NationStates Jolt Archive

http://www.courierpress.com/news/2008/oct/06/lehman-brothers-steered-millions-departing-execs-w/?partner=RSS


WASHINGTON — Days from becoming the largest bankruptcy in U.S. history, Lehman Brothers steered millions to departing executives even while pleading for a federal rescue, Congress was told Monday.

As well, executives who feared for their bonuses in the company’s last months were told not to worry, according to documents cited at a congressional hearing. One executive said he was embarrassed when employees suggested that Lehman executives forgo bonuses, and cracked: “I’m not sure what’s in the water.”

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, said the giant investment bank was “a company in which there was no accountability for failure.” Lehman’s collapse set off a panic that within days had President Bush and Treasury Secretary Henry Paulson asking Congress to pass the rescue plan for the financial sector.
[...]

“In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation,” Waxman said.
[...]

Waxman said that in January, Fuld and his board were warned the company’s “liquidity can disappear quite fast.”

Despite that warning, he said, “Mr. Fuld depleted Lehman’s capital reserves by over $10 billion through year-end bonuses, stock buybacks, and dividend payments.”
Etc.

Rep Waxman makes the excellent, and obvious, point that these golden parachutes that big companies have argued are required to get "good CEOs" prevents them from being held accountable for their failure. Why bother keeping a company afloat when you get millions of dollars for just hiring on for a day? Didn't people actually defend this shit, and still defend it?

Yes, there are people who defended and continue to defend this corrupt bullshit. I have no idea why, since not all of them are CEOs. I have seldom heard more cultish arguments than the ones that people who are not and never will be CEOs of major corporations float to justify rewarding these incompetent and crooked bastards for destroying companies.

Would you suggest a salary cap?

Would you suggest a salary cap?
No. I would suggest severely reducing, or tying to performance, or doing away with altogether, the massive packages of additional forms of compensation that CEOs get.

I would also question why an executive is worth more than 200 times what their average employee, who actually does the work of the company, makes. Just before the $700 bailout bill passed, several CEOs of the worst affected corporations made big news of foregoing their bonuses -- one even refused his annual salary. However, that did nothing to their other forms compensation, and most of them still took home many millions of dollars each.

Here's a site that gives an idea of how executive compensation packages break down:
http://www.companypay.com/

Click on the Executive Compensation columns to see the breakdowns for the listed corporations. For example:

http://www.companypay.com/executive/compensation/wal_mart_stores_inc.asp?yr=2005
http://www.companypay.com/executive/compensation/exxon_mobil_corp.asp?yr=2005

As you can see, these people get paid a lot of different ways, and they don't like to total them up at a bottom line. But if we do the addition, the amounts could give you nosebleeds.

I suggest we burn them at stakes. That way, our cattle will cease to die of strange diseases, and we can get back to putting money on credit cards.

I suggest we burn them at stakes. That way, our cattle will cease to die of strange diseases, and we can get back to putting money on credit cards.

A rather strange response from you Leon. Murayvets I will get back to you, I want to do a detailed response to your post and will need to source a few articles I read recently.

I rather enjoy sleeping on a bed made with ample supplies of diamonds woven into the blankets and a fresco made with pure gold pulled from the teeth of mountains above the Artic Circle.

A rather strange response from you Leon. Murayvets I will get back to you, I want to do a detailed response to your post and will need to source a few articles I read recently.
Take your time and don't expect much in return. Sorry. I gave you my opinion because you asked for it, but this is far from my area of expertise, so I can't go very far down that road. The only reason I entered this thread at all was because the OP expressed disbelief that there are people who still believe the CEOs of these failing institutions deserve their massive comp packages, and I share that disbelief.

Would you suggest a salary cap?
I think a bonus system based on actual results would be a good idea. Just how they can justify their bonuses when the company they're in charge of is in the toilet is beyond me.
I thought the word 'bonus' meant getting something extra for doing good.

Just how bad is the banking industry really? Consider that many financial companies are now balking at the $700 Bill bailout they were so desperately clamoring for based on little else than the newly added provision that acceptance of aid means no big fat bonus.

SImple: Tax any non-salary income sources from an employer(bonuses etc) extra for amounts over $25,000.

A rather strange response from you Leon.
Well, let's be serious then for a second.

This would still have happened if the CEOs got little or no pay. This would have happened if they hadn't had incentive packages based on share prices. Punishing them now doesn't undo what happened either.

So yes, it turns out they ultimately didn't deserve this money, and if there is a (legal!) way of getting back some of these bonuses I'm not going to disagree. What I am against are attempts to change laws retrospectively or cook up new ones in order to somehow hurt them.

It's just not a constructive response, just like burning witches wasn't.

Consider that many financial companies are now balking at the $700 Bill bailout they were so desperately clamoring for based on little else than the newly added provision that acceptance of aid means no big fat bonus.
That''s not the main reason.

First of all we don't actually know who will go for it yet, because there is no "it" as of now. And secondly, much more important than any issue regarding compensation is the question how the assets will be valued. If they're going to be bought at something approaching market prices, and banks still had them on their books worth more than that, then going for the plan will actually hurt them, and so they'll avoid doing it since it would make their situation worse.

People really need to get over CEO pay here. As big as these sums sound, compared to the sums involved for the banks on a strategic level, they really don't matter all that much. The article is being sneaky about this too, when it claims that $10 billion were used on "year-end bonuses, stock buybacks, and dividend payments". I can almost guarantee you that the latter two would have made up the biggest chunk of the sum, and the bonuses would have been comparatively small. But if you lump them together, it sounds quite different, doesn't it.

SImple: Tax any non-salary income sources from an employer(bonuses etc) extra for amounts over $25,000.
Are you trying to start a revolution? ;)

Well, let's be serious then for a second.

This would still have happened if the CEOs got little or no pay. This would have happened if they hadn't had incentive packages based on share prices. Punishing them now doesn't undo what happened either.

So yes, it turns out they ultimately didn't deserve this money, and if there is a (legal!) way of getting back some of these bonuses I'm not going to disagree. What I am against are attempts to change laws retrospectively or cook up new ones in order to somehow hurt them.

It's just not a constructive response, just like burning witches wasn't.
To me, there are two different questions:

1) Do CEOs whose companies fail deserve their compensation packages?

2) Is the current system of executive compensation a good or bad thing in general?

My opinion on (1) is no, they do not deserve to sail away from a wrecked company on a multi-million-dollar golden parachute. I think that's pretty much a no-brainer. Failure does not deserve reward.

My opinion on (2) is that no, it is not a good system in general because the amounts of compensation (salary and non-salary, both) seem arbitrarily high, tied in no realistic way to the actual value of what they do. I have listened to many arguments attempting to justify executive compensation packages, but none of them has made any sense to me, and most have appeared to be self-serving.

However, these are two completely different things, and the OP is specifically about executive compensation for CEOs of failed institutions/corporations, not about the system in general.

All of you objecting to bailing out CEOs are anti-American liberal gay commies.

All of you objecting to bailing out CEOs are anti-American liberal gay commies.

*looks around*

And?

Would you suggest a salary cap?
I suggest they don't get multimillion dollar salary packs when they are tossed out in disgrace. I also suggest their pay be fixed in general. The pay of a CEO grows much faster than that of the average worker. Why don't we cap their pay relative to the average wage of the company? Something far less than hundreds of times larger. If the excuse is "if we don't pay all this money, we won't get the best CEOs," then don't fucking hire them. If I demanded a yearly salary of $2mil + bonuses for my services, I wouldn't get hired any god damn where unless I was a CEO, even one who has bombed out several times.

I suggest that their bonus packages be composed entirely of mortgage securities.

I suggest that their bonus packages be composed entirely of mortgage securities.
A big chunk of these bonuses is paid out as options anyways. Bear Stearns or Lehman Brothers executives will have much less money than these figures you hear about - the ones quoted will be the company-internal valuations of the options at the point of them being issued. But until they're actually used, you can't buy much with them.

Fuld for example held a big chunk of his wealth in Lehman options and shares, and is now a much poorer man than he was prior to the crash. That would hurt the theory of the CEO-detractors, if these people were indeed motivated by money.

But they aren't - at some point it becomes more about what you think about the job, whether you enjoy it, what it says about you and so on, rather than how big the bonus is. Several firms probably wouldn't have to pay as much as they do to get the best people...it just looks bad if they pay less than everyone else.

