More thoughts on Wall Street's spending habits

Citigroup was caught red-handed trying to buy a $50M Dassault Falcon 7X corporate jet and received a call from the White House to cancel that order. After all, it's not the best way to spend billions of bailout money from the government. Columnists on the left are digging in their heels about this. Maureen Dowd at the NYT:

The former masters of the universe don’t seem to fully comprehend that their universe has crumbled and, thanks to them, so has ours. Real people are losing real jobs at Caterpillar, Home Depot and Sprint Nextel; these and other companies announced on Monday that they would cut more than 75,000 jobs in the U.S. and around the world, as consumer confidence and home prices swan-dived.
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Bartiromo also asked Thain to explain, when jobs and salaries were being cut at his firm, how he could justify spending $1 million to renovate his office. As The Daily Beast and CNBC reported, big-ticket items included curtains for $28,000, a pair of chairs for $87,000, fabric for a “Roman Shade” for $11,000, Regency chairs for $24,000, six wall sconces for $2,700, a $13,000 chandelier in the private dining room and six dining chairs for $37,000, a “custom coffee table” for $16,000, an antique commode “on legs” for $35,000, and a $1,400 “parchment waste can.”

Okay, so maybe it was a poor decision made by Citigroup executives to buy a multimillion dollar jet after the taxpayers have funded the company. Maybe Thain, former CEO of Merrill Lynch, shouldn't have spent so much on an office renovation.

On the other hand, the stimulus package in debate right now is about spending, isn't it? The only difference between that bill and what these CEOs have done is who gets to spend. The Democrats prefers spending by the government, but that's just an illusion because taxpayers foot the government spending. These Wall Street executives are also spending money buying merchandise, hiring contractors, etc. Isn't that stimulating the economy?

Despite market turmoil, economy is OK

Yesterday was a scary day for the market: Dow dropped 500 pts. on news of Lehman Brothers collapse, Merrill Lynch's fire sale to Bank of America, and AIG's credit worries. It was the worst drop since the 9/11 terrorist attack.

Many folks are in a panic. They're losing confidence in their banks. They worry what'll happen to their savings. Their retirement accounts are shrinking. It's like the sky is falling...

The Fed understands this crisis which stemmed from institutions' overexposure to the risky subprime mortgage market. Many banks have already failed and taken over by the FDIC. A few months ago the government engineered a sale of troubled Bear Stearns to JPMorgan Chase. A few weeks ago Fannie Mae and Freddie Mac were seized by the government. Was Lehman Brothers betting on a bailout? No bank would pick up Lehman without the backing of the government, and Treasury Secretary Henry Paulson wasn't keen on another bailout. In the end Lehman was left without a suitor and had no option but to file for bankruptcy, ending its 158-year history and making history as the largest bankruptcy ever.

Credit is due to Secretary Paulson for allowing capitalism to work. In order for capitalism to remain healthy, sometimes it must go through illnesses, just like a human. Now that he has shown the market that he's not always Uncle Sugar, many banks have pooled together cash to improve lending, instead of always relying on the Fed.

What will happen to AIG and other troubled institutions in the future? Nobody knows, but capitalism is also about owning up to the decisions you make, good or bad, and living the consequences.