Submitted by Rolfe Winkler, CFA, publisher of OptionARMageddon.com
According to the NYT, the administration is considering all kinds of new rules in the wake of the AIG bonus scandal. These include tougher rules for mortgage lenders, new oversight powers for the Fed, and a new exchange/clearinghouse for derivatives trading. Most interesting in terms of intra-governmental politics, however, may be Obama’s proposed restrictions for executive pay (emphasis mine):
The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said…
The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies…
No specific policy proposals have been made yet, so it’s tough to offer firm opinions about the above. Nevertheless, I’d like to chime in with early thoughts on the pay proposals. In a nutshell, I think Obama may be trying to wrest control of the pay debate from pissed off Senators and Congressman. This is a shame because Congress, in all its outrage, might actually have stumbled onto sensible policy…
The administration’s proposed pay restrictions sound to me like a rearguard action. Friday the House passed a bill that would essentially confiscate bonuses paid to all employees making over $250,000 at companies that have received $5 billion+ of bailout money. You know Timmy Geithner and Sheila Bair don’t like the sound of that. Both have made clear that Wall Streeters should get paid whatever amount appropriately incentivizes them to clean up their own mess. How to compromise with angry lawmakers that want stricter restrictions? Perhaps by cutting a wider swath in terms of companies affected while limiting the restrictions at any one company to only its most prominent corpulent felines.
The House proposal, remember, confiscates bonus income (including, potentially, non-cash bonuses!) for everyone making over $250,000. It would only impact a handful of companies in particular, but the total number of affected employees would run well into the thousands.
Contrast that with Obama’s nascent plan, which, according to the NYT, affects executive pay. “Executive” tends to be code for the top guys listed in the proxy: CEO, CFO, General Counsel, COO, those types. To placate House members who want more sweeping restrictions, the administration says it would regulate “all financials” and possibly other publicly-traded companies—not just those receiving the biggest bailouts.
The House’s version is superior for two reasons: It hits the right companies and is appropriately draconian.
First of all, government has no business making compensation decisions on behalf of the private sector, which is what Obama would do by subjecting so many companies to executive pay restrictions. The House bill doesn’t do this. By hitting only those companies that have received over $5 billion of bailout money, it dodges the private sector entirely. How so? The companies that have received the lion’s share of bailout money really aren’t in the private sector any longer. For one thing, they continue to draw breath thanks to TARP, FDIC and Fed life support; they owe their lives to forgiving taxpayers who’ve not yet chosen to pull the plug. For another, the risks on their balance sheets have ostensibly been socialized. For all intents and purposes, this makes their staffers public sector employees. As such they should be subject to whatever pay restrictions taxpayers’ representatives see fit to establish.
And the pay restrictions are so draconian they might accomplish needed banking reforms simply by driving those most responsible for the bank crisis out of the business. At the very least, it would reduce incentives to take outsized risks with vulnerable, systemically-important balance sheets.
In recent years the biggest profits—and the biggest bonuses—were generated by largely dubious activities. To take two examples, investment bankers and propriety traders have been vastly overpaid relative to the value they’ve added.
I-bankers intent on maximizing fee income often abuse their companies’ balance sheets in order drive deal flow. They leverage their leverage. They aren’t paid to care about the quality of their deals, or the risk borne by the boss’s balance sheet. And far more often than not, their deals destroy value anyway. As for prop-traders, they are little more than ultra high-stakes gamblers. It’s beyond foolish that we allow them to make their bets with the same balance sheets responsible for generating the majority of the economy’s credit. Of course some are great traders, but it’s a zero sum game. For every Boaz Weinstein (vintage 2007 and before anyway) there’s a Ralph Cioffi. The industry’s collective balance sheet isn’t strong enough to withstand the failures—counteryparty risk anyone?—so the profits earned by the good ones are largely a mirage.
Trading and i-banking need not disappear of course; they just need to be gone from the commercial banking sector, for which the only remaining charge should be the prudent allocation of credit. If bulge bracket banks face the severe pay restrictions outlined in the House bill, they probably would lose much of their rock star “talent.” Fantastic. I can think of no better indicator of progress on bank reform than to see the industry return to its stolid past.
In the old days, when Wall Street firms were still partnerships, everyone took a hit when times got tough, including top producers. They all understood it was a survival issue for the firm.