Well... I do consider the CEO compensation system to be unfair and inefficient. It would be better if they actually had to risk their regular compensation if fired for incompetence or failure, not received rewards for failure.

However, it's companies' own business how to pay their executives.

I do object, however, to paying these in bankrupt or bailed out companies, out of budget money. Top executives are not regular Joe the Plumber - they share the responsibility for their companies' failure, and they are not going to lose the means to existence - I see no reason why they should be granted welfare. Getting a lot from the company is fine, from the budget, hard to justify.

Most of his money was in his 10,000,000 lehman shares. He's lost the vast majority of his money. I do think that there is the argument that you could claw back his 2007 bonuses, but I don't think he could pay.

People have been punching him in the face recently too. Face punch! (http://www.businessandmedia.org/articles/2008/20081006150152.aspx)

He's no Angelo Mozillo, that's for certain.

A big chunk of these bonuses is paid out as options anyways. Bear Stearns or Lehman Brothers executives will have much less money than these figures you hear about - the ones quoted will be the company-internal valuations of the options at the point of them being issued. But until they're actually used, you can't buy much with them.

Fuld for example held a big chunk of his wealth in Lehman options and shares, and is now a much poorer man than he was prior to the crash. That would hurt the theory of the CEO-detractors, if these people were indeed motivated by money.

Turning to Mr Fuld, Mr Waxman asked whether it was true he had received $480m in pay and bonuses since 2000 - and whether this figure was fair.

Mr Fuld replied that the correct total was about $300m.
http://news.bbc.co.uk/2/hi/americas/7655178.stm

But I guess you're right - $300m is less than $480m.

Well, let's be serious then for a second.

This would still have happened if the CEOs got little or no pay. This would have happened if they hadn't had incentive packages based on share prices. Punishing them now doesn't undo what happened either.

So yes, it turns out they ultimately didn't deserve this money, and if there is a (legal!) way of getting back some of these bonuses I'm not going to disagree. What I am against are attempts to change laws retrospectively or cook up new ones in order to somehow hurt them.

It's just not a constructive response, just like burning witches wasn't.

Well that's what I thought you were getting at and one I agree with, but your first post (at least to me) seemed out of character.

Who are you and what have you done with the real Leon:p

http://news.bbc.co.uk/2/hi/americas/7655178.stm

But I guess you're right - $300m is less than $480m.
What are you trying to say though? It doesn't say whether that was cash or not, and not only can it be a little cheaper for a firm to pay in options, but the conventional wisdom was also that he'd have a stronger motivation to improve the firm's share price, since his own wealth depended on it.

Anyways, here is a much more reasonable treatment of bankers' pay:
http://www.economist.com/specialreports/displaystory.cfm?story_id=11325420
Make them pay

Bankers' pay is an easy target. Is it the right one?

AS GUESTS filed into dinner at this year's International Financing Review award ceremony in London, an annual shindig for bankers, one table remained empty. “That's IKB's table,” commented one wag, referring to an ill-starred German bank. But the biggest laugh of the evening came later, when the compere said he had heard that the audience had lost a lot of money recently: “The good news is that it was other people's.”

That punchline neatly sums up the critique now being made of how bankers (more specifically, bosses and traders at investment banks) are paid. When times are good, they enjoy massive rewards. A survey published by America's Bureau of Labour Statistics in 2007 showed that average weekly pay in investment banking was nearly ten times the national figure.

But those rewards are not properly aligned with the risks that are being taken. When these risks materialise, the worst that happens is that bankers lose their jobs. The system of compensation gives them an incentive to take excessive risks because the short-term upside is far greater than the long-term downside. Concern has been expressed both outside and inside the industry.

-continued-

Who are you and what have you done with the real Leon:p
Sarcasm doesn't translate well...

Anyways, here is a much more reasonable treatment of bankers' pay:
http://www.economist.com/specialreports/displaystory.cfm?story_id=11325420

People don't want reasonable. People want a scapegoat, and there isn't really a better scapegoat in this whole mess than the CEOs who are seen as having earned millions of dollars for running their companies into the earth. For average people, the idea of being paid while essentially bankrupting your company is difficult to comprehend.

Something else I was reading over the weekend (yes I know I'm a week out) that relates to this thread and provides some food for thought.

http://www.economist.com/opinion/displaystory.cfm?story_id=12304785

Sarcasm doesn't translate well...

Indeed

The conditions on the bail out are nowhere near as harsh as I'd want.

I would want all bonuses paid for the last 2 years paid back as a condition of getting the money. If you've spent the money, then the government forecloses on your mortgage. A bit of justice for once.

Lets look at 2 scenarios. Average guy goes bankrupt. Bank claims his house, anything they can get their hands on. He loses everything.
Rich people go bankrupt through their own stupidity and naked greed. The taxpayer bails them out and they keep their mansion, yacht, etc. Welfare for the rich. The great capitalist system. :mad:

Lets look at 2 scenarios. Average guy goes bankrupt. Bank claims his house, anything they can get their hands on. He loses everything.
Rich people go bankrupt through their own stupidity and naked greed. The taxpayer bails them out and they keep their mansion, yacht, etc. Welfare for the rich. The great capitalist system. :mad:
Actually, if the rich person was to go bankrupt, he'd lose his mansion and everything as well. And he wouldn't get a bail-out.

But in this case it wasn't rich people who went bust, but banks. Those are companies and generally legally distinct from the people who work for them or own their shares.

The conditions on the bail out are nowhere near as harsh as I'd want.

I would want all bonuses paid for the last 2 years paid back as a condition of getting the money. If you've spent the money, then the government forecloses on your mortgage. A bit of justice for once.

Lets look at 2 scenarios. Average guy goes bankrupt. Bank claims his house, anything they can get their hands on. He loses everything.
Rich people go bankrupt through their own stupidity and naked greed. The taxpayer bails them out and they keep their mansion, yacht, etc. Welfare for the rich. The great capitalist system. :mad:

Well actually the rich people haven't gone bankrupt the company has, and with companies there is such a thing as limited liability thus while a rich guy who may have owned part of the company or ran part of it isn't and shouldn't have everything taken from him. The same goes for mum and dad investors should they get their homes and cars taken away from them because they owned part of the company?

It really goes back to the changes in tax law in the early 1980s, late 1970s and the change in pension fund strategies. Before then, something like 80% of stock was owned individually, and those people used to vote. So that kept down executive pay across all sectors, because you would not keep your cushy board job for very long if you handed out these goodies.

Nowadays, most stock is in the IRA/401 and is owned thru mutual funds and other bundles. So 80% of stock is institutionally owned. These people either do not care so much, because it is not their stock, even though they vote. Or they think these pay packages are a good idea - especially in the financial services sector - because they see themselves having a similar role in life at some point in the future with any luck.

This is how last year Goldman Sachs ended up spending 44% of its revenue on compensation. Which is not a very good deal if you are the actual owner.

And while it is true that some people in the banking industry can command very high salaries - because they will walk if they do not get it and go off to private equity or hedgefunds or somesuch - this is not true across the board by any means. (In fact a lot of people are a positive danger around moneys). So there is undoubtedly room to chop a lot. Especially as it is a sector with a lot of fat to cut right now.

The trouble is there is no easy way to correct this. Blanket caps on executive pay are silly. Sometimes a CEO is worth hundreds of millions, because he can turn a massively loss making enterprise into a multi-billion profit machine, so it is actually in the stock owners interest - and these are really the only people who count - to be able to hire him at that price. If you don't allow that then these guys will end up working for privately held companies and publically held companies will be at a disadvantage.

Even doing something like prohibiting institutions from exercising their votes won't work. Because it would be to easy at that point for 'activist' share holders to bugger things up. I actually tend to think that the coming problematic economy is going to sort a lot of this out automatically anyway. Sort of a reset. But no doubt there will be a lot of misguided effort to mess with corporate governance over the next few years. It will be interesting to see what happens. I am thinking that some type of retarded 'stakeholder' model will be adopted because people in Ivory Towers think it is cool. (And these are exactly the type of people who got us into this mess in the first place).

