Wall Street and> the rest of the financial industry have long had a reputation for attracting some of the best and brightest minds around. And no wonder: Most folks, after all, feel more comfortable knowing that there are some brainy people taking care of their money.
Then came the financial crisis. If the actual substantive mistakes that brought it about -- think subprime loans -- weren t bad enough, many of the financial industry s big shots seem intent on supplying a stream of gaffes and goofs that call into question their smarts. (Tough times ahead? Hey, sounds like a brilliant time to redecorate the office with pricey furniture!)
Indeed, the continuing crisis is turning out incidents of seemingly utter tone-deafness and greed at a remarkable pace. It can t all be attributed to pure arrogance, can it?
We ll let you decide. To help you debate the question, SmartMoney.com decided to compile this list of the biggest gaffes of the financial crisis, at least so far. Narrowing things down wasn t easy, but to be fair we haven t limited our choices entirely to the financial industry. From Wall Street to the North Atlantic to the pop charts, here s our top 10:
Ken Lewis's Bank of Amerrill Lynch
When the titans of the financial system were going bust or being nationalized by the federal government, Bank of America (BAC)
John Thain Redecorates -- and How!
As Merrill was losing tens of billions of dollars last year, its new CEO and putative savior John Thain reportedly spent more than a million bucks redecorating his office. It was a stressful new job, to be sure, but Thain probably should have known that blowing $35,000 on a commode would be problematic on the PR front (even though it's just a piece of furniture, not a lavatory item). He has since pledged to reimburse the bank (read: shareholders/taxpayers) for tricking out his office like the Taj Mahal.
Fairfield Greenwich Gets Sucker Punched
It's bad enough that Bernard Madoff allegedly wiped out $50 billion of his marks' money in the biggest Ponzi scheme of all time. Even worse is that hedge fund and fund of funds Fairfield Greenwich Group said it lost $7.5 billion of its clients' money in Madoff's funds (all while charging those clients millions in fees for the privilege). Due diligence, indeed. If Madoff is the schlemiel in this story, then Fairfield is the schlimazel.
Since When Is Iceland in Greenwich, Conn.?
Perhaps the ancient island nation should have stuck to what it's good at: fishing for haddock and soaking in spas. After privatizing the banking sector by the end of the '90s, the country essentially transformed itself into a giant, deeply overleveraged hedge fund. True, fishing the North Altantic isn't as glamorous as international finance, but then it never caused the country to go bankrupt, either. Now Iceland's immediate prospects are even gloomier than its weather.
John McCain's "Strong" Fundamentals
While chugging along on the campaign trail late last summer Republican presidential hopeful John McCain made this fateful statement: "I still believe the fundamentals of our economy are strong." Further gaffes ensued, like the time the senior senator from Arizona suspended his campaign in order to save the financial system from collapse -- and then changed his mind. But it was that remark that stood out again and again, especially as Barack Obama used it as a cudgel to beat McCain away from the White House.
Guns N' Roses and "Democracy"
Guns N' Roses released its first album of original studio material since 1991 (yet another recession year). Nearly a decade-and-a-half in the making, "Chinese Democracy" reportedly cost $13 million. If you're going to take that long with an album, why not just wait until the economy gets better. We can only pray that the gruesome global recession disappears as quickly as Axl Roses's flop.
You Actually Want Us to Ride in Those Things!?
When the heads of the Big Three auto makers headed to Capitol Hill to beg for billions in loans to stave off imminent collapse, it was duly noted that they flew to D.C. in very pricey private jets. Chastened, the chiefs of Chrysler, Ford (F)
The Other Crash
The lore of the Great Depression has it that despondent financial types would throw themselves out of tall buildings, not single-engine aircraft. Tell that to Marcus Schrenker. The Indiana financial adviser allegedly cheated his clients and then parachuted out of a Piper Malibu in order to fake his own death. Fortunately, no one was hurt when the pilotless plane crashed into the ground. Too bad the same can't be said for bilked investors. Schrenker's lawyer says he's mentally incompetent and therefore can't stand trial. Only the first part of that claim sounds right to us.
Just What the Florida Real Estate Market Needed
Maybe it wasn't former Lehman Brothers chief Dick Fuld's fault that his Wall Street firm went bankrupt and helped trigger the global tsunami known as the credit crunch. But many thought there was something fishy about his recent real estate deal. Fuld reportedly sold his share of a $14 million Florida mansion to his wife. For 10 bucks. That might protect the property from shareholder and creditor lawsuits; what it does to tumbling home prices in the Sunshine State remains to be seen.
Diamonds Are Forever?
Pop Quiz: You are formerly the financial supermarket to the world now dependent on a $45 billion bailout to remain solvent. Do you: (a) consider taking delivery of a $50 million private jet? (b) break the company up? (c) stick with a $400 million baseball stadium naming-rights deal? If you're Citigroup (C)
(UPDATE: The Wall Street Journal reports that Citi is now considering bailing on the marketing deal that includes naming rights to the stadium.)