Now that survival is not a question (government: “there won’t be any more Lehmans“) these employees have the luxury to retain their sense of entitlement. “But we earned these bonuses.” Nonsense. But for taxpayers, their firms would have gone horizontal months ago. Is $250k not significantly better than $0?
Yves notes “everyone used to complain about welfare queens. What would you call this level of entitlement? They are every bit as much wards of the state as welfare recipients, and fail to recognize it. No wonder the public is furious.”
Perhaps the best indication that the House bill is good policy: bulge bracket bankers are vociferously opposed…
There should be a blanket rule- any depositary institution can not pay its executive officer compensation linked to performance. Naturally they will demand higher base salaries. However, this will be a good thing since it will align their interests and those of the depositors. Executives will be more interested in preserving their jobs (and by the extension the institution they work for) and will be more reluctant to venture into activities that might provide a short jump to earnings but to could compromise the the institution in the long run. I would add this is exactly how bankers were compensated except in the last 20 years or so.
Why does Obama want to become Hoover? Admitedly, being FDR takes more fortitude.
The AIG bonuses were bad enough but the next real big story soon will be the collapse of dollar big time.
US government is already printing money like there is no tomorrow and soon it will kill the US treasuries market and the dollar.
Probably my generation (gen-x) and a couple of younger ones will deal with the consequences of this crisis for the rest of our lives. Well, shit happens.
Obama is not going to be another Hoover or FDR. He is going to be American Gorbachev, the last president of USA.
The reason is simple: This current plutocracy rule cannot possible survive the relentless onslaught of economic depression/collapse: Either it will turn into fascism or USA will break apart into smaller, more governable entities. Or some combination of both. Bigger is not always better, especially if one wants to keep the republic…
I am definitely part of the choir, but I still enjoyed this. Those of us who remember i-banks as partnerships and commercial banks as boring should speak up more–at this point much of the electorate does NOT remember this.
I, like other commenters, see a broad problem with a form of “Stockholm Syndrome” preventing many educated types from dealing appropriately with the issues. Shumer, Obama, and others insist that overpaid jobs are to be preserved for highly ‘talented’ types. Changing this thinking will be a very, very hard slog and sadly might wait until we have scenes reminescent of Jakarta in 1998.
“Both have made clear that Wall Streeters should get paid whatever amount appropriately incentivizes them to clean up their own mess.”
That amount should be obvious and it isn’t $250K. It’s $0K. By allowing Wall Street to transfer the consequences of its actions to the taxpayer, the above statement is rendered moot.
4Best4Worst has selected one of your posts from the last week as one of the best on the internet.
Maximus would like to thank you for all you do to help spread the truth.
you can find the post under this weeks 4 best with the heading
“Nervos belli, pecuniam infinitam”
(The sinews of war, unlimited money
by visiting http://4best4worst.wordpress.com/
You wrote the following:
“The House proposal, remember, confiscates bonus income (including, potentially, non-cash bonuses!) for everyone making over $250,000. It would only impact a handful of companies in particular, but the total number of affected employees would run well into the thousands.
Contrast that with Obama’s nascent plan, which, according to the NYT, affects executive pay. “Executive” tends to be code for the top guys listed in the proxy: CEO, CFO, General Counsel, COO, those types. To placate House members who want more sweeping restrictions, the administration says it would regulate “all financials” and possibly other publicly-traded companies—not just those receiving the biggest bailouts.”
I agree with the gist of your post, but we need to have a frank, open discussion on executive compensation as well.
In the United States, CEOs of large corporations make hundreds of times more than their workers. Contrast this to Japan or even Europe where the multiples are far less.
I know that people are going to harp on that and say “Yeah but American corporations are run better than those in Japan and Europe”, but I am not sold on this claim and that it has to do with the compensation system.
One thing is for sure, the culture of compensation on Wall Street has gotten out of whack and it has permeated the way public pension funds compensate their senior officers, at least here in Canada.
When I see public pension officers reaping millions in bonuses based on bogus benchmarks, my blood boils. I am sure teachers, police officers, firefighters, and other hard working people would love to collect huge bonuses too based on bogus benchmarks or even collect golden parachutes if they fail to perform.
What I am trying to say is that you are right to lambaste Wall Street’s compensation structure which is based on pure greed no matter what the consequences, but don’t be so quick to dismiss Obama’s plan which targets executive pay.