. As big as these sums sound, compared to the sums involved for the banks on a strategic level, they really don't matter all that much. The article is being sneaky about this too, when it claims that $10 billion were used on "year-end bonuses, stock buybacks, and dividend payments". I can almost guarantee you that the latter two would have made up the biggest chunk of the sum, and the bonuses would have been comparatively small. But if you lump them together, it sounds quite different, doesn't it.

How big do you reckon they sound to the ordinary clerks, cleaners, secretaries and accountants who ended up out the door and out of a job? I'm all for rewarding initiative, but theres some serious questions about the sanity of a situation which massively awards success and failure in almost equal amounts.

the reason they sleep well at night is that they realize their insolvency issues are caused by low interest rates causing people to spend and borrow and drop their savings like they were going out of style.

Actually, if the rich person was to go bankrupt, he'd lose his mansion and everything as well. And he wouldn't get a bail-out.

But in this case it wasn't rich people who went bust, but banks. Those are companies and generally legally distinct from the people who work for them or own their shares.
And that is, apparently, a problem, don't you think? Accountability is out the window and replaced by rewards regardless of performance. To me, this is a definitive corrupt system.

It is time to go back to personal accountability. If CEOs are worth that much, let them prove it with their management and business skills. If they personally think they are worth that much, then let them put their money where their mouth is and tie their personal fortunes to the companies they run. Let them rise and fall with their companies, according to their own skills. The CEO of a company that goes bust the way these investment banks just did -- in ways that are directly tied to management decisions -- does not deserve to walk away with a more luxe lifestyle than his secretary. Let their condition reflect the quality of their work.

The current system encourages decisions that risk the company's future. In some cases, it even encourages destroying the company to make the most money in the shortest term. If you are hired to run a company (rather than kill it), then you should not be rewarded for killing it.

And that is, apparently, a problem, don't you think? Accountability is out the window and replaced by rewards regardless of performance. To me, this is a definitive corrupt system.

It is time to go back to personal accountability. If CEOs are worth that much, let them prove it with their management and business skills. If they personally think they are worth that much, then let them put their money where their mouth is and tie their personal fortunes to the companies they run. Let them rise and fall with their companies, according to their own skills. The CEO of a company that goes bust the way these investment banks just did -- in ways that are directly tied to management decisions -- does not deserve to walk away with a more luxe lifestyle than his secretary. Let their condition reflect the quality of their work.

The current system encourages decisions that risk the company's future. In some cases, it even encourages destroying the company to make the most money in the shortest term. If you are hired to run a company (rather than kill it), then you should not be rewarded for killing it.


Its the federal reserves fault for keeping the interest rate too low to maintain liquidity. The amount of defaults is not abnormal for a recession economy the issue is that sense the rates are so low it doesn't make sense to keep money in the bank as inflation out paces interest. Also encourages people to borrow more and buy that next size bigger house.

Its the federal reserves fault for keeping the interest rate too low to maintain liquidity. The amount of defaults is not abnormal for a recession economy the issue is that sense the rates are so low it doesn't make sense to keep money in the bank as inflation out paces interest. Also encourages people to borrow more and buy that next size bigger house.
It's everybody's fault except the executives who formulated the management direction and carried them out with approval of the boards of directors. Those weaseling, finger-pointing, incompetent crooks get to blame a host of others while walking away with hundreds of millions.

I stand by my original statement.

Well actually the rich people haven't gone bankrupt the company has, and with companies there is such a thing as limited liability thus while a rich guy who may have owned part of the company or ran part of it isn't and shouldn't have everything taken from him. The same goes for mum and dad investors should they get their homes and cars taken away from them because they owned part of the company?
Good try to put the mum and dad investor in there. Is this, or is this not welfare for the rich? If it isn't explain how.
In regards to taking stuff of him, my bankrupt statement was just a rant. My earlier part regarding him having to pay back to the company all his bonuses is not unreasonable.

Good try to put the mum and dad investor in there. Is this, or is this not welfare for the rich? If it isn't explain how.
In regards to taking stuff of him, my bankrupt statement was just a rant. My earlier part regarding him having to pay back to the company all his bonuses is not unreasonable.

Well it may be unreasonable depending on what he was paid those bonus' for. It was a good try actually and it is valid, companies have limited liability so owners of the company whether they be the CEO, a uni student, a hedgefund aren't going to lose everything because the company failed they will be able to keep other assets that are separate from the company.

Well it may be unreasonable depending on what he was paid those bonus' for. It was a good try actually and it is valid, companies have limited liability so owners of the company whether they be the CEO, a uni student, a hedgefund aren't going to lose everything because the company failed they will be able to keep other assets that are separate from the company.
Sorting that out is what accountants are for. I say the bigger the reward, the more one should risk to get them. If you're a CEO and your company prospers, then you should prosper too. If your company loses, then you should lose. If your company fails, and that failure is due to your bad management and/or deliberate actions, then you should fail, too, financially.

The executives who pull in these outrageous incomes defend them by claiming that what they do is so all-fired important that it wouldn't be fair to treat their compensation as the same as the salaries of other employees. Well, if that's the case, then I say let that uniqueness affect everything, including their liability. If there is no reason why their pay should be similar to other company employees, then I see no reason why their liability should be the same. More money, more liability. I don't see anything wrong with that.

Sorting that out is what accountants are for. I say the bigger the reward, the more one should risk to get them. If you're a CEO and your company prospers, then you should prosper too. If your company loses, then you should lose. If your company fails, and that failure is due to your bad management and/or deliberate actions, then you should fail, too, financially.

The executives who pull in these outrageous incomes defend them by claiming that what they do is so all-fired important that it wouldn't be fair to treat their compensation as the same as the salaries of other employees. Well, if that's the case, then I say let that uniqueness affect everything, including their liability. If there is no reason why their pay should be similar to other company employees, then I see no reason why their liability should be the same. More money, more liability. I don't see anything wrong with that.

Well in terms of stock that they receive as part of their salary this is where we see them taking on more liability. Even if this was changed then they would simply take what some do now to a larger extent and transfer their assets to another party where they won't be losing them. For example the 10 bedroom mansion an hour out of London, maybe in their wife's name should the government come after them they still can't take as it now belongs to someone else.

Well in terms of stock that they receive as part of their salary this is where we see them taking on more liability.
Only they don't, because regardless of what happens to the company, they are still going to get that money, sooner or later -- even if they have to violate financial regulations to do it. Stock options were originally presented as a way to tie executive compensation to company profitability, but in fact, they are used as just a way to hide income by reclassifying it as non-salary, even though there is no way it will not be delivered to the executive.

Even if this was changed then they would simply take what some do now to a larger extent and transfer their assets to another party where they won't be losing them. For example the 10 bedroom mansion an hour out of London, maybe in their wife's name should the government come after them they still can't take as it now belongs to someone else.
Like I said, that's what accountants are for.

And I don't know why you're talking to me about this at all. I'm not the one who talked about making them pay back money. I'm the one who talked about giving them nothing as a reward for failure.

It's everybody's fault except the executives who formulated the management direction and carried them out with approval of the boards of directors. Those weaseling, finger-pointing, incompetent crooks get to blame a host of others while walking away with hundreds of millions.

I stand by my original statement.

The mortage failure rate is not out of the norm for times of recession. what is below the norm is the savings rate. No savings = Bank fail when they hit a few bumps. How is it the CEO's the savings rate has declined because no one wants to see their money out paced by inflation?
The mortgage failure is the end result of Demand side economics when taken to the extreme. This sort of thing will continue to happen until we raise the interest rate. Its sort of like blaming a business owner for the great depression.

The mortage failure rate is not out of the norm for times of recession. what is below the norm is the savings rate. No savings = Bank fail when they hit a few bumps. How is it the CEO's the savings rate has declined because no one wants to see their money out paced by inflation?
The mortgage failure is the end result of Demand side economics when taken to the extreme. This sort of thing will continue to happen until we raise the interest rate. Its sort of like blaming a business owner for the great depression.
More excuses. Anyone who has paid attention for the last 25 years should know that specific corporate policy decisions led to the extending of bad credit by lending institutions and to financial insitutions failing to maintain adequate reserves. If not for those decisions, which yielded high short term profits, the banks and lenders would be better able to survive inevitable economic downturns. I'm not blaming you for thinking the way you do, because this is the kind of stuff I described earlier as "cultish" thinking -- just a blind acceptance of the justifications offered by the corporate executives themselves. But it's nothing but attempts to deny responsibility for their own companies, for not knowing what they should have known as part of their jobs, for not doing what they were hired to do -- just excuses to justify them getting paid in full despite their failure to do their job.

