You "can never be too rich or too thin," said the Duchess of Windsor, who was wrong on both counts.
As the economic crisis deepens, many Americans may soon discover what it means to be too thin, an insight that until now has been largely reserved for denizens of the developing world. This is changing. In January, U.S. food banks saw a 30% increase in the number of people who couldn't afford to buy enough food on their own, but 70% of food banks reported that they lacked the resources to feed those extra mouths. (Call it the Economic Crash Diet.)
Meanwhile, other Americans are shocked to discover that the rest of us think they're too rich. Listen to the chorus of Wall Street whining that greeted President Obama's proposal to cap executive pay at firms that take federal bailout money. (A measly $500,000 salary? Who can live on that?)
But yes, Wall Street, it is possible to be too rich.
There's nothing inherently immoral about having a lot of money, if you can keep it in perspective. The median U.S. household income in 2007 was $50,233, and only 5% of U.S. households had incomes of more than $177,000. Statistically, if your income is anywhere near $500,000 a year, you're rich. If you make as much as the CEOs of the nation's 500 biggest companies (whose compensation averaged $12.8 million in 2007), you're very, very rich. If you took in the $657 million averaged in 2006 by each of the top 20 private equity and hedge fund managers, you're insanely rich.
But are you too rich?
Well, if you find yourself appalled at the thought of getting by on $500K a year, and you're not the sole support of 10 special-needs children or perhaps a small Third World village or two, you've gotten too rich. If charity balls, chauffeured limos, a household staff and private jets feel like necessities rather than luxuries, you're too rich. And if you've come to feel you have a God-given right to feed at the government bailout trough, but you denounce it as creeping socialism when you're asked to show some personal financial self-discipline in exchange, then yes, you're too rich.
But, but, but, squeal opponents of executive compensation caps. Link executive pay caps to the receipt of bailout funds and the executives themselves will bail out!
As Meredith Whitney, an analyst at CIBC Oppenheimer bank, recently put it on Bloomberg TV, "Wall Street attracts the best and the brightest because of its compensation structure." Impose pay caps and "the best and brightest will still figure out a way to make money, [but] it may not be on Wall Street when those minds are needed the most."
Call it the "best and the brightest" theory of executive compensation: Smart people are greedy, but we need smart people to get our financial system out of this mess, so we'd better enable those smart Wall Streeters to stay in the ranks of the super-rich.
This would be a persuasive argument if those very same smart people hadn't gotten us into this mess in the first place. Recall that the phrase "the best and the brightest" gained popular currency with David Halberstam's 1972 book of the same name chronicling how the brightest minds of the Kennedy administration embroiled America in the disastrous Vietnam War. In the '60s, the "best and the brightest" brought us Vietnam. In the '00s, they brought us subprime mortgages, credit-default swaps and a global financial crisis of unprecedented scale. (For the record, it is possible to be too smart.)
So if some of the so-called best and brightest flee Wall Street rather than scrape by on $500,000 a year, I'm not sure it's a great loss to the nation.
In the end, linking government bailout funds to executive pay caps shouldn't be seen as a form of punishment for Wall Street, though. It should be seen as an appeal to Wall Street patriotism at a time when the nation faces an economic crisis as dangerous as any war.
Over the last weeks, I've watched dozens of talented people gladly take big pay cuts to work in the Obama administration. The president earns only $400,000 a year, the Treasury secretary earns less than half that, and lower-ranking officials earn less still. Yet hundreds of smart, highly paid people continue to compete for lower-paying government jobs because they want to help clean up the hellish mess we're in. They're willing to be a lot less rich if they can help keep the rest of America from getting too thin.
Is it really too much to ask Wall Streeters to do the same?