Americans always get edgy when they see government meddling with executive pay but we should have an open and frank discussion on whether the compensation system is way out of whack, not just on Wall Street but also among other Fortune 500 companies.
At the end of the day, I believe you should pay people based on performance, but that performance must be based on solid benchmarks.
If executives are not delivering the goods in an honest way, they shouldn’t be getting any bonuses.
Obama and Shumer sound ever-so-much like Joseph Schumpeter to me:
As it is with singing ability, so it is with the capacity for leadrship, including economic leadership. About a quarter of the population, says Schumpeter, is so deficient in this quality that it is consigned to the most routine aspects of economic life–the clerks and functionaries of the business world. Then comes the next half, the possessors of a normal amount of innovating capacity; here we find “practically all business people,” who rely mainly on the comfortable ruts of experience but are capable of adapting themselves to the normal range of daily challenges. From there, we reach the true elite–“people who are a type characterised by super-normal qualities of intellect and will.”
So history–that is, “history” as a narrative of change and development–is the story of the impact of elites on the inert mass of society. In different social settings the qualities needed to exercise influence will change–military talen has its place in a feudal society, economic talent in a market society–but the driving force of an elite of one kind or another is always there. Thus the echelon of leaders constitutes a special group. As such it assumes its rightful place at the apex of society…
“Here is a class” he writes, “which, by virtue of the selective process of which it is the result, harbors human material of a supernatural quality and hence it is a national asset which it is rational for any social organization to use.”
..the Schumpeterian few are chosen not by blood but by “intellect and will.”
–Robert L. Heilbroner, The Worldly Philosophers
“Obama is not going to be another Hoover or FDR. He is going to be American Gorbachev, the last president of USA.”
Can we hope? The present system, diseased as it is, needs to be scrapped utterly. Ideally, there will be show trials for its most egregious enthusists; an end to our military involvement in the Middle East, Korea, Germany and elsewhere; a new constitution which banishes lobbying and anyone from public service that has been in office at any level of government going back four generations, and the nationalization of banks and the institution of a kind of Five Year Plan aimed at reindustrializing the country. Anything less simply leaves in place the toxic elements which served to infect the past and to destroy a truly unique and noble experiment in politics which at one time had held such great promise.
US ponzi scheme economy is basically collapsing so those bonuses are not that important. Fixing the bonus system might feel good but the whole American financial system is totally rotten.
It is like fixing those 5-year production plans of former USSR in year 1989, ain’t gonna make much difference at this point. The collapse of USA is coming, maybe even this year already.
If you walk down Wall Street, there is a building towards the East end of the Street with no markings, but several floors of one way glass where you can’t see in, but people inside can look out. That would be AIG headquarters today. There are lots of innocent people who work in there, and it is tragic that they live this way. But the building is a metaphor for the state of the financial services industry today. To my friends still in the business – guys, the game is over. Accept that your bonus is that you are employed, stick your head down for a few years, and believe there will be plenty of opportunity when things recover, although it will never be 2005 again. If you find this tough to swallow, walk down Wall Street, and ask yourself if that darkened tower near the end is what you want the future to be.
“Can we hope? The present system, diseased as it is, needs to be scrapped utterly.”
Well, it is like continuing a bad marriage. Sometimes it is better to go separate ways. USA started with mere four million people and now the count is over 300 million.
Functioning democracy has its limits and one of the limits is the candidate’s average election campaign budget. If that budget is way beyond the reach of middle class wanna-be politicians, the society becomes eventually plutocracy, rule of the wealthy.
Obama is clearly one example of this systemic paralysis of a plutocracy; In order to become US president, he sure as hell must have made a lot of Faustian deals left and right in order to finance his campaigning.
Now it really shows: he cannot go after the Wall Street crooks and tries silently to water down any resolutions or restrictions against them. After all, they were the guys who gave a lot of money to him. Even the administration is full of the same bastards who created this mess.
Obama and the American political system have painted themselves into a corner with no exit. Because of that paralysis, the whole society will collapse.
Obama looks weak and ineffective a new Jimmy Carter with the same inability to get the Congress moving in one direction. FDR had executive political experience that Obama lacks, and with the news media finally picking up the ugly public mood the training wheels on Team Obama’s game plan have fallen off.
“First of all, government has no business making compensation decisions on behalf of the private sector, which is what Obama would do by subjecting so many companies to executive pay restrictions….”
