This is my response to Mr Syu Ying Kwok’s Straits Times forum letter which was published on 27 Sept.
Entitled “Top dollar for star talent“, Mr Syu writes about how the US Treasury Secretary Henry Paulson rescued the financial markets from calamity with a trillion dollar bailout package, and that Singapore is unlikely ever to have a person of Paulson’s calibre serving in the Finance Ministry. Mr Syu says that “Singapore’s small pool of people and Singaporeans’ pragmatic attitude have seen few top earners willing to sacrifice millions in pay to join government service. Not many are like Education Minister Ng Eng Hen and Law Minister K. Shanmugam who took a $2 million to $5 million pay cut to serve us.”
I think that first and foremost, some perspective is need.
The current financial crisis in the US was caused by reckless lending by banks and other financial institutions as a result of poor oversight by the authorities and overly lax regulation.
Low interest rates, monetary inflation, explosive liquidity, as well as aggressive lending practices by financial institutions led to a housing bubble that saw many home owners leverage way beyond their means, using exotic instruments such as interest-only mortgages and adjustable-rate mortgages. Home owners were even encouraged to provide false or misleading information concerning their income in order to get what are known as “liar loans”. It was said during the housing bubble that anyone who could fog a mirror could get a mortgage. All of this was possible because the authorities failed to put a lid on the aggressive, and often fraudulent practices by the banks and financial institutions.
But when the housing bubble burst, many home owners were left under-water. The subprime mortgages, which were repackaged into other debt instruments such as Collateralized Debt Obligations and Securities (CDO’s and CDS’s) and often put into off-balance sheet vehicles known as Special Investment Vehicles (SIVs) came back to haunt the investment firms which used a huge amount of leverage and borrowed money to dabble in them out of sheer greed. A credit crunch and a crisis of confidence ensued which led to the current financial crisis in which the credit markets have dried up, credit spreads are so wide they are literally off the charts, many credit instruments are no longer being priced by the market, and financial institutions are unwilling to lend to each other.
This has created massive redemptions, a huge outflow of capital and liquidity, and a run on banks and other financial institutions, causing one bankruptcy after another, and escalating the need for a bailout package to get the toxic mortgage debt instruments off the hands of financial institutions which are being systematically wrecked by them.
The bottom line is: Mr Paulson may be an extraordinarily capable bureaucrat who has managed to save the day and prevent financial Armageddon, possibly saving the world from a global depression, but the entire problem was created by incompetent government and fraudulent business practices that went unchecked and unpunished. The root of the problem was rampant corporate greed that went beyond all bounds of reason, and which the authorities did nothing to address while the going was still good. For Mr Syu Ying Kwok to put Paulson on a pedestal and use his high net worth (his net worth is more than US$600 million and at one time he earned more than US$34 million a year from Goldman Sachs) as a justification for paying our own local Ministers multi-million dollar salaries is taking things way out of context, in my opinion.
Mr Syu cites two examples of cabinet ministers forgoing larger private sector salaries to become politicians and explains what a rarity they are compared to many others who are unwilling to make such sacrifices. Well, I am pretty sure all our cabinet ministers are each earning more than US Treasury Secretary Henry Paulson, even though none have been called upon to do something as momentous as Paulson has.
Public service, first and foremost, is about dedication to the community and a desire to serve the nation. Continued talk about ministers or MPs having to make financial sacrifices to enter public service only cheapens it.
Besides, the reason why the Government has found it difficult to attract talent men and women into its top brass is not so much because private sector pay has become much too irresistible, but rather the climate of political apathy and fear generated by dictatorial practices and the suppression of dissent over the past 40 years have turned many talented Singaporeans away from politics.
Mr Syu says that “having the right person doing the right job at the right time is critical to the survival of our country“. I agree. But then the mechanism for selecting the right people to enter politics must be sound. Currently, potential ministers are put on a “fast track” and get into Parliament easily by piggy-backing on a more senior minister. These newbies are hardly put through the rigours of the normal political process. How are we sure they are of the right caliber and possess the necessary skills, which include more than just academic qualifications?
Certainly, “(it) will always be a challenge for any government to fill its posts and we should not skimp on paying the right people to do the job,” as Mr Syu says. But when the competence of our current batch of cabinet ministers are frequently called into questioned (take for instance, Mas Selamat’s escape and the litany of security lapses by Home Affairs Ministry), and when working class Singaporeans are continually being disenfrachised by stagnant wages and rising inflation, not to mention job losses to foreigners, it is time to ask whether we are paying our ministers too much to do too little.
