Two thousand and seven was marked by a series of scandals and betrayals on the part of those society has traditionally looked to for guidance and example. We explored some of these in our Annual Year End Awards for 2007. But among the privileged corporate leaders who stole from their shareholders, the gatekeepers who were blind to the risks inherent in dealing with a country noted for its lack of transparency and unaccountable governance, and the directors and regulators who slumbered while the credit disaster was unfolding, a betrayal of an even higher order was permitted to slip by.
As a result of their greed-driven blunders that soared into the billions of dollars and are certain to cause even greater havoc among consumers, homeowners, employees and investors in 2008, Wall Street icons, including Citibank, J.P. Morgan and Merrill Lynch, sold substantial chunks of themselves to sovereign wealth funds run by non-democratic regimes. China, which time and again has shown the extent to which it cannot be trusted in its products and exports, has been prominent among them, as have affluent oil rich countries. No democratic nation was included in the group.
The one silver lining in all of this is that the mess Wall Street and its subprime, fee-grabbing wizards have wrought has been so egregious as to unite liberals and conservatives, free market advocates and proponents of responsible regulation in a common chorus of indignation. Generations before have had to bear the costs of Wall Street’s excesses and the shortcomings in its supervision. Perhaps the demand for reform this time will bring about a more transparent market along with more vigilant guardians and regulators. What is also required, however, is a change in stakeholders themselves where they aren’t so willing to give a pass to boards that award a CEO a sultan’s treasure one year only to learn they have to give him a king’s ransom in severance the next because of his failed plan. As we have suggested on more than one occasion in the past year, Pharaonic pay is never a guarantee of future success. Sometimes it has no connection with success at all.
It is bad enough that Wall Street’s lead actors can walk off with hundreds of millions in the aftermath of their blunders, but for tyrannical and repressive regimes that place little credence in American values of freedom, transparency and accountability to profit from the crisis by acquiring major stakes in America’s financial heart is, for us, the Outrage of the Year.