If there is no limit set on compensations, the compensations could grow so large that the whole national economy can not sustain them eventhough related individual company may be able to during good time. Greed knows no bounds, as we have seen what happened when there was no oversight or restrictions over compensations in the current financial mess.
BonusGate, is just smoke being used to cover the TARP elephant, which is a hologram fantasy.
Wake up people, keep your on The Trillions, not the bonuses!
Years ago, when Jon Corzine was first running for Senate, I made the mistake of sharing a compensation-related proposal with him, thinking he was a thinking Democrat and not just another Goldman guy playing that side of the street. Sadly, he professed not to understand it, which may have just reflected his own greater worry and focus on getting elected for the first time ever.
I proposed a simple scheme to dampen the increasing disparity in income distribution, without regard for whether a company was publicly held or involved in finance.
Here it is:
offer a substantially lower corporate tax rate for all holding companies that keep the ratio of max pay to min pay within socially useful bounds, say 30:1 or 40:1.
This will create shareholder pressure to keep compensation in line, satisfy the lower-tax crowd, and simultaneously satisfy the social justice crowd.
Maybe we can take this opportunity to have a re-think about compensation in general. Can anyone kindly take the time to poke holes in the simple proposition above, so as to help improve or disqualify it?
Talking about compensation is ridiculous, whether it’s private citizens or elected representatives. Do we want revenge or do we want to fix the system so that this never happens again?
1. We should not have to care if an i-bank fails. No i-bank is systemically important. So reimpose Glass-Steagall already.
2. Credit default swaps are insurance, so regulate them as such. That means reserves. That means imposition of long established concepts like insurable interest.
3. Something has to be done about credit rating agencies. There is a simple rule in economic life: You work for the person who signs your paycheck. As long as CRAs are paid by the originators/distributors of paper, there is unavoidable conflict of interest.
I chime in here to support the idea stated that this whole issue is a huge RED HERRING.
It takes the eye off the ball..the first and primary question: are we going to try to re-inflate the bubble to 2005-08 levels (by paying banks for toxic waste assuming those are the prices that will come back)..or do we want de-valuation of residential real estate to fall to an affordable level in any case..and commercial real estate to a sustainable level?
the assumption in all ‘bailout plans’ 1.0 to 4.0 seem to be based upon the need to re-inflate the bubble as the goal (how could taxpayers break even if those values don’t come back over the maturity of the waste?).
how many cars do we need as a country/people/ how many homes, flat screen TVs etc etc.
what is the goal/end game? controlled deflation or bubble recreation? what is sustainable and realistic?
once that is clear and agreed and policy..then executive pay etc will follow….cart after horse…and less horse play to cover the agenda of wall street and banks…L summers et al…where is the progressive voice in the economic discussion inside this administration??
“3. Something has to be done about credit rating agencies.”
Agreed. By keeping ratings up at AAA levels well past the point in time when they were deserved, they directly contributed to the bubble expanding further than it would have otherwise. And then by suddenly withdrawing those ratings, they hastened the demise of many companies that otherwise may have limped along before recovering. It has to stop.
Very nice argument.
There has been too much attention paid to the criminals as they whine about the unfairness of having their ill gotten gains taken away. Given the damage they have wrought, I think there should be executions for the biggest criminals. Anyone who is found guilty of a certain level of criminality, say of having earned more than $10M while having cost the American public more than $1B, should be at risk for execution. It is not an unreasonable punishment, and might actually send a message. They will have given their lives to help the country they tried so hard to destroy.
Gentlemutt, great idea. Who could be against such an argument except a true criminal? Unfortunately it is now obvious that every part of the government and corporate/financial system is controlled by criminals, so your idea will never be adopted.
There are several good articles in the press, alternative media, and blogs today about how Goldman Sachs (and also I believe CITIBANK) has deeply captured this administration. For a good run down of the characters, Professor Patterson at Dissenting Opinion has a playbook. See http://dissentingjustice.blogspot.com/2009/03/tangled-webs-goldman-sachs-aig-and-feds.html.
For the role of Mark Patterson, Chief of Staff for Secretary Geithner, David Corn at Mother Jones reports on his role on protecting the bonuses at AIG and other banks, despite his conflict of interest as a former lobbyists for Goldman Sachs.
