Some Capital Commerce readers took offense at my post yesterday that highlighted Reaganesque aspects of the economic agenda that John McCain outlined. In particular, they pointed out that President Reagan never harangued business the way McCain did in that speech. (To be fair to me, I pointed out that the speech was a mix of Reagan, Mike Huckabee, and Teddy Roosevelt.) It was probably this portion that bugged them, the part of the speech where McCain named names:
Meanwhile, the people we expect to be most sober and level-headed in their economic decisions—bankers and other home lenders—forgot some of the basic standards of their own profession. Hard-working homeowners are learning for the first time about the endlessly complicated borrowing, bundling, and betting that has been going on in our capital markets. Americans are also right to be offended when the extravagant salaries and severance deals of CEO's—in some cases, the very same CEO's who helped to bring on these market troubles—bear no relation to the success of the company or the wishes of shareholders. Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while Mr. Cayne of Bear Stearns, Mr. Mozilo of Countrywide, and others are packed off with another forty—or fifty million for the road.
I think it's worth keeping in mind that the formative years for McCain were spent in the U.S. Navy (and a Vietnamese POW camp), a place where the cardinal values are duty, honor, service, and sacrifice for the greater good. He's never spent any time in the private sector, as primary opponent Mitt Romney loved to point out. The key years for Reagan, on the other hand, may have been a period from the mid-1950s to the early 1960s when he served as a spokesman for General Electric, hosting General Electric Theater on Saturday evenings and giving speeches at GE plants around the nation that stressed the value of limited government and low taxes. He was in the truest sense a company man. "Two very different perspectives on corporate America: one a bit sunnier, the other a bit more skeptical."
Two different perspectives on Wall Street were also evident last night on CNBC's Kudlow & Co. where Larry Kudlow, a Friend of the Blog, conducted a peppery interview with McCain. Here is an excerpt:
KUDLOW: Let me begin, in your speech today, and also in recent speeches, you're really blasting corporate greed and reckless corporate conduct.... What are you driving at?
McCAIN: I'm driving at the people who get compensation which is not approved of by the stockholders, even a nonbinding fashion.... I'm talking about people that when their corporation has losses, that they are rewarded with exorbitantly high pay packages. And it gives Wall Street a bad name, Larry. And that's—and that's pure and simple. I do not believe in government intervention, I do not believe in government control, I do not believe that. But I do believe we should take steps to increase transparency and also shareholder input into the compensation of CEOs. ...
KUDLOW: OK. Well, do you support te say on pay bill? That's a key point. And would you make that mandatory?
McCAIN: I think nonbinding is just fine. I think that sends enough of a signal to corporate executives.
KUDLOW: When you are criticizing these corporations, I mean, there's 140 million Americans work for corporations, in rough numbers. Companies are the ones who create jobs in America, they're the ones who really generate the family incomes, and of course companies need capital investment. Do you ever worry that you're sending a very tough anti-business message to the firms, to the work force and to investors?
McCAIN: Larry, in all due respect, don't you think that when corporate executives take exorbitant pay packages that are not justified by the performance of the corporations that they have stewardship of, that that gives corporate America a bad name and then increases the influence of those who are basically anti-business? Don't you think that is also one of the spillovers here? We expect corporate America to be transparent, honest, accountable, and I don't care how much executive compensation is as long as it's justified by corporate performance. And you know and I know there are many of them that that's not the case. Not the majority, but there's enough of them that it gives Wall Street and corporate America a bad name, the strength and basis of America's economy. You and I are not in that much disagreement. But just like there are bad politicians that—who need to be punished, there are bad corporate executives and corporate greed that has to be checked, as well.
KUDLOW: Why? In the case of James Cayne—I mean, I don't want to get too deep into this...
KUDLOW:... because neither of us are securities analysts.
McCAIN: Yeah. Yeah. Yeah.
KUDLOW: But he didn't do anything that broke the law. He worked there for 40 years.
McCAIN: Of course not.
KUDLOW: He collected stock over that whole period of time. And you yourself supported the JPMorgan/Bear Stearns deal. So I'm not sure where the issue is here, because he didn't do anything illegal.
McCAIN: Yeah. Well, when a politician gets corporate contributions and then writes an earmark for that corporation, which is not competed or any other virtue that I know of, that's not illegal, either. OK? But it ain't right. I'm saying that there are corporate executives—I'm sorry to waste our—I mean, to spend so much of our time together on this particular issue, because we're not that much in disagreement. I want accountability and transparency, and I know that you do, too. And there are bad corporate heads just as there have been bad politicians and there have been bad everything, unfortunately, in America. And transparency and accountability to shareholders is the best way to check it. And you and I are not in that much of disagreement of it.
McCAIN: But I cringe when I hear—when I hear my constituents saying, "Wait, I just lost my job and that corporate CEO just cashed in X," OK?
KUDLOW: All right. So as someone once said, let us move on, sir.[endblock]