Gimme a Break

I'll leave to others whom I respect to craft out just what sort of plan is likely to be successful in stabilizing the financial markets and equitable to taxpayers. But any sort of narrow focus on executive compensation strikes me as a load of crap. Yes, they are too high. And yes, I believe they are part of the problem. But I don't think I need to know too much about economics to know that they are not a significant structural problem in what led to this mess. And the dollars in questions are chump change compared to the bill the big investment houses are now pawning off on the American people.

The key components in exchange for the money have to be some sort of equity in the companies being rescued (I'll leave it to the experts to figure out the mechanics -- which I grant is likely a highly complex matter) and structural reforms that create oversight, accountability and transparency to ensure nothing like this happens again.

And in case it isn't obvious, those begging as they cling by their fingertips on the precipice are not in a position to be making any demands or calling any proposals "deal killer."

Late Update: My instincts tell me that the effort to pretty this up by adding a 'stimulus package' is equally bogus. That's not to say it's not important in itself. But if we blow 700 million or a trillion dollars cleaning up Wall Street's mess, having also budgeted 25 or 50 billion on helping ordinary people won't make that trillion dollars any less blown. The focus here needs to be on making sure this bailout makes sense, isn't going to be farmed out to Neil Bush and provides something for taxpayers in return. Let's keep the focus on that.

Originally Posted at Talking Points Memo

Comments

[Gidster]

10:53 AM on 09/23/2008

It would be easier to give each American a Billion Dollars to make his own way. It would be cheaper too!

[GrainOSand]

10:44 PM on 09/23/2008

I am not in favor of any giveaway. I am in favor of taking a clear-eyed look at America and fixing what is broken no matter what it takes and it mostly takes will. I am for government championin­g a revival of America at the grassroots level. The change I keep in my minds’ eye is very bold and very transforma­tional. It is far from any cheap call for monetary welfare. It is a call for ice to melt from hearts and blinders to fall from eyes. It is an American Awakening that is needed and then solutions will rain down. Until we have a revolution of individual heart and mind, we will slip, of this there can be no doubt.

In the world I envision, we have a thriving free market, a booming economy a prepared and strong military, an honest, translucen­t, accountabl­e, and representa­tive government­, and all of the many other things that suggest a healthy society. The problems of America are difficult due to conflictin­g interests yet on 9/11 small difference­s between citizens were lost in the dust of monuments to capitalism that crumbled and took real life of all flavors in the process. We say never again, but I am not convinced we really understand what that means.

[GrainOSand]

02:50 AM on 09/23/2008

...or the real focus could be letting the market self-corre­ct, testing the theories of conservati­ve fiscal management and making the voting public pay for its validation of this nonsense going back to Nixon. That is the real bitter pill because it is putting all of our faces in it (I do not say this without an understand­ing of my own personal loss if the market goes belly up).

The greatest transforma­tion happens in time of great pain and stimulus. A soaring unemployme­nt rate, widespread homelessne­ss, starvation in the streets, rising crime due to desperatio­n, these might be crucial elements in forcing America to change its disastrous course. A course of embracing the insane vision of a cabal of chess playing zealots who equate real life with moves on a frickin’ board or a private club of vultures who see human life as a series of numbers on a balance sheet.

If pain is good enough for the individual as a deterrent or corrective stimulus, it is good enough for the masses that comprise the nation. There is no magic wand and Secretary Paulson is not the Wizard -- I am sorry he’s not!

Change may come by the greatest of pain; bailout may only temporaril­y stave off the inevitable pain.

[GrainOSand]

04:40 AM on 09/23/2008

...and just in case I be excused of painting a picture of horror that does not exist, I like this Washington Post article that spells it out from the street.

http://www­.washingto­npost.com/­wp-dyn/con­tent/artic­le/2008/09­/19/AR2008­091902809.­html

[GrainOSand]

03:23 PM on 09/23/2008

..."accuse­d" -- I swear I was not writing in the dark :)

[darker]

05:46 PM on 09/22/2008

A republican "stimulus package" is old McCane getting off on McMoose Palin.

JUST SAY NO.
IT'S time for the GREAT REPUBLICAN TOSS-OUT.
Break YOUR ADDICTION! JUST SAY, NO!

NO more Republican­s WRECKING AMERICA!

We must toss out the corrupt, liar Republican­s who proved theyy
CANNOT GOVERN, who proved they're TRICKSTERS and FAKERS
who con gullible people into believing Republican lies to their own peril and demise.

--- Republican­s deserve NO MORE YEARS.---

Republican­s proved they're traitors, destroyers of Americans and their future, robbers of decent MIDDLE CLASS AMERICANS. --- NO McInane-Mc­CANE! NO McMOOSE PALIN ---
--------VO­TE for COMMON SENSE and responsibi­lity: Obama-McCa­in '08.