The hedge funds likely to benefit from the Geithner plan are headed by people like Lambert, Friedman, and Rubin (James Rubin, Robert Rubin’s son) were all mentored by Robert Rubin at Goldman Sachs. Who said campaign contributions were not good investments? One million dollars in contributions, 6 billion dollars in tax payer dollars (if you are Goldman Sachs).
Christine Romer, was ultimately left in the awkward position of simply defending all these tax dollars going to AIG, Goldman Sachs, CITI, BoA, etc. and their senior management and traders, by simply throwing up her hands and saying that well, it is outrageous, but we need to do this in order to “get credit flowing again.”
” Anonymous said…
Obama is trying to pull the same shit Shumer did with proposed taxes on hedge fund managers’ carried interests. Congress proposed taxing hedge fund and private equity fund managers compensation for running money at ordinary income rates, even if they disguise it as a partnership interest. Shumer responded by refusing to allow taxing hedge fund managers to be taxed that way unless the tax extends to real estate partnerships, oil and gas partnerships, venture capital partnerships, and every other kind of partnership.
Shumer is trying to kill the legislation by taxing all investment partnerships, so as to burn enough people that it is impossible to tax hedge fund managers and private equity fund managers just like joe plumber at ordinary income tax rates.
Obama is doing the same thing by trying to expand the reach of executive taxes over-broadly in order to kill the legislation. Obama is just like Shumer — an evil catomite to the banksters.
March 22, 2009 11:52 AM”
I am amazed at the quality of comments on this blog.
I have defended Obama before on NC, believing that he has a stealth plan. Now, I’m not too sure.
I clearly see that we are being lead down a very dangerous road…like “filling the Pacific Oceans with basketballs,” this task of making the banks whole; and it is corruption.
The model of the world in my mind is at war. I’m making peace with each faction, the work is slow, but washing Bush’s and Geithner’s feet inwardly frees space for me, and for cool analysis with pen and paper, outwardly.
* * * * *
…Did you hear about the four teenagers in Spain who snapped photos of the Earth with a weather balloon? Amazing photos:
Look, suckers! As I saiz, you had better see to it that I get my millions in AIG bonus, cuz I ain’t worked there a whole year for nothin. Like I saiz, I sold yo subprime shit like hotcakes, I put your trailer trash in mansions and your asses in BMW’s and Lexus. Yo owe me big time. I am your benefactor.
I doesn’t want to hear another word about taxing my bonus, capish? Comprende? Got that, suckers? I want my AIG bonus 100% tax free. Is that clear? Don’t wanna hear no bullshit about changing my contract or nothin, no more. Capish?!
I has been too magnanimous with you, losers. You ain’t deserve my generosity. If you push me, I’ll come over and evict you out of your mansions myself.
I better gets my bonus pronto, suckers!
Signed: An AIG-London top banana whose getting a bit irate at your despicable tightfistedness.
I like the fact that Larry Summers is defending AIG bonuses based on the rule of law: Summers says, “We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.”
Based on that standard Summers should denounce Geithner’s plan for the Fed and FDIC to give subsidies as illegal, given that we are a country of law and given that the Fed and FDIC do not have legal authority to grant subsidies or grants to banks and Geithner’s plan is a disguised subsidy or grant to banks.
Or does Larry really mean he gets to break the law, but no one else does. If that’s what he means, he should expect DOJ, GAO, CBO, TIG, and the FBI to audit and prosecute him and Geithner because Geithner’s plan is flagrantly illegal.
Comrade! STOP THIS INSANITY! Money “Bonuses” for failure is absolutely wrong and should be stopped! That’s just bullshit and everyone knows it!
But Commissions or Bonuses regardless of size “If Earned” has been fone since the beginning of time and should stay that way.
All this compensation crap is exactly just that small crap! The real issues of the day and have to be stopped is Obama’s runaway spending! The U.S. will never be the same if you don’t stop the spending now!
NO MORE BAIL OUTS OF ANY KIND! NO BAD ASSET PURCHASES, NO TALF, NO MORE TARP!
THERE IS ALREADY A HALF TRILLION DOLLARS FROM THESE FUNDS THE GOVERNMENT CAN’T OR WON’T TELL US WERE AND TO WHOM THE MONEY WENT TO!
THAT’S $500,000,000,000.00 GONE AND TO WHOM? WHERE IS YOUR OUTRAGE?
