During the federal government's case against Enron, I recall an especially contentious point in the proceedings when the lead lawyer for our government felt compelled to say "My. Lay, you seem to have forgotten that I'm here in this courtroom representing the People of the United States of America."
It marked a psychological sea change at which a deflated Kenneth Lay must have realized that this was not just another legal skirmish from which he would escape unscathed. It was us that had to deal with, and collectively we won't be pushed around.
We're back again-the ever-annoying People of the United States of America. This time we're fighting block by block to retake the corporate control that slipped from our fingers when we fell asleep at the wheel. When government is good, it's one of the most powerful assets we have. When it's not where it needs to be, bad things happen.
Our food supply offers a good example. We just had nine people die from salmonella poisoning from peanut butter and hundreds more were deathly sickened. Why? Because the FDA had been gutted in recent years and was in no position to monitor food safety.
Over time, the food industry and the politicians they supported had been effective at gutting the food safety laws. Today, with sales of hamburger and peanut butter in a free fall, those with selfish interests have decided that maybe that deregulation was not such a great idea after all. But they still have power, so just like that, they voted to spend $854 million to beef up the enforcement capability of the FDA.
About $3 a year per citizen seems like a reasonable cost to avoid what I'm told are some of the most painful afflictions imaginable.
This economic crunch should bring new meaning to that '60s-era rallying cry, "Power to the People!" For one thing, executive compensation will be severely curtailed compared with the excesses of the past 20 years. It's an insult to our intelligence to be told that eight- and nine-figure incomes are required to keep people in top corporate jobs. What does that say about people in the public sector, the military, government, or academia who manage huge organizations for a few hundred thousand dollars a year?
If someone in corporate America feels compelled to make really big money, they can do it the old fashioned, deserving and extremely difficult way by rounding up investors and starting a company. Entrepreneurs creating businesses out of thin air deserve what can be enormous wealth, but short-term professional CEO's are plentiful and worth, at best, about as much as college presidents or U.S. generals. We will fix this problem and the correction will contribute to the next economic boom.
Another pet peeve is the continual carping by people I respect regarding the "mistake" of not saving Lehman Bros. I loved the fact that we refused to save a firm that was leveraged 27 to one. I don't care what the aftermath has been. I think it sent an important shot across the bow of the rest of the financial services industry. "You could be next." AIG is different because it's much larger. When we're finished with AIG, however, We the People will own all the pieces of AIG, many of which are corporate jewels.
The housing problem? For what it may be worth, private industry is starting to buy those troubled mortgages at about 40 cents on the dollar. Permission to buy such a loan, in a typical case, needed the approval of two different bond trading companies in New York with the ultimate OK coming from the actual owner of the note, a teacher's retirement fund in Paris, France.
In other cases, private companies are buying loans from the government lending agencies for 10 cents on the dollar and buying the right to keep 20 percent of what they collect. We the people get the other 80 percent. Negotiations with homeowners are reducing interest rates from 7.5 percent down to about 4 percent where the rate should be today. Soon, there will be the option to reduce the loan balance as well, or we'll see some suburbs turn into slums.
Considering the ease with which I just refinanced my own home, I sense that a turnaround in our financial sector will happen sooner than most people think. There's too much money to be made just around the corner, and it's all possible because we have the power to do what's right.