‘Too Big to Fail’ Doesn’t Have a Great Track Record

American banks and investment houses have been designated by the U.S. Government as ‘too big to fail,’ and so we suffer financial crime after crime in the industry.

It’s not been a pretty sight, or experience for the taxpaying public, many of whom have lost jobs, homes, or entire industries. And now there’s a new kid on the block that government will protect at the cost of both public safety and NASA integrity.

The name on the door is Boeing

Boeing deserves to dissolve into bankruptcy because it is an engineering-based company that deliberately turned its back on technological excellence in favor of profit. Not a week (and often a day) goes by without another of their aircraft diverting due to mechanical failure or the threat thereof. In space, Boeing was years behind schedule and more than $1.5 billion over budget with their Starliner project. Finally launched in desperation, with numerous leaks and deficiencies, it wasn’t able to safely return its astronauts, who ended up hitching a ride home on SpaceX.

But there’s a common thread here, and Boeing is just the latest victim

It’s called ‘investor returns’ and every public company registered in the stock exchanges of the world is vulnerable. Capitalism needs capital, and there are only three sources, ‘retained earnings’ (which are derived from setting aside a percentage of profits, ‘investors’ (who buy your stock, and their money funds your needs), and ‘banks’ (that loan you money, with company stock as a guarantor). Common to all three is the company stock price, and that better be either reliably steady or consistently on the rise.

Unsurprisingly, whether you know what you’re doing, and do it well, is of almost no interest to money markets. Packard failed in automobiles, Pan Am and Trans World in airlines, Lehman Brothers and Washington Mutual in banks, Enron, Gulf Oil and Standard Oil of Ohio in energy, McDonnell Douglas, TRW and Westinghouse in manufacturing, Woolworth, Montgomery Ward and Sears Roebuck in retail, as well as scads of shipping and mass transportation companies.

Feeding the investor makes for followership instead of leadership

There was a time (and I was there) when banks made most business loans, and they had their requirements: were you a customer with a solid history of making payments on time, was your industry or market in good shape for the long term, did you have an experienced executive team, and were you a steady bet to be there tomorrow?

But that was then and now is now. CEOs today are a marketable commodity, and they are compensated, sometimes extraordinarily well, on how creatively they drive the stock price. Like talented jockeys, they’re paid to ride well and cross the finish-line ahead of the pack. A great deal of their compensation is tied to ‘future stock options’ and they’re hired not on how well they know the industry, but how profitably they rode their last horse.

As with Boeing, everyone makes money, while disaster lurks in the training stable

Back in the day, businesses failed as they were meant to do, when facts became fiction.

Had Barack Obama been a bit more experienced, he’d have allowed the banks to fail. We have a mechanism for that, created in FDR’s times to weather any future storms. But Obama’s Secretary of the Treasury was an old hand (ex-CEO) at Goldman Sachs and ‘too-big-to-fail’ became part of our financial language, all but guaranteeing a recession every decade.

In a nation that fears ‘socialism’ beyond all others, we punish civil financial failure and ‘socialize’ bailouts. Either way, criminal leadership bails out on golden parachutes and Joe Public cleans up the mess—but we call it capitalism.

Boeing is just such an example of criminal leadership

Yet, criminal as it is, it’s the only military-industrial game in town, other than SpaceX, and we dare not have a monopoly no matter how egregious the choice.

Dave Calhoun, Boeing’s recently departed CEO, should have been fired for malfeasance and sent home in disgrace.  Instead, in the midst of a safety crisis, his compensation rose 45% to nearly $33 million. His potential retirement payouts are valued at more than $44 million. That must be the ‘thank-you’ for Boeing stock tanking 40% on his watch.

But Boeing will not fail, it’s not the American way.