On Wall Street, Skepticsm On Exec Pay Cap
MELISSA BLOCK, Host:
One of the most provocative suggestions for the bailout package is a cap on executive salaries. This week, John McCain said executives who take the bailout money shouldn't be paid more than the highest paid government employee. That is the president, with a salary of $400,000. As NPR's Robert Smith reports, that salary has some New Yorkers chuckling.
ROBERT SMITH: Four hundred thousand dollars a year may sound like a lot of money. But for a corporate executive living in New York, I mean, that's pocket change. I did the math and found that at that salary, these guys could only afford a mortgage on an apartment for about $1.5 million. I'm standing in front of a real estate bulletin board with all the listings in front of it, and there's a fellow New Yorker here, Jimmy Chalk(ph), who's going to help us decode this. What are they going to get? They're not going to be able to afford this penthouse.
BLOCK: No penthouse. No Tribeca condo penthouse, no West Chelsea penthouse.
SMITH: Now, this right here is a one bedroom for 1.1 million, but that seems too small.
BLOCK: It seems a little out of the way, though it looks like a nice enough place.
SMITH: So, what's an executive to do?
BLOCK: I guess, get used to it. They made some mistakes, and I guess they have to pay for it. We've probably got a room in our house in Harlem, so they can move in there.
SMITH: New Yorkers have been known to look on with glee as the mighty fall. But even those who spend their life under that $400,000-a-year salary cap, they can't imagine these guys taking a pay cut. Fritz Tucker(ph) and Paulina Trecheck(ph) were spending their lunch hour discussing the financial crisis.
BLOCK: These are, like, the most powerful people in the world. So, I don't really think any, like, legal thing is going to stand in their way of making as much money as they possibly can.
SMITH: If they had to downsize from, let's say, $30 million a year to $400,000 a year, what would be the first thing they should cut out of the budget?
BLOCK: Private jets probably have to go. They probably spend a lot of money on gas. Like, Puff Daddy recently had to put away his private jet because he couldn't afford the gas anymore.
BLOCK: I have gotten by on less than that for many years so...
SMITH: But you live in Brooklyn.
BLOCK: Yes, that's true. I'm sorry. I'm sorry.
SMITH: They admit that they don't really know enough about the lifestyles of the rich and bankerly to know how executives will react to the salary caps. But I met Joan DeStefano(ph), a stained-glass artist. And she says in some ways, these executives might not even notice.
BLOCK: If you have a greedy personality, it wouldn't matter how much money you could make, you would always want more and always find a reason why it was never enough.
SMITH: So they'd be just as resentful on 400,000 as they are on 30 million?
BLOCK: Yeah. If they made 20 million, they'd say, you know, life would be fine if only I had another 10 million.
SMITH: Let's just say that the heads of investment banks aren't the most sympathetic figures in New York City these days. But how about Brian Hocousser(ph)? He's just a poor business-school student at NYU. And frankly, he was hoping to grab one of those vastly overinflated executive salaries one day.
BLOCK: I mean, that's the dream. That's what we're all looking for.
SMITH: So if you found out you could only make $400,000 at the very top of a firm, what? You're going to change professions?
BLOCK: I mean, it's too late for that now. But maybe if I knew that ahead of time, I would not be in business because - maybe I'd pursue acting or something, I don't know.
SMITH: And these days, that might be a safer investment. Robert Smith, NPR News, New York.