And that is, apparently, a problem, don't you think? Accountability is out the window and replaced by rewards regardless of performance. To me, this is a definitive corrupt system.

It is time to go back to personal accountability. If CEOs are worth that much, let them prove it with their management and business skills. If they personally think they are worth that much, then let them put their money where their mouth is and tie their personal fortunes to the companies they run. Let them rise and fall with their companies, according to their own skills. The CEO of a company that goes bust the way these investment banks just did -- in ways that are directly tied to management decisions -- does not deserve to walk away with a more luxe lifestyle than his secretary. Let their condition reflect the quality of their work.

The current system encourages decisions that risk the company's future. In some cases, it even encourages destroying the company to make the most money in the shortest term. If you are hired to run a company (rather than kill it), then you should not be rewarded for killing it.
I guess you can see how this plays out when you get a seat at the table that determines CEO compensation. My guess is that you'll have a hard time hiring that top-notch executive. But how about some more simple things first...

Why should it be anyone's business, but the company and shareholders what compensation is awarded?

Once it is awarded, why should the terms be changed when things don't go well?

If CEOs are worth that much, let them prove it with their management and business skills. If they personally think they are worth that much, then let them put their money where their mouth is and tie their personal fortunes to the companies they run.
http://forums.jolt.co.uk/showpost.php?p=14076087&postcount=20

Dick Fuld did have his personal fortune invested in the company he ran. But that didn't stop this from happening. If people make unplanned and unintentional mistakes, then the prospect of getting hurt won't change that.

Fact of the matter is that the CEOs of these failing companies are unequivocally, unambiguously significantly worse off than they were before. All of them.

I have no problem talking about the pay arrangements (not the amounts, because they're irrelevant) of bankers and their bosses. But if I'm going to do that, we must first move beyond the witch hunt that is going on in public discourse right now.

I guess you can see how this plays out when you get a seat at the table that determines CEO compensation. My guess is that you'll have a hard time hiring that top-notch executive. But how about some more simple things first...

Why should it be anyone's business, but the company and shareholders what compensation is awarded?
When did I say it should? What I'm saying is that the system does not actually let the shareholders and boards of directors enforce accountability by handing down penalties, and this is part of what makes the system corrupt. It says CEOs are answerable to these people, but it makes "answerable" a meaningless term, because they stand to lose nothing.

Once it is awarded, why should the terms be changed when things don't go well?
Who said anything about changing the terms? I am advocating building accountability into the terms of a CEO's hire.

So, I never said anything about accountability outside the companies, and I never said anything about terms changing after they have been established. Do you have any questions that actually refer to what I have been saying?

More excuses. Anyone who has paid attention for the last 25 years should know that specific corporate policy decisions led to the extending of bad credit by lending institutions and to financial insitutions failing to maintain adequate reserves. If not for those decisions, which yielded high short term profits, the banks and lenders would be better able to survive inevitable economic downturns. I'm not blaming you for thinking the way you do, because this is the kind of stuff I described earlier as "cultish" thinking -- just a blind acceptance of the justifications offered by the corporate executives themselves. But it's nothing but attempts to deny responsibility for their own companies, for not knowing what they should have known as part of their jobs, for not doing what they were hired to do -- just excuses to justify them getting paid in full despite their failure to do their job.

How many CEO's were in the same position for 25 years ??? I am guessing Zero. average CEO term is what ? 5 years? longest i've seen has been 10 years. Then you got CEO like this guy whole stole a bunch of Money http://en.wikipedia.org/wiki/Franklin_Raines Funny how know one wants to point fingers at the guys we know were stealing money when they were caught.

http://forums.jolt.co.uk/showpost.php?p=14076087&postcount=20

Dick Fuld did have his personal fortune invested in the company he ran. But that didn't stop this from happening. If people make unplanned and unintentional mistakes, then the prospect of getting hurt won't change that.
A lot of wasted typing time could be avoided if people would actually read the arguments they respond to. Kindly reread my posts until you find the bolded part where I highlighted my view that punitive measures should come IF THE COMPANY'S FAILURE IS DUE TO THE CEO'S DELIBERATE ACTIONS. In other words, NOT "unplanned and unintentional mistakes" (as opposed to the planned and intentional mistakes?).

Fact of the matter is that the CEOs of these failing companies are unequivocally, unambiguously significantly worse off than they were before. All of them.
Like I've said elsewhere, boo-hoo for the poor little dears, sobbing buckets of tears, with their fat off-shore accounts. When I meet one of those fuckers offering to supersize me at McD's I'll be sure to express my condolences.

I have no problem talking about the pay arrangements (not the amounts, because they're irrelevant) of bankers and their bosses. But if I'm going to do that, we must first move beyond the witch hunt that is going on in public discourse right now.
Yeah, you keep saying that -- you must be proud of your witchy little bon mot; 'tis the season and all -- but your comments to me indicate that you have not really read what I've been saying, so... get back to me when you do, if you end up still disagreeing with me. I don't defend arguments I never made.

Oh, and fyi, lack of sympathy for some rich screw-up's set-back of the moment does not a witch-hunt make.

How many CEO's were in the same position for 25 years ??? I am guessing Zero. average CEO term is what ? 5 years? longest i've seen has been 10 years. Then you got CEO like this guy whole stole a bunch of Money http://en.wikipedia.org/wiki/Franklin_Raines Funny how know one wants to point fingers at the guys we know were stealing money when they were caught.
Kindly point out to me anything in my statements in this thread that is in anyway referring to or dependent upon the time a CEO spends at any one company. Kindly point out to me anything in my statements in this thread that in any way implies a desire to pick and choose which targets to go after and which to let slide.

You guys may have your pet bugbears on this issue, but you're going to have to raise them as issues on your own, because I'm not going to let you use my statement and me to prop them up on, and I sure as hell am not going to play the role of defender of positions I never took or arguments I never made.

All of you objecting to bailing out CEOs are anti-American liberal gay commies.

Welcome to Nation States General.


Now to the OP. I don't believe that CEO's deserve the compensation they receive, and I especially do no believe that these 'golden parachutes' they have been getting are even close to necessary, especially when the average employee is turned out on his (or her) ear and given nothing for doing all the real work.

I also believe that the money to fix this crisis should be taken in part form the very CEOs who let this happen.

A lot of wasted typing time could be avoided if people would actually read the arguments they respond to. Kindly reread my posts until you find the bolded part where I highlighted my view that punitive measures should come IF THE COMPANY'S FAILURE IS DUE TO THE CEO'S DELIBERATE ACTIONS. In other words, NOT "unplanned and unintentional mistakes" (as opposed to the planned and intentional mistakes?).


Like I've said elsewhere, boo-hoo for the poor little dears, sobbing buckets of tears, with their fat off-shore accounts. When I meet one of those fuckers offering to supersize me at McD's I'll be sure to express my condolences.


Yeah, you keep saying that -- you must be proud of your witchy little bon mot; 'tis the season and all -- but your comments to me indicate that you have not really read what I've been saying, so... get back to me when you do, if you end up still disagreeing with me. I don't defend arguments I never made.

Oh, and fyi, lack of sympathy for some rich screw-up's set-back of the moment does not a witch-hunt make.


61% of all "subprime" loans actually qualified for conventional loans.
source: "As Housing Boomed, Industry Pushed Loans To a Broader Market", Wall Street Journal, December 3, 2007, at A1
First time home owners are normally subprime loans due to lack of credit history. And a lot of the increase in subprime lending had more to do with demographics one generation is passing on retiring and a new generation is seeking the American dream know as home ownership. kinda hard to get passed subprime when you need to have owned a home before to not be subprime isn't it ?

it doesn't matter if you have a sub prime or normal loan you lose your job during a recession your likely going to default on your mortgage.

