Good Morning Friends,

Let me briefly comment on something that is not unrelated to what we're discussing. It would seem that the banks are paying back their TARP money and so forth. Some people want "reform" in the compensation structure. It seems that Wall Streeters are set to receive another round of fantastic bonuses and stock options and the like.

We are coming to realize how much compensation of these folks and, of course, the CEOs are detached from performance. We're really left scratching our heads, trying to figure out why Wall Street acts like this and why doesn't government do anything to stop it.

What if the answer is class power? What if the motivation, on the part of Wall Street and government's apparent apathy, involves the maintenance of a class-based social structure? Hold that thought.

I was listening to the radio earlier this morning, a show on NPR called The Take Away. They had a professor of behavioral economics at Duke University. I forget his name, but he's good. He's a frequent guest on the show.

There was a discussion on the show about the compensation of Wall Street traders, hedge fund people, and so forth. He correctly pointed out that a discussion of compensation should be divided into two parts.

For twenty-odd years or so, their collective action seems to have kept the market "up." Therefore, we thought that special skills, talents, ability, and know how that allowed them to foster, maintain, and manage this "growth." Believing this, we, the people, vaguely felt that they "deserved" such rates of pay.

As the revelation of the source of this present crisis continues to unfold and we learn more and more, we find that we gave them far too much credit. We know that there were gaps in their understanding of how the financial system was working these days. We hear about the role of mathematicians and physicists from M.I.T. and other place in designing exotic financial products.

You know what this dynamic reminds me of? The Emperor With No Clothes. Remember the story. Two con men come to a kingdom, saying that they are weavers of the finest garmets. They said that their work was so sublime that anyone who could not see the clothes, were not competent rulers. The vizier comes, sees nothing and yet not wanting to think he's incompetent, pretends to see them.

The king comes in, sees nothing and yet not wanting to think he's incompetent, pretends to see the clothes, gives effusive praise for the beauty and so forth, and you know the rest...

But that aside, what if pay on Wall Street and in the corporate world in general in about maintain class hierarchy? What if we thought of the Wall Street traders, hedge fund people, investment bankers, and the like, as the lower rungs of the bourgeoisie. Even though they are technically "workers" who must sell their "labor," we can hardly think of them as the proletariat.

By the way, the second part of the behavioral economist's discussion was about the efficacy of bonuses, and experiments found an actual inverse relationship to size of bonus and performance. The more money involved, the more pressure was felt, and so on and so forth.

If you're a CEO of a Fortune 400 corporation of staggering wealth, [maybe you own an island], you can't have the people just below you - mind you, I say just below you - [top executives and upper level managers, and so forth] driving minivans, having to sweat their bills, having to go through mental contortions figuring out how their going to send their kids to college and the like. In other words, you can't have them living like the middle class.

First of all, that would put more pressure on your compensation, as the Fortune 400 CEO. Second, these people on the strata, make up the social layer that you interact with socially, that you may have originated [again, we're talking about, in total, a very, very, very narrow range of society] in. We're talking about your "world," your very world.

Anything approaching serious reform in pay for the corporate world and Wall Street, would bring your world under threat, might even deal a fatal blow to it. Think of it, this might mean that suddenly scores of people could no longer afford their country club memberships, and raquet ball health club memberships.

All of the sudden multitudes could no longer afford to send their children to elite private schools and from that flows the interruption of childhood friendships. Suddenly multitudes of nannies and other live-in and outside staff have to be let go [see how they would pose as populists defending their way of life based on preserving these domestic help jobs]. People could no longer afford to give as many, or any parties - its all about networking, is it not?

Suddenly there would be a lot fewer hunting trips and golf outings and summer houses, winter houses, or other residences in other countries. These things give are symbols of success to the bourgeoisie [yes, bring them nearer to God, whether they 'believe' or not] and give them a chance to network and wheel and deal and yet again, increase their holdings, and so forth. Money is not just money - I'll have more to say on that point.

So, if you're a Fortune 400 CEO, any reform in compensation of your own pay and others at your level and just below you, reform in compensation would mean social and cultural catastrophe in your eyes.

wingedcentaur