11 OCTOBER 2003, Page 30

Come on out with the money, chairman we all know you're in there

Iemerged from the Lexington Avenue subway to find an ambulance and a fire engine parked in the middle of Wall Street. The barricades were up, police were everywhere, and outside the New York Stock Exchange, six marksmen in blue helmets had their machine carbines at the high port. What drama was this? Could Richard Grasso, the Exchange's embattled chairman, be holed up in his great stone fortress, refusing to leave unless he could take his $140 million pay-packet with him? No such luck, I was told — all this was standard procedure when Vladimir Putin was in town. (In the event, Mr Putin preferred to stage a photo-opportunity beside a Lukoil petrol pump, eating a Krispy ICreme doughnut, to show what globalisation could do.) Amid the assorted American tycoons and promoters now in trouble, Mr Grasso is in a class of his own. They stand accused of cooking the books (Bernie Ebbers at WorldCom) or insider trading (Martha Stewart, the queen of the kitchen) or spending the company's money on hockey teams (John Rigas, Adelphia) or on parties in Sardinia where swans carved from ice dripped vodka (Dennis Koslowski, also charged with spending $8,000 more of Tyco's money on his shower curtains). All that Mr Grasso has done is to spend his whole working life at the Exchange, starting off with a pencil behind his ear and ending up with a ridiculous salary. Friends like Rudolph Giuliani, who made his name busting the junk-bond financiers and went on to be Mayor of New York, urged him to hang in there. His lawyers have told him that not agreeing to resign ought to be worth an extra $50 million. It has all been too much for him.

Duty paid

John Reed, the Stock Exchange's new chairman, is paid a dollar a year, but he retired as president of Citigroup, the world's biggest financial company, and can afford it. He will tidy things up, find a suitable successor and retire again, but is making a start with a cull of the two dozen corporate grandees who sit on the Exchange's board and settled Mr Grasso's contract. They may have come to believe that for them and for their peers, no rewards could be ridiculous — ridiculously high, that is. They were fortified in their belief by the cult of the stock option, which could make them rich without costing their companies anything, or so the auditors told them. At this time last year Bill McDonough, who was president of the Federal Reserve Bank of New York, preached in Trinity Church, on the corner of Wall Street, about chief executives' pay. Over two decades, he said, when compared to average pay, it had multiplied tenfold: 'I can assure you that we chief executives of today are not ten times better than those of twenty years ago.' He had taken as his text our duty towards our neighbour. The Exchange's directors seem to have thought that their neighbour was called Grasso,

Live richly, Sandy

One peer who never made it to the Stock Exchange's board was Sandy Weill, who dislodged Mr Reed from Citigroup and reigned there in solitary power on another nine-figure pay packet. Mr Grasso set out to recruit him, but by then some of the markets' excesses were being laid at Citigroup's door. It picked up a $400 million fine, and its star analyst, who was banned for life, explained one of his tips by asserting that Mr Weill had been most helpful in getting his twins into nursery school. Now the great man is standing down as chief executive, though staying on as chairman, and has marked the occasion by selling $264 million worth of his Citigroup shares — to Citigroup, naturally. Posters carry its latest advertising slogan: `Citi — live richly.' No one can accuse him of failing to set an example.

Doctor Arnold

The Virginia Company's charter from King James I proclaimed that its territory stretched from coast to coast, including the island of California. Later discoveries led to amendments, but New Yorkers might agree that California is somewhere off the coast, or off the planet. Witness, they would say, this week's election, featuring Arnold Schwarzenegger, who combines a bulging physique and a Hollywood connection with a new-found interest in Adam Smith and Milton Friedman. He gets his chance to be Governor because California has learned that it is easier to spend money than to raise it. The state's revenues may flag and, after the dotcom boom, did — but public spending has a momentum of its own and carries straight on upwards. Then the bills have to be paid, and then comes political trouble. We can recognise the problem, even if the putative solution is California's own.

Snow blows cold

The biggest spender and borrower of all has found its own solution. The Bush administration simply exports the United States' debt to the world. The Treasury runs off bonds in industrial quantities, and central banks in the Far East pile them up. This helps them to keep their currencies competitive against the dollar. Now John Snow, the Treasury's new Secretary — unkindly described to me as a golf-handicap and corner-office type — has gone off this cosy relationship. The manufacturers who back his party keep telling him that the Far East is too competitive for comfort, so he wants his creditors to revalue their currencies or let the dollar slide. If they did, they would stand to lose a fortune on their hoards of bonds, which is one reason why they are resisting. Mr Snow might ask himself who else is going to buy the output of his printing presses, and on what terms — even if his policies foster my quest for the twodollar martini.

Above its station

My railway correspondent, I.K. Gricer, will be pleased to learn that the Waldorf Astoria Hotel still has its own station, somewhere in the basement. It was busy in the days when the hotel's more affluent customers had private railway carriages and, for that matter, owned railways. Now it has been dusted off for the President's benefit, with a train parked at the platform, in case he needs to get out of town in a hurry. One up to the Waldorf. The Plaza has a direct subway line to Goldman Sachs, but that — let us face it — is not the same thing,