61% of all "subprime" loans actually qualified for conventional loans.
source: "As Housing Boomed, Industry Pushed Loans To a Broader Market", Wall Street Journal, December 3, 2007, at A1
First time home owners are normally subprime loans due to lack of credit history. And a lot of the increase in subprime lending had more to do with demographics one generation is passing on retiring and a new generation is seeking the American dream know as home ownership. kinda hard to get passed subprime when you need to have owned a home before to not be subprime isn't it ?

it doesn't matter if you have a sub prime or normal loan you lose your job during a recession your likely going to default on your mortgage.
And...?

A lot of wasted typing time could be avoided if people would actually read the arguments they respond to. Kindly reread my posts until you find the bolded part where I highlighted my view that punitive measures should come IF THE COMPANY'S FAILURE IS DUE TO THE CEO'S DELIBERATE ACTIONS. In other words, NOT "unplanned and unintentional mistakes" (as opposed to the planned and intentional mistakes?).
Let me ask you, if a trader working for a firm like this does a bad deal, and loses a few million dollars on it, would you support the bank coming after his house and posessions to try and get the money back? Or is risk-taking simply a part of the banking business, that needs to be managed but not condemned?

Does one really become property of a firm by virtue of working for it, or is one entitled to an existence (financial and otherwise) outside of it?

Like I've said elsewhere, boo-hoo for the poor little dears, sobbing buckets of tears, with their fat off-shore accounts. When I meet one of those fuckers offering to supersize me at McD's I'll be sure to express my condolences.
See the emotion? That's precisely the thing I have no interest in dealing with. What I'm saying is that they did get personally hurt by their companies falling to pieces. Personal accountability is therefore given. As for its extent, that's to be decided by the firm itself.

They didn't do anything to you, and you need to stop pretending that they did. You have no right to be as outraged as you appear to be.

Oh, and fyi, lack of sympathy for some rich screw-up's set-back of the moment does not a witch-hunt make.
Look, this is the time of biggest economic crisis perhaps since WWII ended. There are macroeconomic and social reasons for it, chief among which is the overreliance of many western, and particularly American, consumers on debt which has in part come about because changing global economic realities weren't perceived and reacted to in the US.

It's just plain silly to think that if the CEOs of investment banks had done less to try and maximise shareholder returns, that wouldn't have blown up in everyone's face eventually. While the issue of banker pay bears revisiting at some point in the future, it's really not important right now. And it's certainly not worth raising your blood pressure for. What you're exhibiting isn't a lack of sympathy, it's an overabundance of antipathy.

Did the CEOs do anything to you? No, they didn't. They didn't cause the credit crunch, it's not clear to which extent they could have prevented or even postponed it. They didn't take your money either, but that of the firm's shareholders. Had you been one, you would have been entitled to a say in the process that allocated pay, and if you had been outvoted, you'd now be much more justified in being angry.

At any rate, it seems to be in human nature to look for scapegoats. Initially politicians thought they had them in short sellers, but not only didn't that work out the way they had hoped, it actually may have made things worse. And worst of all, Average Joe doesn't actually understand short selling, which means they're less likely to get all emotional about it. CEOs on the other hand are easy to be angry at. But as therapeutic as that may be to some people, every time you hear someone ranting about CEOs, that's time they could instead have spent on understanding what's going on, or about securing their own future for the years ahead. It's just wasted energy. And that's what I mean by 'witch hunt': I'm not trying to be particularly witty, it's just that the similarities are so glaring as to make the two interchangable.

Let me ask you, if a trader working for a firm like this does a bad deal, and loses a few million dollars on it, would you support the bank coming after his house and posessions to try and get the money back? Or is risk-taking simply a part of the banking business, that needs to be managed but not condemned?
A) What kind of transaction are you talking about?

B) How is a trader's responsibility to the company equal to that of the CEO?

C) What does this have to do with my stated position?

D) Banks should be risk-averse. Banks are not trading firms, after all -- and that brings me back to (A) What are you talking about?

Does one really become property of a firm by virtue of working for it, or is one entitled to an existence (financial and otherwise) outside of it?
Kindly explain what this question has to do with my statements.

See the emotion?
Nope. But I may see you reading things into a statement rather than just dealing with the words on the screen. Maybe.

That's precisely the thing I have no interest in dealing with. What I'm saying is that they did get personally hurt by their companies falling to pieces. Personal accountability is therefore given. As for its extent, that's to be decided by the firm itself.
Uh-huh. And what I'm saying is that I believe the current economic crisis is evidence that the extent of accountability is insufficient.

They didn't do anything to you, and you need to stop pretending that they did. You have no right to be as outraged as you appear to be.
Kindly point out in my statements anything that claims or implies that I have personally and directly been affected. If you cannot, then I will thank you to stop blaming me for arguments/statements I never made. (Or is that your tactic -- if you can't get me to play along, just act like I did anyway?)

Look, this is the time of biggest economic crisis perhaps since WWII ended. There are macroeconomic and social reasons for it, chief among which is the overreliance of many western, and particularly American, consumers on debt which has in part come about because changing global economic realities weren't perceived and reacted to in the US.

It's just plain silly to think that if the CEOs of investment banks had done less to try and maximise shareholder returns, that wouldn't have blown up in everyone's face eventually.
That's your opinion. Other people have differing opinions. I am of the opinion that bad business practices were a contributing factor to the failures of certain large investment banks, triggered by the current economic downturn.

While the issue of banker pay bears revisiting at some point in the future, it's really not important right now.
Excuse me, but it is the topic of this thread. Are you arguing that it is off topic to discuss the topic?

And it's certainly not worth raising your blood pressure for. What you're exhibiting isn't a lack of sympathy, it's an overabundance of antipathy.
Did you buy the Super Medi-Mate computer that lets you monitor the vital signs of everyone you talk to online? No? Then stop making up fantasies about my blood pressure and emotional level. On this detail you really don't know what you are talking about. I am not emotional. Learn to cope with it.

Did the CEOs do anything to you? No, they didn't.
Did I say they did? No, I didn't.

They didn't cause the credit crunch, it's not clear to which extent they could have prevented or even postponed it.
Did I say they caused it? And as to the part that's not clear, you have one opinion and I have another.

They didn't take your money either, but that of the firm's shareholders. Had you been one, you would have been entitled to a say in the process that allocated pay, and if you had been outvoted, you'd now be much more justified in being angry.
You know no more about my money than you do about my blood pressure.

Tell me, are your arguments for CEO compensation based on just as much groundless speculation as your arguments against me?

At any rate, it seems to be in human nature to look for scapegoats.
It also seems to be human nature to set up strawmen -- when the other person does not say something you can or want to attack, you just claim they did and proceed from there. But hey, if Sarah Palin can ignore the actual content of the debate she's in, then why can't we all?

Initially politicians thought they had them in short sellers, but not only didn't that work out the way they had hoped, it actually may have made things worse. And worst of all, Average Joe doesn't actually understand short selling, which means they're less likely to get all emotional about it. CEOs on the other hand are easy to be angry at. But as therapeutic as that may be to some people, every time you hear someone ranting about CEOs, that's time they could instead have spent on understanding what's going on, or about securing their own future for the years ahead. It's just wasted energy. And that's what I mean by 'witch hunt': I'm not trying to be particularly witty, it's just that the similarities are so glaring as to make the two interchangable.
No, not actually interchangeable. See, in a real witch-hunt people get killed for something they did not do. The people being complained of in this instance did do the wrong thing (i.e. they harmed their companies), but nobody is trying to kill them for it. And in the more modern kind of figurative "witch hunt" (the McCarthyist kind), people had their careers, reputations and lives ruined for something they either did not do or had every legal right to do. Nobody is being ruined over the credit crunch, and again, the people who are being complained of actually did do the relatively mild thing it is said they did.

So which of us is the one engaging in over-emotional hyperbole -- the one who keeps saying that CEOs should be held accountable for their failures and not rewarded for destroying their companies, or the one who keeps talking about witch hunts?

Let me ask you, if a trader working for a firm like this does a bad deal, and loses a few million dollars on it, would you support the bank coming after his house and posessions to try and get the money back? Or is risk-taking simply a part of the banking business, that needs to be managed but not condemned?

Well, if the trader tells lies about the trade, then tries to cover it up, tries to fix the mistake with further dodgy trades, finally gets caught, that usually is what happens.

