America’s Endless Capacity to Reward Failure

Please God give me the luck to enter the upper echelons of the American elite — the upper, upper crust where normal rules don’t apply, where illogic reigns, where failure doesn’t have consequences, only out-sized rewards. Please give me the luck to fail splendidly one day (even to bring a major company or a nation itself to near ruin) and yet get nothing less than the platinum parachute that a lucky few deserve:

• Stan O’Neal, CEO of Mer­ill Lynch, recent­ly led the bank to take a $7.9 bil­lion write-down because of bad deals in the sub-prime mar­ket, result­ing in a $2.3 bil­lion loss, the worst loss in 93 years for Mer­rill. As he began to feel the heat, O’Neal secret­ly start­ed look­ing to sell the bank to Wachovia, a deal that could have per­son­al­ly net­ted him an esti­mat­ed $250 mil­lion. Instead, the board of direc­tors oust­ed him last week and he got to walk with $161.5 mil­lion in secu­ri­ties and retire­ment ben­e­fits, the fifth-largest exit-pay pack­age for a U.S. exec­u­tive. It’s good to be the king.

• As the sub­prime mort­gage mar­ket melt­ed down this sum­mer, James Cayne, the chief exec­u­tive of Bear Stearns, was nowhere to be found. In this midst of the cri­sis, two of the bank’s hedge funds col­lapsed. But, accord­ing to The Wall Street Jour­nal, Cayne was out of town for ten days and incom­mu­ni­ca­do. No cell­phone. No Black­ber­ry. Noth­ing. Where was he? Play­ing in a bridge tour­na­ment in Nashville (and it’s alleged by the Jour­nal that he has a pen­chant for smok­ing pot at such tour­na­ments). For­tu­nate­ly, his team placed in the top third of the com­pe­ti­tion, and he gets to keep his high­ly lucra­tive job. In the mean­time, Cayne let War­ren Spec­tor, the com­pa­ny’s Pres­i­dent, take the fall. And Bear just announced that it’s lay­ing off 2% of its work­force. It’s good to be the king.

• Don Rums­feld, the for­mer Sec­re­tary of Defense, used the Iraq War as a prov­ing ground for his the­o­ries about how the US army should fight the mod­ern war and defend itself against the unknown and the unex­pect­ed. Rums­feld’s mantra was to keep the armies small, mobile and high-tech. And that’s what we did for four years in Iraq, despite mount­ing evi­dence that we had too few troops on the ground. Rums­feld, who could nev­er adjust his the­o­ries to the real­i­ties in Iraq (see this piece in the Armed Forces Jour­nal), even­tu­al­ly got forced out, leav­ing behind a mess that will con­sume the US for a decade or more. What’s the fall­out? Months lat­er, Rums­feld gets Stan­ford’s seal of approval. In Sep­tem­ber, Stan­ford’s Hoover Insti­tu­tion announced that he will join as a “dis­tin­guished vis­it­ing fel­low” where he will par­tic­i­pate on a task force of schol­ars and experts focus­ing on “issues per­tain­ing to ide­ol­o­gy and ter­ror” in a post 9–11 envi­ron­ment. It’s pre­cise­ly the same flawed vision that land­ed the US in a deep hole that the Stan­ford-affil­i­at­ed think tank is choos­ing to hon­or. Once again, it’s good to be the king.

Amen.

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