→ Bailout
A Shot Across the Bow
| Wed Oct. 21, 2009 3:02 PM PDT
I'm pretty sure that Lefty High Command has instructed us not to refer to the Obama administration's "coordinators" as czars anymore, but anyway, Obama's pay czar has apparently decided to show that he's no potted plant. Kenneth Feinberg announced today that banks that got a big chunk of bailout aid will have to rein in their top managers:
The seven companies that received the most assistance will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year....Total compensation, which includes bonuses, will drop, on average, by about 50 percent.
The companies are Citigroup, Bank of America, the American International Group, General Motors, Chrysler and the financing arms of the two automakers. At the financial products division of A.I.G., the locus of problems that plagued the large insurer and forced its rescue with more than $180 billion in taxpayer assistance, no top executive will receive more than $200,000 in total compensation, a stunning decline from previous years in which the unit produced many wealthy executives and traders.
There's certainly some justice in this. But I'd prefer something less punitive and more useful: a limit on the total bonus pool at these banks. The point isn't just that executives who imploded their companies don't deserve huge paydays — though there's a lot to be said for that — it's that financial companies in trouble should be using their retained earnings to build up their capital base, not to pay their staffs outlandish salaries. Today's action is nicely symbolic, but insisting on a more wide-ranging cultural change that helps the entire system recover would be even better.
Advertisement
Advertisement
Comments
>>limit on the total bonus
Submitted by Anonymous (not verified) on Wed Oct. 21, 2009 3:26 PM PDT.
>>limit on the total bonus pool at these banks>>
No, they just raise base pay. You have to limit total compensation
Total Comp limits are futile
Submitted by The Lounsbury (not verified) on Wed Oct. 21, 2009 4:02 PM PDT.
As a Director of a subsidiary that faces total comp limits (legal), I assure you one can get around those.
Shareholders
Submitted by Boronx on Wed Oct. 21, 2009 3:29 PM PDT.
How about we also make it so shareholders have a say in executive pay. They are the ones paying the bill.
Good Point
Submitted by Vincent Sheffer (not verified) on Wed Oct. 21, 2009 3:58 PM PDT.
Based on the recent past, I suspect nothing will come of this at all. The pay czar is just providing lip service, but as always, that's all it will be. Gets some OK headlines and that is probably all that is even intended.
But, limiting overall compensation is a good idea (I would apply it to all compensation, not just bonuses). I seem to recall the point of all of the bailouts was so that the banks could recapitalize, which would, in turn, get them lending money to the real economy. That didn't happen. And while giving huge bonuses may help the real estate market in Manhattan or the Hamptons, but it is not going to help anything or anyone else prosper.
russian single dating,
Submitted by compiknews on Sun Nov. 8, 2009 2:10 PM PST.
russian single dating, anastasia russian dating, russian love dating, dating in russian, dating single russian woman
Dating... russian dating now this appearance became more and more distributed. Many foreign rich men wish to get married on an common Russian or Ukrainian woman. Why do alien millionaires want to live only with Russian lady? All over the world there are many beautiful ladies, so why do they select only Russians? No one knows answer for this important russian dating and joyful question, but this note can show you a little truth. What do you think about Russian and Ukrainian ladies. Let me tell you. russian dating They are beautiful beautiful, kind, cheerful, funny and clever. Many them are very smart, but they choose a joyful family against their russian dating profession. Most of them wish to get married on a nice person and to raise a kid. They love their parents, they will help everybody who need them. In a dialog with common Russian or Ukrainian lady you will find many good feelings. russian dating Conversation with them is funnyly and simple. russian dating Russian or Ukrainian girl are fond of cooking, their delicatessens are really tasty. russian dating Russian lady will wait you after your work with russian dating your child, she will love you. She will do all flat housecleaning while you are at work, she would take care of your kid; family life with her will be like a fairy. Look russian dating at ordinary American russian dating woman and tell me her good russian dating characterizations. I think that you won't russian dating find them. American women are lazy and rude. They are fond of beer, cigarettes, simple stupid series on the TV and they prefer to discuss them with their girls. It isn't interesting to talk and live with them, they can't grow a kid. That's why really clever men don't want to get russian dating married on them. Russian or Ukrainian ladies are much better then American. So if you want to start a really good family life with really good lady, the best method for you is to find a russian dating woman in Russia or Ukraine. Nowadays there are lots of ways of dating in the web, so prospecting of Russian or Ukrainian girl will be really simple for you. Source: russian dating
Oddly agreed in large part
Submitted by The Lounsbury (not verified) on Wed Oct. 21, 2009 3:59 PM PDT.
I believe your most important point is here: "financial companies in trouble should be using their retained earnings to build up their capital base, not to pay their staffs outlandish salaries."
While "outlandish" is harsh, I believe it an interesting way method to impose 'market discipline' on the actual economic operators (i.e. management ex owners / shareholders), while at the same time preserving key market actors to prevent panic. Simplistically shutting them down would create chaos and more cost.
However, now about a year out from the panic, there seems space to impose economic penalties on the actors that are still on the Gov't dole. That would not have been a good idea in October 08, in the panic (and in a situation where the data was unclear as to real situs, even really near term), but now that is not the case. The immediate panic has subsided - if not all risk aversion - and some hair shirts for near term remuneration is well merited. Additionally, this kind of pain (I like -if correct- that the real caps are on near term comp, cash or otherwise, as it seems to me that if the execs of the firms aided by Gov really are bought in, having little cash but options cashable after 5-10 years will focus their minds on making the US whole.
Will It?
Submitted by alex (not verified) on Wed Oct. 21, 2009 5:43 PM PDT.
