Saturday, July 23, 2005

Better watch out.

Luck largely dictates whether one has the good fortune to accumulate wealth; where the skill lies is in how one spends it.

The new wealthy fail to appreciate both elements of the equation.

---

Rich Man, Preposterously Rich Man
WASHINGTON, July 21, 2005

This commentary was written by CBSNews.com's Dick Meyer.

At about 3:15 a.m. this past Sunday, a nurse, Robin, quietly came into a room in Stephens Memorial Hospital in Norway, Maine, and barely waking the patient up, gently changed the packing inside her badly infected and very painful foot wound. The patient, a person Robin had never met before, happened to be my 13-year-old daughter.

Watching this scene of competence and compassion, and being odd, the first person I thought of was Stephen S. Crawford.

Earlier in the week, Crawford, 41, was dismissed as a co-president of Morgan Stanley, the investment bank. He held that job for four just months but was awarded a goodbye package of $32 million.

According, to the National Compensation Survey the government published last year, registered nurses who work full-time earn about $52,000 a year.

Tuesday evening, the president nominated a man named John G. Roberts to be the next associate justice of the Supreme Court of the United States. Being odd, the first person I thought of was Phillip J. Purcell.

Roberts will be paid about $199,000 a year to be on the Supreme Court. That's a raise of about $30,000 from his current salary as a federal appeals court judge, but it's still pay cut from what his salary was at the Washington law firm of Hogan & Hartson, $1,044,399.

Purcell, who was fired as the CEO of Morgan Stanley, will get a severance package of $113 million. Justice Roberts will have to sit on the court for about 568 years if wants to earn what Mr. Purcell got just for being axed.

A few weeks ago, I had the opportunity to scrub up and go into the operating room with Dr. Frederick Finelli, a surgeon who is also president of the Medical staff at the Washington Hospital Center. I watched him perform a gastric bypass operation on a morbidly obese patient. Finelli also took me to observe procedures by two renowned Washington surgeons: Paul Corso, who was doing a heart bypass, and Paul Sugarbaker, who was in the middle of a 14-hour marathon to remove abdominal tumors from the gut of a middle-aged man.

Meeting these men, who are routinely entrusted with the lives of the nation's most rich and powerful, as well as the penniless, and being odd, I immediately thought of Edward Lambert.

Lambert is the first hedge fund manager to crack the $1 billion a year mark, according to Institutional Investor's Alpha Magazine. The top 25 hedge fund managers earned an average of $250 million in 2004, according to Alpha.

According to the government's survey, the average doctor made about $118,000 in 2003. Top Washington surgeons do better than that, but they don't earn hedge fund or investment banking money just for saving lives in ways that demand years of training and where mistakes have kind of a high cost.

Obviously, I have been trying to figure out some rhyme and maybe a little reason to how society allocates its rewards and obviously I have failed. I can't really find a correlation between the way society values things and the way society distributes money. And I guess that's why I'm too dumb to be an investment banker or a hedge fund manager.

While flying recently, I had the opportunity to discuss this with an investment banker who joined Goldman Sachs in 1983. Goldman is famous for making people rich young and then losing them to other callings, like Robert Rubin and Jon Corzine. The guy next to me was clearly brilliant and obviously loaded. We spent a lot of the flight trying to explain why investment bankers now received such gargantuan pay. He couldn't really.

He said that really, most investment bankers didn't risk much personally because they are protected by huge corporations and are not entrepreneurs. They work hard, but he said their lawyers work much harder for much less money. He said zillions of brilliant Ivy League kids would go into "i-banking" for a fifth of the money with no drop-off in talent, so it’s not matter of supply and demand. Maybe society simply values money for money's sake and accumulators are the valued.

I could be convinced that there is nothing new about this in America, that if I had tried to make sense of who got what 50 or 100 years ago, I would have been just as baffled. But there may well be a fresh angle. The gap between the uber-class and the middle class seems to be at one of its widest points ever. That's mostly because the uber-class is consuming an unusually high portion of national treasure.

The Congressional Budget Office says that in 2002, the top one percent of the population received 11 percent of total national after-tax income; in 1979, that top one percent got only 7.5 percent. In a statistical realm where numbers move at glacial pace, this is a fast melt.

In 1982, the ratio of average CEO pay to average worker pay was 42 to 1; in 2003, the ratio was 301 to 1. The government says the average "blue collar worker" made about $31,000 in 2003. Those gaps have become canyons.

There is also a perception issue. The Media - especially television entertainment and magazines but also the press - is going through a phase of wealth obsession and idolatry. The reality of increased wealth concentration and media cheerleading, I fear, combine to make people who do good work for good but not astronomical pay (nurses, doctors, teachers) feel inadequate and frustrated in a country that historically has had minimal class resentment.

"This is not the type of thing which a democratic society - a capitalist democratic society - can accept without addressing."

What left-wing bleeding heart said that?

Alan Greenspan.

Dick Meyer, a veteran political and investigative producer for CBS News, is the Editorial Director of CBSNews.com, based in Washington.

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