Not every corporate trip is a boondoggle

Some businesses on the dole are getting bashed for enjoying lavish events. Is that bad for taxpayers?

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
Allan Sloan, senior editor at large

NEW YORK (Fortune) -- I've made my career whacking big business. Magazine covers with titles like "Corporate Killers" and "How Wall Street Sold Out America" hang in my office, and my files are filled with pieces I've written about corporate tax dodging, questionable accounting and toxic waste being peddled as spring water to unsuspecting investors. Since joining FORTUNE in mid-2007, I've been complaining about the price we prudent people are paying to bail out the imprudent.

But even by my bash-them-bloody standards, Democrats' attacks on banks that have taken bailout money and continue holding meetings in nice places or sponsoring athletic events are way over the line. Sure, it makes for great sound bites ("You took our money to do what?"). But it's counterproductive, because it will cost taxpayers money and make reviving our financial system more difficult.

To be nonpartisan, the Republicans are no prize either. The worse things get, the more they gloat. They've forgotten that their policies helped bring on this mess, and that we all live in this country and have a stake in its success. Besides, the sickening swoons in our economy and stock market are undermining faith in capitalism, a bedrock Republican principle, and are making government programs like Social Security more popular.

But it's the Democrats' show. It's fine for them to bash the true excesses of bailout recipients, such as deposed Merrill Lynch chief executive John Thain's $1.2 million office redecoration and Citi's $50 million corporate plane purchase (now canceled). But not every trip is a boondoggle, and not all private-plane flights are wasteful self-indulgence.

Take sales meetings. If you have any concept of how business works, you know that you motivate salesmen with aspirational things like plush retreats for top producers. The cost is more than covered by the business the producers generate in trying to qualify for the trips.

Unlike President Obama, who warned, "You can't go take a trip to Las Vegas ... on the taxpayers' dime," I have no problem with Goldman Sachs's plans to hold a conference there. I've just been to Vegas, and it's a mess-housing, casinos, and resort travel are all heading downhill fast. Meeting there produces work for folks like taxi drivers, maids, and cabana guys, the kind of people we're trying to help via economic-stimulus legislation. Having Goldman move its meeting to San Francisco means more jobs in the Bay Area, fewer in Vegas. Does that help us as a country? I don't see how.

Demonizing Goldman for its Vegas plans and Northern Trust for sponsoring a golf tournament is hurting taxpayers rather than safeguarding the money we've lent companies under the Troubled Asset Relief Program. Here's why. The flogging being inflicted on TARP recipients has led a growing number of sound organizations (Goldman, Northern, U.S. Bancorp, M&T Bank, Iberia, and TCF Financial, among others) to talk about repaying their TARP money to avoid being stigmatized.

If sound borrowers repay TARP, it will hurt taxpayers because the government, which has put $225 billion into 488 banks (according to SNL Securities), is getting 5% a year from sound recipients but paying only 2% or so to borrow the money it's lending them. That profit would vanish, leaving nothing to offset losses to sick borrowers like Citi, American International Group, and General Motors.

In a more subtle problem, repayments would undermine TARP's best feature: having sound outfits participate. Because no stigma was attached to TARP, institutions could tap it without fear of setting off a bank run by depositors seeking safety. If lots of institutions repay TARP, the remaining borrowers would be stigmatized. Which could be very bad.

Look. If Democrats want to micro-manage TARP recipients, they should have the government take them over and impose rules. Until then, they should stop acting like children throwing spitballs. It's dangerous out there, folks. Our financial system and economy are on the edge of the abyss, as they were in September. Let's try to act like grownups and stop pointing fingers until the danger passes. After which we can throw all the spitballs we want.

Allan Sloan is FORTUNE magazine's senior editor at large. His e-mail address is To top of page

Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.