An Excess of Bashing

By Allan Sloan
Tuesday, March 17, 2009

I've made my career whacking big business. Magazine covers with titles such as "Corporate Killers" and "How Wall Street Sold Out America" hang in my office, and my files are filled with pieces I've written about corporate tax dodging, questionable accounting and toxic waste being peddled as spring water to unsuspecting investors. Since joining Fortune in mid-2007, I've been complaining about the price we prudent people are paying to bail out the imprudent.

But even by my bash-them-bloody standards, Democrats' attacks on banks that have taken bailout money and continue holding meetings in nice places or sponsoring athletic events are way over the line. Sure, it makes for great sound bites ("You took our money to do what?"). But it's counterproductive, because it will cost taxpayers money and make reviving our financial system more difficult.

To be nonpartisan, the Republicans are no prize either. The worse things get, the more they gloat. They've forgotten that their policies helped bring on this mess, and that we all live in this country and have a stake in its success. Besides, the sickening swoons in our economy and stock market are undermining faith in capitalism, a bedrock Republican principle, and are making government programs like Social Security more popular.

But it's the Democrats' show. It's fine for them to bash true excesses, such as deposed Merrill Lynch chief executive John Thain's $1.2 million office redecoration (money he says he's paying back) and Citi's $50 million corporate plane purchase (now canceled). But not every trip is a boondoggle, and not all private-plane flights are wasteful self-indulgence.

This is different from American International Group, beneficiary of more than $170 billion in bailout funds, paying bonuses to high-ranking executives who presided over policies that tanked the company and sent it running to Uncle Sam for succor.

Take sales meetings, which aren't the same thing as paying bonuses to incompetents. If you have any concept of how business works, you know that you motivate salesmen with aspirational things like plush retreats for top producers. The cost is more than covered by the business the producers generate in trying to qualify for the trips.

Unlike President Obama, who warned, "You can't go take a trip to Las Vegas . . . on the taxpayers' dime," I have no problem with Goldman Sachs's plans to hold a conference there. I've just been to Vegas, and it's a mess -- housing, casinos and resort travel are heading downhill fast. Meeting there produces work for folks like taxi drivers, maids, and cabana guys -- the kind of people we're trying to help via stimulus legislation. Having Goldman move its meeting to San Francisco means more jobs in the Bay Area, fewer in Vegas. Does that help us as a country? I don't see how.

Demonizing Goldman for its Vegas plans and Northern Trust for sponsoring a golf tournament is hurting taxpayers rather than safeguarding the money we've lent companies under the Troubled Assets Relief Program. Here's why. The flogging being inflicted on TARP recipients has led a growing number of sound organizations (Goldman, Northern, U.S. Bancorp, M&T Bank, Iberia, and TCF Financial, among others) to talk about repaying their TARP money to avoid being stigmatized.

If sound borrowers repay TARP, it will hurt taxpayers because the government, which has put $225 billion into 488 banks (according to SNL Securities), is getting 5 percent a year from sound recipients but paying only 2 percent or so to borrow the money it's lending them. That profit would vanish, leaving nothing to offset losses to sick borrowers like AIG, Citi and General Motors.

In a more subtle problem, repayments would undermine TARP's best feature: having sound outfits participate. Because no stigma was attached to TARP, institutions could tap it without fear of setting off a bank run by depositors seeking safety. If lots of institutions repay TARP, the remaining borrowers would be stigmatized. Which could be very bad.

Look, if Democrats want to micromanage TARP recipients, they should have the government take them over and impose rules. Until then, they should stop acting like children throwing spitballs.

It's dangerous out there, folks. Our financial system and economy are on the edge of the abyss, as they were in September. Let's try to act like grown-ups and stop pointing fingers until the danger passes. After which we can throw all the spitballs we want.

Allan Sloan is Fortune magazine's senior editor at large. His e-mail address is

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