13 Comments

Absolutely. Some of them should be going away anyhow. And some congress-critters, big-time party players and lobbyists too…

Ditto Roger and especially Mojo!

The government takes advantage of the public’s short attention span…didn’t the Democrats just pass a $300 billion housing bailout in August? As a belaboured taxpayer, I feel helpless trying to contest the the beauracracy that demands I subsidize affordable housing for all & the underdeveloped foreign governments, who also obtained bank loans that once were financed by the World Bank.

The apparent good news is that the government is buying those companies, with intent to sell when market conditions improve. That’s a lot better than bailing them out.

The bad news is that a significant moral hazard has arisen in the markets as a result of the control of wealth by intermediaries. CEO’s (and traders and fund managers) are rewarded by each other, and on short term measures. The true owners, in most cases, are individuals (often through funds) who have longer term interests at heart.

Does anyone believe that owners would reward failed executives with tens of millions of dollars?

Wall Street has become corrupt as those active “for” the owners really act for themselves.

I’m with you on this one!

But seriously, it’s very hard to come up with legislation that could fairly tie compensation to long-term performance (even deferred compensation). If you could think of a formula that would work without burdening an executive with decisions made after his/her tenure and for which he/she was not responsible I think you would have a lot of attention about now.

Of course, what’s good for the goose is good for the gander. How would we hold politicians accountable for the Fannie Mae appointments, for example? It seems almost Kafkaesque to have Chris Dodd presiding over corporate reform legislation.

Wrt corporate governance, even without any financial crisis we face quarter-by-quarter management in public companies. All of us know that the shareholders’ interests are secondary to management’s interests (I see it every day at work). Hopefully the sympathy for taxpayers won’t overwhelm the need to look after shareholders long-term – and I’m not talking about compensation fpr their current losses. but rather shareholder rights reform.

I think the government had to step in just to avoid a meltdown that would have led to a lot of collateral damage out here in the real world. But I don’t have much sympathy for the CEOs I must admit.

I did hear that since the government is taking on assets in return for an infusion of funds it might not be so costly in the long run. Of course the long run could be several years.

When Nixon and his group got caught, names were put out in black & white, why are all these CEO’s names
not in print ? They are guilty of big time robbery on not only the American Public but even of foreign investors.
The government is now using our tax dollars to save us, or is it to save these buddies of long standing ? They
are entitled to only one motion, the motion of guilt in our courts and forced to pay back all the funds they
have been upsurping while holding their positions. We need to clean up those in government that let these
corporations and their CEO’s mismanage across the board.

Re the CEOs of the failed financial institutions being “lucky to stay out of jail,” can Roger or one of the other people on this thread calling for criminal prosecutions please explain specifically which laws were broken? It’s easy to fall into this kind of populist sabre-rattling mode– both candidates are doing it for sure– but unless you have a specific accusation of laws being broken, it’s kind of silly, and evades the harder questions of what precipitated this crisis.

Its just one more social engineering change codified in the Community Reinvestment Act. The government forces institutions to lend to unworthy borrowers, then the government must accept the consequences of their legislative actions.

Actually, its a very clever way to hide social engineering schemes which would have never seen the light of day if they had been induced via a tax change.

Here’s an idea: Propose to the heads of these institutions that as part of the deal to bail them out, they have to undergo a public flogging.

Anyway, I think I have a new career strategy…I’ll send out letters to corporations and say, “I’ll run your company into the ground for half of what you’re paying your current CEO.”

Cut-rate mismanagement–the new growth industry of the 21st century.

Scott

Actually, Mike Shuster, I agree. I was bloviating and expressing my anger that these CEOs -particularly of Freddie and Fannie, which were quasi-governmental to begin with – are apparently getting golden parachutes 50-70 million range. While I have no idea if they did anything legal, the idea that they are deserving of a reward that would pay the pensions of dozens of people is laughable and, yes, repellent.

It can be tempting to channel your inner Lou Dobbs on matters like this, as Mike Shuster sagely states in the above comment. Populist tut-tutting is a familiar theme at kitchen tables here in the Detroit area when an auto exec walks away with millions, but it’s either a free market capitalist system or it isn’t.

Economics is not my strong suit, but from what I’ve been able to gather from the fallout coverage, government, as usual, played a large role in screwing things up (surprise!). I’ll leave the details and finer points to posters with facts at the ready and go pick up a copy of Thomas Sowell’s “Basic Economics” like I’ve been meaning to for a few years now. No time like the present.

Roger, agreed re: parachutes. This situation does make me wish that I had taken some economics classes in college. I guess my main question is: could this have been avoided if there was a regulation that prohibited home loans for anyone who didn’t have, say, a 15% down payment? I’d imagine that kind of government interference in the market would have been resisted by democrats (who have championed various sorts of subsidized home ownership initiatives) and republicans (who tend to see that kind of regulatory behavior as inherently growth-diminishing, which it probably is).

This would of course have dampened the housing bubble, since the pool of buyers would have been a lot smaller. Which means some people (actually, myself included) would not have been able to make the kinds of money they did from buying/selling houses over the past eight or so years at the right times. But unless I’m wrong, which I may be, it also would have prevented this crisis.

I’d also like to know why Paulson thinks it’s a better idea for taxpayers to buy up all these lousy mortgage loans as opposed to (as was suggested in a WSJ op-ed a few days ago, I forget by whom) address the problem by injecting banks with the same amount of capital and taking part-ownership of them. This would serve the function of injecting a lot of credit into the economy, and as a taxpayer, I’d rather that my 700 billion dollars bought a chunk of the banking industry than of the crappy mortgage industry.