Grasso Deal Was Legal, But Doesn't Pass The Smell Test

by Mark Scheinbaum

The "it" is the "smell test."

Legal or not, de jure or de facto, there's just some stuff that doesn't smell right. It doesn't seem fair. It doesn't look good for the folks in the cheap seats.

First there's Mr. Grasso, 35-year veteran of the New York Stock Exchange. Not one wolf, but a pack of wolves were put in charge of the compensation chicken coup. We're not talking about Wendy's or Home Depot or Bill Gates at Microsoft, where true capitalism rules. For investors in these companies, are perhaps their managers, greed is not just good, but very good. We're talking about a regulatory agency where the guy or gal in charge is doing the work of all investors, not just Fortune 100 moguls.

Mr. Grasso, who reveled in never getting a college degree, and according to the Wall Street Journal was delivered from his Long Island home each morning to the corner of Broad and Wall in an armored car, was handed a $191 million pay package over 10 years. The last installment was going to be $48 million or so, including a performance bonus for getting the post-9/11 NYSE up and running lickety-split, as he was supposed to do.

Keep this in mind: one of the catalysts for the secret pay negotiations, secret pay award, and secret salary was Sandy Weill, the billionaire who controls Citigroup-Travelers Insurance-Smith Barney -- hardly an uninterested observer.

So now comes the "interim" NYSE CEO, John Reed, former head of Citigroup Inc. who mowed the lawn, pulled the weeds, trimmed the hedges, fertilized the soil, and prepared the flower bed in which the Glass-Steagall Act could be buried. If you don't remember your course in Great Depression 101, this was the key consumer protection legislation which kept banks, brokers, and insurance companies from crossing into each other's lanes.

You can now buy annuities in your bank lobby, and insurance with your Citigroup credit card, and get a mortgage from your stock broker. Along the way Citigroup never mentions the billions in Brazilian loans and the insurance required to cover the defaults in the same loans, and the evolution of a banking and investment banking world which treats small investors and customers worse than ever before.

So, the greed and "just don't get it" goes on and on.