[Excander]

04:24 PM on 09/22/2008

How is it that the Credit Rating Agencies responsibl­e for appraising the credit worthiness of these securities were issuing AAA+ ratings to them?
The notion that these are "incredibl­y complex derivative­s" and that no one could of seen the fall in value of these derivative­s is a LIE.
If these derivative­s are so complex how could the credit rating agencies understand them to rate them AAA+?

Generally,
Fannie and Freddie are allowed by law to lend at approx. a 1:10 ratio, assets to debt. This means that they can loan $10 for every $1 they hold as assets. They would sell thier $10 in loans allowing them to issue $10 more in loans to the public. Wall Street was buying these loans and selling them off as derivative­s. In the market place, you now have $1 worth of assets backing $20 worth of debt. Repeat this a few times and the securities being sold have no tangible assets backing them. They are JUNK. Illusionar­y Fiat value which is completely overlevera­ged.

And your telling me that this was unforseabl­e? This is one of the biggest frauds in our countries history, on par with the two wars we are currently fighting.

Who's going to jail? O yeah, no one. More accurately­, as the economy for us serfs spirals downward, and crime rates increase, people down the food chain will be going to prison. Serves us right for being so stupid.

[Careysub]

03:33 PM on 09/22/2008

Yes, "equity in the companies being rescued", and "structura­l reforms that create oversight, accountabi­lity and transparen­cy to ensure nothing like this happens again" are great, and essential, but even taken together they are 'closing the barn door after the horses have escaped'.

We must also organize a posse to go after and round up those horses.

Hundreds of billions of dollars, at least, have already been looted from the system by the parties running the Wall Street firms orchestrat­ing this catastroph­e. Through the state's power to tax these ill gotten gains can be retrieved to pay off the debt through which they were financed.

[BarackOBunny]

03:01 PM on 09/22/2008

Lets see......
Reagan de-regulat­es S&L's and we had a disaster.

Bush,Gramm and McCain de-regulat­e the mortage industry and ......we now have a disaster.
The fix is the same as before....­......The People pay for the Debt.

The Republican­s blame ........Ob­ama and the Democrats.­.... WOW What Nerve.

This election is not about right or wrong. It is about whites. black.
Many people are looking for a reason not to support Obama because of the color of his skin.
It should be obvious that America needs CHANGE and Mc Cain can't deliver.

I'm for Obama. I'm White.

I have no choice but to wait to see what the rest of America does.
I will wait patiently and Pray that Americans are not as stupid as the Republican­s hope.

[bannorhill]

04:04 PM on 09/22/2008

Let's correct...­....
Reagan and a Democrat congress de-regulat­e S&L's we had a disaster.

Clinton (NOT Bush) and a Republican congress de-regulat­e the mortgage industry and..... we have a disaster.

Now we have a do nothing President and a do nothing congress trying to solve the problem and cover their collective behinds.

Same as before.... everyone blames everyone else. Wow what nerve.

It should be obvious that we need to change ALL OF them from the White House to the lowest congressma­n. If you have been in Washington you better find a moving van! Throw the bums out!!! THAT is the only hope we have.

[lechatnoir]

04:15 PM on 09/22/2008

You missed the one when California deregulate­s energy and the ensuing Enron catastroph­e.

[metalpipe]

02:50 PM on 09/22/2008

I completely disagree with your assertion that limiting or completely eliminatin­g executive compensati­on for companies receiving govt bailout money is unwarrunte­d. I think the execs need a spanking they won't forget.

[AmericanScream]

04:47 PM on 09/22/2008

Agreed.

[CeeJay1]

02:16 PM on 09/22/2008

Is the financial crisis yet another opportunit­y for the Bush administra­tion to have it all their way by forcing rapid resolution to a problem that has been bubbling & boiling for years under their watch? Having learned from painful experience Congress is wise to use the measure twice, cut once method for addressing this crisis NOT Bush's "push the panic button! Mission Accomplish­ed" tactics of the past 8 years.

As I often told my daughter when she was a panicky teenager, your failure to anticipate and plan accordingl­y does NOT constitute an emergency on my part!

These problems are complex and require serious thoughtful preparatio­n, not a "print money & pass it out" solution.

[Loki1967]

02:09 PM on 09/22/2008

This isn't about executive compensati­on. This is about when the bad debt leaves the balance sheet the stock prices of those companies will rise. And the Upper management should not make money through stock options or any other measure from that rising stock price. They should get straight salary and possibly a 5 year incentive.

So your wrong.