A point that everyone seems to be missing:
Wall Street could not pay such big bonuses, salary and benefit packages UNLESS they were were bringing in enough cash to do so.
IMO, the real question we should be asking is: “are we paying too much for the financial services that Wall Street offers”?
The Wall Street under discussion doesn’t provide financial services.
The Wall Street under discussion is running casinos with a rigged deck that sucks all the air out of the real economy.
“Obama is clearly one example of this systemic paralysis of a plutocracy; In order to become US president, he sure as hell must have made a lot of Faustian deals left and right in order to finance his campaigning.
“Now it really shows: he cannot go after the Wall Street crooks and tries silently to water down any resolutions or restrictions against them. After all, they were the guys who gave a lot of money to him. Even the administration is full of the same bastards who created this mess.”
Would that it were only the financial lobbies that define the problem here. Obama’s harlotry, or that of any other politician, ought not be seen as limited to banker johns alone but to be grasped most comprehensively must include those filth that have a strangle-hold on our foreign policy as well, to wit: AIPAC. It is this kind of ownership, this kind of slavery, that will never end within the auspices of the present system. The whole stucture must come to an end first for any genuine remedy to be effected. However impotent outrage against the financial lobbies may be it is utterly so when it comes to AIPAC. Point me, please, to the first senator committed to resisting passage of the next sabre-rattling resolution brought to the floor against Iran. Fat chance you’ll find even one.
How long do any of you think it will take for MSM to start telling the Yve’s side of this sordid story?
Ever? What do we have to do start our own version of ABC?
Anonymous said “How long do any of you think it will take for MSM to start telling the Yve’s side of this sordid story?”
Yves was referenced in Paul Klugman’s latest blog entry!
The House bill also introduce one strong motivator — peer pressure.
Can you imagine the internal pressure that will bear down on a firm’s shakier divisions, when the prospect of company-wide pay restrictions looms overhead?
No way. Right now there is no incentive to shape up.
“We have tried spending money. We are spending more money than we have ever spent before and it does not work. And I have just none interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job, I want to see people get enough to eat. We have never made good on our promises. . . . I say after eight years of this administration we have just as much unemployment as when we started . . . . And an enormous debt to boot!” –Henry Morgenthau, Jr., FDR’s Treasury Secretary admitting the New Deal’s stimulus programs had failed.
Henry, your problem was that you did not throw enough money at the problem. Never mind that today the USA’s debt to GDP ratio is 3 times that of the 1930’s, and that the current GDP is much, much larger than 80 years ago. We’re going to throw trillions of dollars at the financial problem and then worry about budgets and debts after everyone is back to work and once again living in their own homes. The Government is committed to using every tool at their disposal to succeed where you failed.
We are going for broke!
Dateline 2017: Henry was right; massive debt is not the solution. We’re broke alright.
Stop the bailouts now!
Like I saiz, better get my bonus pronto. Make sure it’s in the mail. Got it, suckers?
Signed: AIG top banana
“For one thing, they continue to draw breath thanks to TARP, FDIC and Fed life support; they owe their lives to forgiving taxpayers who’ve not yet chosen to pull the plug.”
If taxpayers actually had a choice in the matter, the plug would have been pulled already.
Jojo you moron (I almost never post a comment like that but here it is actually justified) the bonuses are being paid out of bailout money, not from money paid voluntarily for services rendered.
The basic problem is that by making some bad loans and leveraging that between 10 and 100 times, the banks are HOPELESSLY bankrupt. The dollar would have to be worth peanuts for that to be paid off, or else generations of debt slavery for Americans.
Well I guess the banks are trying to promote exactly that but fortunately their safety (as in personal safety) is starting to come into question. For reasons of self defense they may start behaving a little better!
But then the banks and their minions will blame Joe 6 pack who took advantage of what the loan broker offered, to get himself the once in a lifetime chance for a house that was somewhat above his station.
Joe 6 pack is fully within his rights to remove those bankers from their homes, by whatever means will work.
MMDonner and Timo make good, ‘big picture’ points that most readers have not responded to.
Timo, the difference between the US and USSR may be that the USSR had pre-defined entities to dissolve into and each had its own history as an independent. We do not. In fact, the ‘united’ states may …bizarre as this sounds…be the default structure and the structure requiring the least energy (entropic). It may take a level of organizing (structured, not mass riots) to get states to leave the union and still function.
