JPMorgan Chase (JPM) CEO Jamie Dimon and Bank of American (BAC) head Brian Moynihan flew via corporate aircraft to Washington, D.C., Wednesday to testify before a Congressional panel investigating the banking crisis. In previous years, the media would not raise an eyebrow over such a disclosure, but these are not ordinary times.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% Wall Street is now seen as the villain riding on its 21st-century steed, known as the corporate jet, as it pillages the cash-strapped American public. But the furor over corporate aircraft is misplaced.
Jets, made by companies including General Dynamics' (GD) Gulfstream, are indeed as luxurious as people might imagine (I flew in one a couple of years ago). The seats are comfortable with plenty of room to stretch your legs and get work done. Some even have full-sized beds so the globe-trotting executive can arrive at the next business meeting refreshed. Corporations are not snapping them up the way they used to, however. Sales of Gulfstream were down in 2009 as the company cut planned production to 73 large cabin and 24 mid-sized cabin planes from 94 and 30 respectively. Manufacturers are so worried about the negative publicity surrounding their products that it launched a "No Plane No Gain" advertising program last year, featuring legendary golfer Arnold Palmer.
However, amenities aside, there is a sound business reason for big-shot executives to use corporate jets. Oftentimes, it's the most practical way for CEOs to get from one place to another. The aviation system used by most of the public is not always a suitable alternative for these fliers. It can't get them to the places they need to be in a timely manner. As a taxpayer, I would rather have Dimon and Moynihan show up at an important hearing than be stuck at an airport somewhere.
Last month, Citigroup Inc. (C) Chairman Dick Parsons, Morgan Stanley (MS) head John Mack and Goldman Sachs Group Inc.'s (GS) CEO Lloyd Blankfein could not make a meeting with President Obama because their flights were canceled due to inclement weather. Smaller jets are not going to fly in dangerous weather that would ground commercial airliners either, but perhaps the executives would not have been subject to such extensive delays.
To be sure, Wall Street does have many, many things to apologize for and has certainly not appeared remorseful. As The New York Times noted, being a CEO means never having to say you're sorry, even when you really should. An exception was former Time Warner Inc. (TWX) CEO Jerry Levin, who recently stunned Wall Street by apologizing for the disastrous AOL merger. It was late, but nice to hear nonetheless. I am not holding my breath for the financial services industry to be that contrite.
Sadly, the attitude of Wall Street toward the public has not changed much since Congress investigated the cause of the Great Depression. Ferdinand Pecora, the head of the investigation, blasted the banks of the time in terms which seem hauntingly familiar today.
"Bitterly hostile was Wall Street to the enactment of the regulatory legislation." he wrote in his memoirs. "Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the banker's stoutest allies."
Corporate aircraft are a red herring that distracts Congress and the American public from the real issues affecting the country.
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