, in many ways, symbolic of the leadership deficit that created the circumstances of greed and over-leveraging, ineffective governance and inept regulation that brought the world to its economic knees.
Since the pampered, pumped-up participants at Davos predictably added few, if any, insights that were new, different or particularly hopeful this year, we thought we would reprint our observations from 2007.
Tell me one major sea-changing event that has been anticipated or predicted at Davos in the past two decades. Show me a crisis that has been averted. Everything takes place in rear-view time… In many respects the image is one of myopic leaders still sitting atop the overreaching and unsustainable and who refuse to recognize the existence of icebergs until the Titanic calamity occurs.
Of all the deficits and shortages in the world today, it is the lack of genuine character in so many leaders and the absence of truly transformative leadership that is the most striking. In this, Davos is an apt mirror. One sees in this annual Alpine pilgrimage to Davos fragments of the grainy black and white movies showing the imperial families of Europe gathering in their toy soldier costumes and opulent surroundings, oblivious to the marshalling clouds of change and discontent that would bring their primacy to an end.
It seemed to catch a glimpse of the wreckage to come.