Let us not be naive here. Guys like Dick Fuld aren't pure as the driven snow. Fuld, Mozillo, Thaine, Blankfein, Killinger, et al have consistently misrepresented the capital positions of their firms, have taken internally different views to the values of the securities they were selling to the way they valued them for the public, have presided over insider trading, authorized abuse of the moneys raised via TAF, PDCF &c and generally caused all sorts of mayhem.

It's not as if they are a bunch of well meaning guys who were promoted above their competence threshold. At the very least constantly publicly lying about how well capitalized their firms are should open them to litigation exposure from their shareholders.

I mean, you can't write all of this off as something nobody saw coming. I will grant that the conditions that led to this were partly beyond anyones control, but the actions of the past few years are criminal mismanagement.

And so, in light of last years dash for bonuses on the street, when everyone knew things were FUBAR, I think it is reasonable to demand some type of clawback of the money. At least in the 2007 time frame, because these guys did nothing but tell lies from march 2007 onwards.

I have more respect for a whore that works to feed her family than any of these CEO's that fuck the system for their personal gain.

Well, if the trader tells lies about the trade, then tries to cover it up, tries to fix the mistake with further dodgy trades, finally gets caught, that usually is what happens.

Let us not be naive here. Guys like Dick Fuld aren't pure as the driven snow. Fuld, Mozillo, Thaine, Blankfein, Killinger, et al have consistently misrepresented the capital positions of their firms, have taken internally different views to the values of the securities they were selling to the way they valued them for the public, have presided over insider trading, authorized abuse of the moneys raised via TAF, PDCF &c and generally caused all sorts of mayhem.

It's not as if they are a bunch of well meaning guys who were promoted above their competence threshold. At the very least constantly publicly lying about how well capitalized their firms are should open them to litigation exposure from their shareholders.

I mean, you can't write all of this off as something nobody saw coming. I will grant that the conditions that led to this were partly beyond anyones control, but the actions of the past few years are criminal mismanagement.

And so, in light of last years dash for bonuses on the street, when everyone knew things were FUBAR, I think it is reasonable to demand some type of clawback of the money. At least in the 2007 time frame, because these guys did nothing but tell lies from march 2007 onwards.
Hello, thank you, this. ^^

Yes, it is true that economies go up and down like the tides. It is not the job of a CEO to control a nation's or the world's economy. But it IS their job to understand how economies work and to manage their companies in such a way that they can survive economic vagaries. This, these people failed utterly to do.

A) What kind of transaction are you talking about?
The normal sort - take a position in a market for shares, commodities, debt, you name it. The sorts of things traders get paid to do. If the position doesn't work out, the losses can be significant. If the positions taken become very large, as they did with Lehman Brothers, the losses can become too much.

The question is, would you go after the personal property of the trader to make up for the losses he incurred while on the job?

B) How is a trader's responsibility to the company equal to that of the CEO?
Every member of a company has the same responsibility to it. The only difference is the area in which they're expected to apply themselves.

But in this case, you could certainly make the argument that the positions that brought down Lehman Brothers weren't taken by Dick Fuld. On a micro level, he wouldn't even have been aware of them. People on trading desks took the positions, and surely they must be at least as responsible for this as Fuld.

C) What does this have to do with my stated position?
Everything. You said that if CEOs make decisions that bring down the company, at the end they should leave with no more than the secretary. Does this include going after wealth they already have personally? Dick Fuld isn't getting a parachute, afterall. He never left the company, it just went bust on him.

So for him to get punished to the extent you appear to be advocating, people would have to go after his personal wealth that is independent of his work with Lehman Brothers.

D) Banks should be risk-averse. Banks are not trading firms, after all -- and that brings me back to (A) What are you talking about?
If banks were risk-averse, they wouldn't do business. And many, if not most, banks actually do have trading departments. And there is nothing wrong with that, given that as brokers or clients of brokers they are information hubs that allow them to make pretty good decisions a lot of the time.

But it doesn't even need to be a bank. We could call it a hedge fund instead, if you preferred. We could even take it out of the finance industry and include any situation in any company in which an individual employee must make decisions that could cost the firm a lot of money. Should they be held personally liable for this above and beyond any bonus payments?

Kindly explain what this question has to do with my statements.
I think it's sufficiently clear. If you want Dick Fuld to be serving fries, you want the personal accountability to go so far that a mistake at work wipes out his financial existence outside of it beyond simply losing his income. So I have to ask - does Dick Fuld have the right to wealth that is his regardless of what happens to the company he's been appointed to manage? And if not him, then what about the CFO, or the star prime broker, or the newbie at the trading desk, or the cleaner?

Uh-huh. And what I'm saying is that I believe the current economic crisis is evidence that the extent of accountability is insufficient.
That would require two points to be argued: Firstly, that this crisis would not have happened had the extent been greater, and secondly that accountability can be rightfully extended beyond simply losing an income.

And once you've done that, you have to justify why it should be a matter for anyone but the shareholders of the company.

That's your opinion. Other people have differing opinions. I am of the opinion that bad business practices were a contributing factor to the failures of certain large investment banks, triggered by the current economic downturn.
That's a very different statement. Of course they were contributing factors. But as I keep saying, these factors are simply the bad weld that explodes. The pressure in the system itself wasn't caused by it, and had this particular weld held on, something else would have broken. The idea that the crisis had not happened had Dick Fuld or his peers acted differently is far-fetched - and at the very least it's certainly not a matter of opinion.

Excuse me, but it is the topic of this thread. Are you arguing that it is off topic to discuss the topic?
No, I'm arguing that the public anger going on at CEOs at the moment is a waste of time and energy.

I am not emotional. Learn to cope with it.
I'm very sorry. I just have to get used to your vocabulary, since "those fuckers" and "boo-hoo" aren't usually used unless people want to convey some degree of emotion.

Tell me, are your arguments for CEO compensation based on just as much groundless speculation as your arguments against me?
Actually, I don't think CEO compensation is any of my business. No argument for or against required.

At the very least constantly publicly lying about how well capitalized their firms are should open them to litigation exposure from their shareholders.
And I never said that they shouldn't. (http://forums.jolt.co.uk/showpost.php?p=14075797&postcount=11)

But Muravyets isn't arguing that they broke a law and should be punished accordingly. As far as I can see, he's saying that they made wrong decisions and should be punished as a result, moreso than they are right now.

But it IS their job to understand how economies work and to manage their companies in such a way that they can survive economic vagaries. This, these people failed utterly to do.
And as a result, they've lost their jobs, careers and incomes. But you're saying that's not enough, aren't you?

The normal sort - take a position in a market for shares, commodities, debt, you name it. The sorts of things traders get paid to do. If the position doesn't work out, the losses can be significant. If the positions taken become very large, as they did with Lehman Brothers, the losses can become too much.

The question is, would you go after the personal property of the trader to make up for the losses he incurred while on the job?


Every member of a company has the same responsibility to it. The only difference is the area in which they're expected to apply themselves.

But in this case, you could certainly make the argument that the positions that brought down Lehman Brothers weren't taken by Dick Fuld. On a micro level, he wouldn't even have been aware of them. People on trading desks took the positions, and surely they must be at least as responsible for this as Fuld.


Everything. You said that if CEOs make decisions that bring down the company, at the end they should leave with no more than the secretary. Does this include going after wealth they already have personally? Dick Fuld isn't getting a parachute, afterall. He never left the company, it just went bust on him.

So for him to get punished to the extent you appear to be advocating, people would have to go after his personal wealth that is independent of his work with Lehman Brothers.


If banks were risk-averse, they wouldn't do business. And many, if not most, banks actually do have trading departments. And there is nothing wrong with that, given that as brokers or clients of brokers they are information hubs that allow them to make pretty good decisions a lot of the time.

But it doesn't even need to be a bank. We could call it a hedge fund instead, if you preferred. We could even take it out of the finance industry and include any situation in any company in which an individual employee must make decisions that could cost the firm a lot of money. Should they be held personally liable for this above and beyond any bonus payments?


I think it's sufficiently clear. If you want Dick Fuld to be serving fries, you want the personal accountability to go so far that a mistake at work wipes out his financial existence outside of it beyond simply losing his income. So I have to ask - does Dick Fuld have the right to wealth that is his regardless of what happens to the company he's been appointed to manage? And if not him, then what about the CFO, or the star prime broker, or the newbie at the trading desk, or the cleaner?