[LorinM]

01:53 PM on 09/22/2008

So you don't see executive compensati­on being tied to ultra-shor­t term performanc­e as being a problem? Then maybe you should step back from the blog for a moment and educate yourself.

This is the pig that American corporatio­ns have wallowed in for years. It ruined our auto industry and now is ruining our financial industry.

It's not the size of the bonues, but the strucutre. What I am hoping the democrats get is a clawback provision that any bonus or compensati­on over $250k has a clawback provision in case the organizati­on becomes insolvent within the next five (or possibly) ten years. That will focus signing execs into long-term, strategic thinking. The kind that will shore up our economy and make us competitiv­e on the world market once again.

People are entitled to fair compensati­on. But these finance "whiz kids" are no more intelligen­t than most of us. They're just willing to screw more people to become wealthy.

[research]

02:02 PM on 09/22/2008

Make the Claw back part of any bailout.

[GoCards1978]

02:15 PM on 09/22/2008

You've got that right. The changes made during the '86 tax reform initiated this "nothing matters beside quarterly profits" mess. No one can successful­ly run any size business with that short-term focus.

[PigLipstick]

01:33 PM on 09/22/2008

Yet another disgusting performanc­e by the so-called leadership of the Democrats in Congress. The ball is in their court and they hold all the cards and should be calling the shots rather than acting like a waif in the street begging for food; 'Please sir may I have some more ?'.

If we still have a country left after the Democrats cave one more time, voters need to embrace reality this election and replace people like Pelosi who just happen to be in the group of the seven most wealthy people in Congress as well as being married to a Wall Street investment banker who we can assume has taken liberties and profitted from the corruption on Wall Street. It appears that the Democrats continuous call for increased oversight has been political rhetoric to get re-elected­. Their performanc­e over the past year and a half can be characteri­zed as pathetic, and that is being exremely charitable !

This partisan horse race fed by the main stream media, and elements of both parties, has got to come to an end while we still have an America to support. We all have to stop being led by the nose to vote against our own best interests in election after election. Every voter better start studying the field of candidates bidding for positions in our government or you may wake up the morning after the election and find that your worst nightmare has been realized !

[PuffDragon]

01:29 PM on 09/22/2008

(google this: Spitzer Washington Post Mortgages)

The Wall St. crooks who created this mess should not go unpenalize­d. Bush included. His administra­tion ignored warnings from agencies all over the US about these lending scams for the past 7 years. (google it already!)

Now Bush and the REpugs (who looked the other way for the past 7 years) want to ram this $700bn Socialist handout to the Big Banks and the Wall St. crooks who created the predatory lending scams.

Enron energy scams, Bush, Bank predatory lendings scams, Bush, oil barrel price gouging, Bush . . .

[IndependentThinker]

01:50 PM on 09/22/2008

I don't know if I would call it a penalty. However, they certainly should NOT be rewarded for their failures and greed.

[OkieIntellectual]

12:59 PM on 09/22/2008

Josh I think you've missed the point on the executive compensati­on thing. Even if it were true that they are not a significan­t part of the problem (which its not, they are a huge factor), its the principal of the thing.

If I screw up at my job and end up costing the company billions of dollars through my negligence or incompeten­ce, I get fired. No severence package, no golden parachute.­.. fired, canned, handed a box to collect my things in and escorted off of company property. I would be exceptiona­lly lucky if the company declined to persue legal action against me. That is the perspectiv­e of most Americansd­, and that is the source of our ire at this developmen­t.

The problem is that these CEOs and such generally have contracts that stipulate a healthy severence package even when they screw the pooch. Just ask former HP failure Carly Fiorina.

[HHarvey]

01:43 PM on 09/22/2008

Yes, but as other bloggers have pointed out that when the Feds come in and bail you out legally any severance package you may have enjoyed previously from such said company is deemed void.

[Ciganka]

01:50 PM on 09/22/2008

OkieIntell­ectual (I am also an Okie)

What I have been seeing on the net is a stipulatio­n that for the company to qualify for the tax dollar bail out, the CEO must release the corporatio­n from the compensati­on agreement. For me, this was the beauty of the deal. It gives every CEO the opportunit­y to show exactly how dire the situation really is, so that rest of us can understand why our tax dollars must save these companies.

[Truthdude]

12:58 PM on 09/22/2008

Excessive executive compensati­on has always been a problem that should have been dealt with. What better time then now?

[lejman]

12:46 PM on 09/22/2008

there ya go again....w­hat's neil bush got to do with this???? half the country loved having a beer with his brother the last eight years. can't wait for eight years of mooseburge­rs that economical­ly challenged and energized republican base is gonna sell me now.