MMdonner, it’s not a given that re-inflation attempts will remotely work or even produce something recognizable. To get back to 2005 would require harmonized re-flating of multiple debt bubbles in US, EuroZone, China, Japan, UK and sovereign wealth funds of the oil oligarchs, to a Goldilocks-type size that’s just perfect for the domestic needs of each economy. Too small or too big will lead to a deflating bubble likely quicker than the current one. Such Goldilocks harmonizing is a feat very unlikely.
Purgatory would be living between deflation and failed reflation while Timo’s ‘Barack Gorbachov’s states try to must enough organization to lead or regionalize.
Re: Obama is not going to be another Hoover or FDR. He is going to be American Gorbachev, the last president of USA.”
The facsism comment was right too (no pun intended). The US has a fasicst loving peasantry for as long as I’ve been alive (which is 50+ years), I was one for many years (note that’s fascist NOT Nazi, big difference – probably same end-game regardless tho). When things “get bad” (whatever that is, exactly) the US peasants are going to turn on each other like animals. And only facsism will hold this place together. When Democrats behave like corporate-loving facists INSTEAD of socialists you know something is REALLY messed up. The Democrats deserve everything they get if they can’t even figure-out what side of the fence they’re on (note, I’M not a socialist, and don’t consider myself “an American” anymore, so I could care-less which side “wins”.)
It’s too bad, but this democracy stuff only works with a somewhat educated peasantry OR a peasantry that has a convienent enemy to keep their tiny brains occupied (the Indians and “those people” have worked for the last 200 years).
It won’t be good for the Canadians either, due to proximity.
“You know Timmy Geithner and Sheila Bair don’t like the sound of that. Both have made clear that Wall Streeters should get paid whatever amount appropriately incentivizes them to clean up their own mess.”
Had it been up to them after 9/11 they would have proposed bonuses to the terrorist to dismantle their terrorist networks. After all they are the ones who created them. Can some one out there please tell me where is the moral integrity of the people making these decisions?
Spitzer for treasury secretary. He was shamed by one hooker. I can’t imagine what would be reqired to shame some of these people who still think they are worth 10 million a year.
If you are worth 10 million a year to the US taxpayers, we are going to lock you up in a safe and have you guarded 24/7. That is what you do with something worth that much money, you don’t let it walk around manhattan.
“The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies…”
This is fascism.
A little more on this subject; the writer does a great job on the bipartisan nature of our trainwreck:
My accountant is of the opinion that this retroactice tax on executive bonuses will be an “all or nothing proposition.” Adjusting IRS tax code auditing and processing software would be unworkable and expensive for such a small population of taxpayers. And thus this law will either die or be expanded to a much larger population.
I’m upset about rewarding players destructive financial failure, however the thought of a Congressional lynch mob imposing a retroactive, punitive tax for selected people is a more scary thought.
If you want to fully understand the reason that this administration is attacking and demonizing capitalism, all one needs to do is examine Western European social democracies that Obama seeks to emulate. I beg every American that loves individual liberty and freedom to read: “While Europe Slept” by Bruce Bawer. Primarily focused on the Islamic invasion of Europe, he describes brilliantly the socialism in W. Europe that has crippled democracy. This is exatly what Obama intends for the U.S. Bawer, a New York resident moved to The Netherlands in 1997 and initially thought he’d discovered heaven on earth. Please read this book. We cannot allow this to happen to America.
Yves, whether it’s conducting a rearguard operation or cutting a wider swath, they are all from the same playbook that says, to tax the rich, we hit people with income over $250K/yr.
C’mon, these people are not rich…middle class in some areas and upper middle class in many parts of the country.
Being rich depends on how much asset you have – min. $100 million. How long does it take a couple making $250K/yr?
Don’t tax income.
Asset is about the past, maybe ill gotten gains from the roaring-est two decades in centuries…like backdated options, inheritance, trading in derivatives.
Income, unless you’re talking about retroactive income in general and not just retroactive bonus, is about the future, about taxing earners’ contributions to reviving tomorrow’s economy. But if you must, make it $5 million a year minimum to be qualified as a member of the rich.
No offense, but if you only make $250K, $500K or $1 million, you are not really that rich. The envy of your bourgeois buddies, maybe, but not rich.
So, don’t be fooled by Obama’s cutting a wide swath and burdening further wage earners to pay for the sins of past wrong doers.