The Lounsbury: "having little cash but options cashable after 5-10 years will focus their minds on making the US whole"
Or it will focus their minds on recreating their glory days of the recent past. Look how well that worked out.
Whow,
Submitted by SRW1 (not verified) on Thu Oct. 22, 2009 1:35 AM PDT.
a post without a single insult by The Lounsbury!
Whoudda thunk we'll ever see that day.
So when the federal budget
Submitted by MacGruber on Wed Oct. 21, 2009 4:27 PM PDT.
So when the federal budget gets tight (as it is now), is Obama or one of his czars going to suggest pay decreases for themselves? How about Congress?
For all their bluster about those eeeevil CEOS, Congress and the presidential administration sure don't pitch in and help.
What's the deficit? 1.4 trillion? Yeah, I think that would be some sound fiscal policy.
Ain't gonna happen. Politicians love spending other people's money. Especially on themselves.
Hasn't this horse left the barn?
Submitted by jrw on Wed Oct. 21, 2009 4:34 PM PDT.
So to speak. Now that, as The Lounsbury says, the immediate panic has subsided, it appears as if there's no will, no pressure, and maybe no leverage to put in whatever restrictions should have been in the original bailout package. Whether there should have been restrictions on compensation, leverage ratios, reserve requirements, I don't have the foggiest notion, but the bigger picture seems to be that the opportunity has been lost. The bailouts have taken place. Not much was asked in return. Why would financial institutions agree to rules now? Why would their retainers in Congress ask for them? Public outrage? Please. I'm pretty sure trying to embarrass these folks won't work.
This seems fair. After all,
Submitted by ed (not verified) on Wed Oct. 21, 2009 4:47 PM PDT.
This seems fair. After all, running AIG is much easier and less important than, say, being a stagehand at Carnegie hall.
public relations
Submitted by tpx on Wed Oct. 21, 2009 5:28 PM PDT.
The solution should be higher marginal income tax rates for all incomes, and especially high income taxes for very high income/bonus/gains/compensation. The president cannot impose those and Congress will not, so Nixon-like commands are being used at the companies receiving the dole. It is obviously a public relations disaster when managers of companies receiving unimaginably high amounts of money become wealthy from the public funds used to prevent their companies from collapsing, while limiting pay of these few executives provides the president's adversaries with proof of his socialism. (Of course, the socialism occurred when the banks were bailed out, not when the government imposed some restrictions on pay.) It is difficult to believe these restrictions on a few companies are going to challenge America's finance industry to stop its speculative ways. The failure of the markets should be spurring real changes to the political economy. Until Congress becomes more liberal, especially the Senate, it looks like the economy will be run for the benefit of the finance industry, even if managers have compensation restrictions.
Fake toughness from Team Obama
Submitted by alex (not verified) on Wed Oct. 21, 2009 6:03 PM PDT.
Neither Team Obama nor congress is serious about properly regulating the financial industry. As reasonable as these restrictions are, they're no more than the bare minimum that's needed so that Obama can claim to be "getting tough" and "doing something" without laughing himself silly.
Note that these restrictions only apply to the top seven TARP recipients that haven't repaid their loans. What a joke! Please name a large financial company these days that doesn't receive enormous government largess, whether it be FDIC loan guarantees, access to Fed funds at near zero interest rates, or what have you. TARP is but a piece of this record breaking welfare package.
Shareholders
Submitted by Anonymous (not verified) on Wed Oct. 21, 2009 6:27 PM PDT.
Did you miss the fact that the taxpayers, by virtue of our hundreds of billions invested, are the shareholders, or at least a lot of them?
But Alex T has gone all Galt
Submitted by Anonymous (not verified) on Wed Oct. 21, 2009 6:30 PM PDT.
But Alex T has gone all Galt about this: http://www.marginalrevolution.com/marginalrevolution/2009/10/going-galt....
Alex T: "most of these
Submitted by alex (not T) (not verified) on Wed Oct. 21, 2009 6:57 PM PDT.
Alex T: "most of these executives will quit"
Considering the wonderful job they've done, that's a good thing.
Two-tiered Compensation
Submitted by Neil S (not verified) on Thu Oct. 22, 2009 6:28 AM PDT.
Actually, only the competent ones who can get jobs elsewhere will quit. The less competent will stay. In effect, we are establishing a two-tiered compensation system in which being an executive at one of these seven firms is worth significnatly less than being an executive at competing firms.
We should expect to see new talent avoid these firms and managment at these firms to underperform relative to their peers. I'm sure of course that this was the intended consequence of the action.
Regards,
Neil
If You Have FDIC
Submitted by bob h (not verified) on Thu Oct. 22, 2009 2:33 AM PDT.
insured deposits, you limit total compensation to a certain % of sales.
How Does This Work?
Submitted by Trashhauler (not verified) on Thu Oct. 22, 2009 5:17 PM PDT.
I rather thought the ones who ruined everything had already headed off for the high hills with their ill-gotten gains. Are these 175 people responsible for all the chaos or are they merely the Sons of Martha who were left holding the bag?
So, what happens now? When do they get their pay cut and do they have to endure it next year as well? Did they all get screwed equally or was there some formula rewarding good results? I don't know any of these people, but I've known many business execs. All the ones I've know have been real people, not cardboard cutout bad guys. I was once in a business meeting with several when they got news that their company had just declared Chapter Seven. They didn't even have tickets home. They had the same stunned, what-do-I-do-now look that any laid-off factory worker gets.
Post new comment
MoJo Comments: Send Us Your Feedback
We changed our spam software to better filter comments. Should you encounter any issues, please let us know.