That would require two points to be argued: Firstly, that this crisis would not have happened had the extent been greater, and secondly that accountability can be rightfully extended beyond simply losing an income.

And once you've done that, you have to justify why it should be a matter for anyone but the shareholders of the company.


That's a very different statement. Of course they were contributing factors. But as I keep saying, these factors are simply the bad weld that explodes. The pressure in the system itself wasn't caused by it, and had this particular weld held on, something else would have broken. The idea that the crisis had not happened had Dick Fuld or his peers acted differently is far-fetched - and at the very least it's certainly not a matter of opinion.


No, I'm arguing that the public anger going on at CEOs at the moment is a waste of time and energy.


I'm very sorry. I just have to get used to your vocabulary, since "those fuckers" and "boo-hoo" aren't usually used unless people want to convey some degree of emotion.


Actually, I don't think CEO compensation is any of my business. No argument for or against required.


And I never said that they shouldn't. (http://forums.jolt.co.uk/showpost.php?p=14075797&postcount=11)

But Muravyets isn't arguing that they broke a law and should be punished accordingly. As far as I can see, he's saying that they made wrong decisions and should be punished as a result, moreso than they are right now.


And as a result, they've lost their jobs, careers and incomes. But you're saying that's not enough, aren't you?
I'm sorry, but you and I must be just living in different worlds because:

A) Everything in your post responding to me strikes me as such unmitigated horseshit that I can't even pick a point at which to start sorting out the clods of it; and

B) Your assessment of my argument is completely wrong, so much so that either you have not read my words or you cannot comprehend them (and I don't think it's the latter).

I'll just say this: You have not understood my argument, and in my opinion, your kind of point of view is the reason why our economy is so fucked right now.

Oh, and I'll also point out that you continue to (a) try to attribute arguments to me that I never made, (b) misrepresnt what I did say, and (c) try to make me answer nonsensical questions that have nothing to do with my arguments, the topic, or reality. How many times do you need to be told that homie don't play that?

I'll just say this: You have not understood my argument, and in my opinion, your kind of point of view is the reason why our economy is so fucked right now.
That's soft, seriously.

You made two points in this thread:
No. I would suggest severely reducing, or tying to performance, or doing away with altogether, the massive packages of additional forms of compensation that CEOs get.That's a point of view to take, but not the topic of the thread. My personal answer to this is that I don't think it's any of my business, unless it is my money that is being spent. It's the same with sports stars getting huge sums of money to play sports - demand and supply, and even though my demand for Tiger Woods is limited, I don't see why I should be interfering in that market. Much better to just ignore it.

The CEO of a company that goes bust the way these investment banks just did -- in ways that are directly tied to management decisions -- does not deserve to walk away with a more luxe lifestyle than his secretary. Let their condition reflect the quality of their work.And that's the thing I have been arguing with you. Right now, Fuld and co. have a more luxe lifestyle. Unless you merely wanted to express some general moral issue regarding merit when you said "deserve" but didn't advocate any legal action to actually make this happen, I don't see how anything I said was misrepresenting your view or irrelevant to it. For Dick Fuld to be poor now, you have to take wealth he earned by investing his pay, or earned before he was CEO. From there comes the question whether this is in fact valid, and if it is for him, then why not for other employees.

If you didn't mean to start a debate about that, that's fine. But you did say it, and I did respond to what was written. I admit that given the BS I am constantly getting bombarded with whenever the issue of the crisis gets raised in real life makes it difficult not to jump to conclusions. If you think I did, I'm sorry.

But I maintain that the talk about CEO pay at this point is a smoke and mirrors act that is keeping people from thinking about what actually matters. And it's one of the easiest things to use in order to motivate stupid laws and government interferences that are going to come out of all this and that will go far beyond what is necessary or justified. We've seen it with short selling, we've seen it with the bits added into the bail-out package. It's just another attack on the little bit of belief I have left that governments are actually good sometimes, and since we live in democracies, that directly impacts any belief I may have left in my fellow man.

So I'm sorry for any projections, I note your objection to CEO pay and dismiss it as irrelevant with regards to any company you don't actually own shares in, including any investment banks.

I think there is middle ground here. There were some hapless fools in all this, like Cole at New Century. And nobody is going after him, because well, the loss of career income &c. is enough.

But the mishandling of segregated client assets at lehman (which fuld could not possibly have been unaware of) alone is enough to convict the man of more than just incompetence. And so his 'punishment' should be more than just the sack.

It really comes down to whether or not you think Jeffery Skilling (Enron) should be in jail.

And people miss the larger point here. Why is there a credit crunch? Well, lots of reasons, but a big part is nobody trusts anybody else right now. Go pull up the commercial paper market. Non-financials while squeezed are not in crisis. Its financials that can't roll. And that is because nobody is going to lend to them, because it is easier to get your money back if you don't lend it to someone you suspect might go tits up in the next few weeks.

All this mistrust is a product of the litany of lies that have been told by CEOs - who could not possibly have been unaware of the actually problems at their companies - over the past 18 mos. And we are seeing that some of these lies are so huge that a 'well capitalized' company can disappear in the space of a few months. So, basically, no lending.

Now, if these companies are not going to enforce truthfulness from the inside, then it is going to have to be done from the outside. And that means that people who bang on about the capital adequacy of their company, and then have to dash out and raise, say, $10 billion a month later - I'm looking at you Ken Lewis - while slashing the dividend, probably should face some type of punishment beyond just losing their job. That way, people can see that the SEC, and .gov are serious about running a clean transparent marketplace, and confidence can return.

Just letting these guys run off into the sunset won't do that.

The reality is that to unfreeze credit requires punishments at this point, as well as recapitalization of failing entities. Otherwise people aren't going to have any trust going forward. They need to feel its not going to happen again, and they can rely upon what people say.

So this is more than just some academic discussion of what do these guys really deserve. The punishment aspect is probably quite important if you ever want to see a somewhat normally functioning credit market again.

Edit: I just saw your embedded quote NL. I don't think that anyone is actually suggesting changing the law retroactively. If you don't participate in TARP, then there is no compensation limits. I think what it comes down to is that people feel the existing law hasn't been enforced, or selectively enforced. I also think that some people don't realize that a lot of these guys are going to end up in court under existing laws anyway.

That's soft, seriously.

You made two points in this thread:
That's a point of view to take, but not the topic of the thread. My personal answer to this is that I don't think it's any of my business, unless it is my money that is being spent. It's the same with sports stars getting huge sums of money to play sports - demand and supply, and even though my demand for Tiger Woods is limited, I don't see why I should be interfering in that market. Much better to just ignore it.
I was specifically asked for my opinion on that, and I gave it. The part you edited out was where I said I did not wish to pursue that line because it was not my area of expertise. However, that does not mean I think my opinion is wrong, just that I lack the facility in this area to explain it clearly to someone else. So, what you are actually doing here is cherry picking out details from my whole statements so you have something to attack. The problem is that, since this one sentence, isolated from its context, does not represent my actual position or full argument, you have to add your own spin to it in order to make an argument of it. In so doing, you have wandered into strawman territory, and that's why I say to you, leave me out of your little party. I did not make the argument you claim I did, and I will not try to defend an argument I did not make.

Also, I understand your point of view that it's all none of your business perfectly well. You are entitled to your opinion. I think it's foolish, but you are entitled to it if you like it.

And that's the thing I have been arguing with you. Right now, Fuld and co. have a more luxe lifestyle. Unless you merely wanted to express some general moral issue regarding merit when you said "deserve" but didn't advocate any legal action to actually make this happen, I don't see how anything I said was misrepresenting your view or irrelevant to it. For Dick Fuld to be poor now, you have to take wealth he earned by investing his pay, or earned before he was CEO. From there comes the question whether this is in fact valid, and if it is for him, then why not for other employees.
Then entire bolded part is a strawman argument, which you constructed by jumping on a single rhetorical flourish which, like the first statement, you cherry picked out of a much larger and more nuanced statement. I will not respond to it because it is not the argument I was making.

If you didn't mean to start a debate about that, that's fine. But you did say it, and I did respond to what was written. I admit that given the BS I am constantly getting bombarded with whenever the issue of the crisis gets raised in real life makes it difficult not to jump to conclusions. If you think I did, I'm sorry.
You might be able to avoid such errors if you pay attention the WHOLE argument you are reading, instead of playing "gotcha" with individual sentences within it. Rather than accuse others of being over-emotional, maybe you should try calming down yourself and stop snapping at anything that looks even remotely like bait for your pet peeves.