Entitled “Top dollar for star talent“, Mr Syu writes about how the US Treasury Secretary Henry Paulson rescued the financial markets from calamity with a trillion dollar bailout package, and that Singapore is unlikely ever to have a person of Paulson’s calibre serving in the Finance Ministry. Mr Syu says that “Singapore’s small pool of people and Singaporeans’ pragmatic attitude have seen few top earners willing to sacrifice millions in pay to join government service. Not many are like Education Minister Ng Eng Hen and Law Minister K. Shanmugam who took a $2 million to $5 million pay cut to serve us.”
I think that first and foremost, some perspective is need.
The current financial crisis in the US was caused by reckless lending by banks and other financial institutions as a result of poor oversight by the authorities and overly lax regulation.
Low interest rates, monetary inflation, explosive liquidity, as well as aggressive lending practices by financial institutions led to a housing bubble that saw many home owners leverage way beyond their means, using exotic instruments such as interest-only mortgages and adjustable-rate mortgages. Home owners were even encouraged to provide false or misleading information concerning their income in order to get what are known as “liar loans”. It was said during the housing bubble that anyone who could fog a mirror could get a mortgage. All of this was possible because the authorities failed to put a lid on the aggressive, and often fraudulent practices by the banks and financial institutions.
But when the housing bubble burst, many home owners were left under-water. The subprime mortgages, which were repackaged into other debt instruments such as Collateralized Debt Obligations and Securities (CDO’s and CDS’s) and often put into off-balance sheet vehicles known as Special Investment Vehicles (SIVs) came back to haunt the investment firms which used a huge amount of leverage and borrowed money to dabble in them out of sheer greed. A credit crunch and a crisis of confidence ensued which led to the current financial crisis in which the credit markets have dried up, credit spreads are so wide they are literally off the charts, many credit instruments are no longer being priced by the market, and financial institutions are unwilling to lend to each other.
This has created massive redemptions, a huge outflow of capital and liquidity, and a run on banks and other financial institutions, causing one bankruptcy after another, and escalating the need for a bailout package to get the toxic mortgage debt instruments off the hands of financial institutions which are being systematically wrecked by them.
The bottom line is: Mr Paulson may be an extraordinarily capable bureaucrat who has managed to save the day and prevent financial Armageddon, possibly saving the world from a global depression, but the entire problem was created by incompetent government and fraudulent business practices that went unchecked and unpunished. The root of the problem was rampant corporate greed that went beyond all bounds of reason, and which the authorities did nothing to address while the going was still good. For Mr Syu Ying Kwok to put Paulson on a pedestal and use his high net worth (his net worth is more than US$600 million and at one time he earned more than US$34 million a year from Goldman Sachs) as a justification for paying our own local Ministers multi-million dollar salaries is taking things way out of context, in my opinion.
Mr Syu cites two examples of cabinet ministers forgoing larger private sector salaries to become politicians and explains what a rarity they are compared to many others who are unwilling to make such sacrifices. Well, I am pretty sure all our cabinet ministers are each earning more than US Treasury Secretary Henry Paulson, even though none have been called upon to do something as momentous as Paulson has.
Public service, first and foremost, is about dedication to the community and a desire to serve the nation. Continued talk about ministers or MPs having to make financial sacrifices to enter public service only cheapens it.
Besides, the reason why the Government has found it difficult to attract talent men and women into its top brass is not so much because private sector pay has become much too irresistible, but rather the climate of political apathy and fear generated by dictatorial practices and the suppression of dissent over the past 40 years have turned many talented Singaporeans away from politics.
Mr Syu says that “having the right person doing the right job at the right time is critical to the survival of our country“. I agree. But then the mechanism for selecting the right people to enter politics must be sound. Currently, potential ministers are put on a “fast track” and get into Parliament easily by piggy-backing on a more senior minister. These newbies are hardly put through the rigours of the normal political process. How are we sure they are of the right caliber and possess the necessary skills, which include more than just academic qualifications?
Certainly, “(it) will always be a challenge for any government to fill its posts and we should not skimp on paying the right people to do the job,” as Mr Syu says. But when the competence of our current batch of cabinet ministers are frequently called into questioned (take for instance, Mas Selamat’s escape and the litany of security lapses by Home Affairs Ministry), and when working class Singaporeans are continually being disenfrachised by stagnant wages and rising inflation, not to mention job losses to foreigners, it is time to ask whether we are paying our ministers too much to do too little.
