Ya break my heart …

You are wrong that the only difference between these companies and other public companies is a bonus culture. If that were true, some discount provider would have come to Wall Street and cleaned up the way Southwest Airlines did. It has to do instead with the nature of the business. The primary money-making assets of these companies can walk out the door. When they went to IPO themselves, investors should have just laughed and said what assurance do I have that you are not going to take all the profits for your employees? But they didn’t. Caveat emptor.

This is why Buffet only wanted preferred stock. They have to pay his dividend. Even so he demanded constraints on the management team as part of his deal. Common stock investors should have done same, but the time to do that was at the IPO.

Stay away from these stocks. That’s all there is to it. The employees are going to ream the shareholders every time. Don’t kid yourself that that is going to change. No one can make them change.

If not for the government getting involved here, none of us should even care that a bunch of bankers are screwing over a bunch of stockholders who were dumb enough to buy the stock in the first place. Although, from a broader perspective, the same poor governance practices are at work everywhere else in our economy, with less drastic but still unfavorable effects. It ought to change. But there is no practical way for shareholders, however well-intentioned, to really make it happen.

1. Bank ‘A’ overpays talent – and knows it. So does ‘B’ and ‘C’.
2. If Bank ‘A’ were to lower pay in an oligopoly, then it would be in ‘B’ and ‘C’s interest to gobble up the talent, as revenue follows talent.
3. So Bank ‘A’ ceases to exist.
4. Bank ‘B’ and Bank ‘C’ are now losing 1.1 gazzilion, instead of their previous 1.0 gazzilion.
5. Bank ‘B’ and Bank ‘C’ now get more government bailouts, because ‘A’ is out of the picture, and ‘B’ and ‘C’s need is greater.