Whenever there’s a corporate scandal, there is going to be an example of ridiculous excess. You can count on it. This time, the excess came from Washington Mutual, you mortgage brothers can’t deny.
I was a happy Washington Mutual customer for years, both in San Francisco and Chicago. The people who worked in the branches were really nice and efficient, and their service charges were the lowest around. I was sad when the bank failed, although I was thrilled that the Federal Deposit Insurance Corporation existed so that the bank’s failure wasn’t a hardship for me.
But the Feds never like bailing out banks, even though they have done it quite a bit in the last few years. Hence, a bank bailout is followed by lots of subpoenas and hearings, and that is why we now know: Karen and the Kauai Krewe like big bucks and they cannot lie.
Yes, her homegirls tried to warn her that rapping big bucks make her look corny. But she did it anyway, and now it is entered into the public record. Billy Bragg could not have skewered the banking business better.
Karen and her Krewe were attending Washington Mutual’s sales meeting in Hawaii, an incentive for its top performers. Of course, we now know that they brought in such big revenues because many of the mortgages were bad. The players who liked to make big bucks probably knew that a lot of the mortgages were bad when they made them. So why did they? Well, they gotta have that big new Benz. They were paid to write mortgages, not to write good ones.
And they were not paid to write good songs, either.
Corporate types always like to fancy themselves are rock-and-roll rebels. The problem is when they make enough money to start living out the fantasy. A friend of mine who was a successful mutual fund manager for many years always said that the time to sell a stock was when the CEO got a new wife, a new airplane, or a new headquarters. I’d add ”formed a vanity rock band” to the list.
The rock-star-wannabe CEO is not interested in schlepping gear in a van and driving among eight mid-sized towns in the Midwest, crashing on the couches of relative strangers and strange relatives, in the hopes of hitting it big. No, he did his own schlepping through business school and up the corporate ranks, and now he wants the champagne and the chicks that go with being a rock star. Richard Scrushy, the CEO of HealthSouth Corporation who was charged with a wide range of fraud-related crimes and eventually found guilty of bribery, was in two bands: a rock band called Proxy and a country band called Dallas County Line. Scrushy also had a few ex-wives and an airplane or two to warn investors long before the Feds arrived.
Goldman Sachs is probably too tony to have a bad song lurking in its past, but we won’t know that until discovery in its fraud suit is completed. But good luck trying to hide it. KPMG commissioned a soaring anthem about its vision of global strategy back in the dot com bubble days. It quickly became an Internet joke, so the company sued arguing that website addresses were protected by copyright and could only be linked to with permission. And they lost.
Bad corporate rock is not a new phenomenon. A friend tells me that when he was at his fancy Ivy League college in the mid-1980s, Drexel Burnham Lambert (of junk bond and insider trade fame) came to campus to recruit some fancy Ivy League graduates. My friend swears that he attended a presentation that had a video with a soundtrack by Jefferson Starship, or Starship, or Tap, in which they sang ”We Built This City on High Yield Bonds.” I have never been able to find that song or even a corroborating witness, but I am looking.