But I maintain that the talk about CEO pay at this point is a smoke and mirrors act that is keeping people from thinking about what actually matters. And it's one of the easiest things to use in order to motivate stupid laws and government interferences that are going to come out of all this and that will go far beyond what is necessary or justified. We've seen it with short selling, we've seen it with the bits added into the bail-out package. It's just another attack on the little bit of belief I have left that governments are actually good sometimes, and since we live in democracies, that directly impacts any belief I may have left in my fellow man.

So I'm sorry for any projections, I note your objection to CEO pay and dismiss it as irrelevant with regards to any company you don't actually own shares in, including any investment banks.
Like I said, I note your objections and reject them on the grounds that attitudes like yours are contributive to the problem.

I think there is middle ground here. There were some hapless fools in all this, like Cole at New Century. And nobody is going after him, because well, the loss of career income &c. is enough.

But the mishandling of segregated client assets at lehman (which fuld could not possibly have been unaware of) alone is enough to convict the man of more than just incompetence. And so his 'punishment' should be more than just the sack.

It really comes down to whether or not you think Jeffery Skilling (Enron) should be in jail.

And people miss the larger point here. Why is there a credit crunch? Well, lots of reasons, but a big part is nobody trusts anybody else right now. Go pull up the commercial paper market. Non-financials while squeezed are not in crisis. Its financials that can't roll. And that is because nobody is going to lend to them, because it is easier to get your money back if you don't lend it to someone you suspect might go tits up in the next few weeks.

All this mistrust is a product of the litany of lies that have been told by CEOs - who could not possibly have been unaware of the actually problems at their companies - over the past 18 mos. And we are seeing that some of these lies are so huge that a 'well capitalized' company can disappear in the space of a few months. So, basically, no lending.

Now, if these companies are not going to enforce truthfulness from the inside, then it is going to have to be done from the outside. And that means that people who bang on about the capital adequacy of their company, and then have to dash out and raise, say, $10 billion a month later - I'm looking at you Ken Lewis - while slashing the dividend, probably should face some type of punishment beyond just losing their job. That way, people can see that the SEC, and .gov are serious about running a clean transparent marketplace, and confidence can return.

Just letting these guys run off into the sunset won't do that.

The reality is that to unfreeze credit requires punishments at this point, as well as recapitalization of failing entities. Otherwise people aren't going to have any trust going forward. They need to feel its not going to happen again, and they can rely upon what people say.

So this is more than just some academic discussion of what do these guys really deserve. The punishment aspect is probably quite important if you ever want to see a somewhat normally functioning credit market again.

Edit: I just saw your embedded quote NL. I don't think that anyone is actually suggesting changing the law retroactively. If you don't participate in TARP, then there is no compensation limits. I think what it comes down to is that people feel the existing law hasn't been enforced, or selectively enforced. I also think that some people don't realize that a lot of these guys are going to end up in court under existing laws anyway.
Thank you, Lacadaemon. You obviously have the facility with this subject that I lack because in this and your other posts you have been expressing my thoughts on this matter precisely, with a clarity I could never reach.

NL, fyi, please take note. THIS is the point of view from which I have been thinking of this issue.

And you are right, I, for one, did not mean -- just as I did not say -- that punitive measures should be applied retroactively.

As for the question of systems of executive compensation in general, that is, in my opinion, an entirely different question, one to be addressed at a later date to fix these problems going forward. And I believe I said that earlier, also.

Did the CEOs do anything to you? No, they didn't. They didn't cause the credit crunch, it's not clear to which extent they could have prevented or even postponed it. They didn't take your money either, but that of the firm's shareholders. Had you been one, you would have been entitled to a say in the process that allocated pay, and if you had been outvoted, you'd now be much more justified in being angry.

Actually, if the companies are bailed out by the government using tax money, doesn't that sort of make every US citizen their involuntary shareholder?

Let me ask you, if a trader working for a firm like this does a bad deal, and loses a few million dollars on it, would you support the bank coming after his house and posessions to try and get the money back? Or is risk-taking simply a part of the banking business, that needs to be managed but not condemned?
CEOs basically say "we need our ridiculously high pay because we are special. Our gifts, our skills can make the difference between our company being a multi billion dollar failure, or a multi billion dollar success. " They can't claim the high wage without also claiming high responsibility.
See the emotion? That's precisely the thing I have no interest in dealing with. What I'm saying is that they did get personally hurt by their companies falling to pieces. Personal accountability is therefore given. As for its extent, that's to be decided by the firm itself.
Yes. The firm decides, until the taxpayer is asked to bail them out. If they want government cash, then it's up to the government (who should be looking at the will of the populace) to punish CEOs accordingly.

It's just plain silly to think that if the CEOs of investment banks had done less to try and maximise shareholder returns, that wouldn't have blown up in everyone's face eventually. While the issue of banker pay bears revisiting at some point in the future, it's really not important right now.
Claiming something is silly doesn't make is so, not to mention it's a weak debating tactic. If the CEOs couldn't spot what was coming, then they don't deserve their wage.
CEOs on the other hand are easy to be angry at. But as therapeutic as that may be to some people, every time you hear someone ranting about CEOs, that's time they could instead have spent on understanding what's going on, or about securing their own future for the years ahead. It's just wasted energy. And that's what I mean by 'witch hunt': I'm not trying to be particularly witty, it's just that the similarities are so glaring as to make the two interchangable.
I understand capitalism perfectly. I jsut think it has glaring problems. I find it wrong that on the same planet someone can work like a dog , work 7 days a week, 12 hours + a day, and get less money in their entire lifetime than 1 CEO gets in a day. That world system is wrong. Thus I am angry at CEOs.

So I'm sorry for any projections, I note your objection to CEO pay and dismiss it as irrelevant with regards to any company you don't actually own shares in, including any investment banks.

So, if I owned shares in some of these investment banks, as part of my 401(k), can I complain about CEO pay?

So, if I owned shares in some of these investment banks, as part of my 401(k), can I complain about CEO pay?

Do they send you the shareholder meeting stuff, or a proxy doodad? Corporate democracy is just like RL democracy, though, you get drowned out by vested interests.

So, if I owned shares in some of these investment banks, as part of my 401(k), can I complain about CEO pay?

Yes, though the likelihood of your 401(k) plan allowing investments in individual stocks is low. And as Lac says, even if you had proxy status the likelihood of your voice being heard is even lower, unless you are Carl Icahn or Kirk Kerkorian, in which case I am disturbed that you are spending so much time on NSG. :wink:

Okay then, let's try it from the top.

And that is, apparently, a problem, don't you think? Accountability is out the window and replaced by rewards regardless of performance. To me, this is a definitive corrupt system.
I'm not sure what definition of corruption you're using, but that's not important.

What is important is the sentence before that. CEO pay is generally split into base salary and bonuses. Those two are split into a cash component and another part, usually share options of some sort. Everything but the base cash salary part are designed to try and get the CEO to do what he is supposed to, maximise shareholder return, by aligning his personal financial interests with those of his shareholders.

So you really can't say that there are rewards regardless of performance. More than in pretty much any other form of work, the pay of a CEO is directly related to how well they do what they're supposed to do.

It is time to go back to personal accountability. If CEOs are worth that much, let them prove it with their management and business skills. If they personally think they are worth that much, then let them put their money where their mouth is and tie their personal fortunes to the companies they run. Let them rise and fall with their companies, according to their own skills.
As was said, that's what happening. A CEO, particularly one who has been with the company for a long time, has a significant amount of his wealth invested in the firm he's leading. If it goes bust, he loses a lot of money, as Dick Fuld did, for example. So therefore you have no problem with the situation as it is right now in this respect, correct?

The CEO of a company that goes bust the way these investment banks just did -- in ways that are directly tied to management decisions -- does not deserve to walk away with a more luxe lifestyle than his secretary. Let their condition reflect the quality of their work.
Duly noted to be a rhetorical flourish.

The current system encourages decisions that risk the company's future.
That's what all bankers get paid for: taking risks and managing them appropriately. Even something as vanilla as a pure retail bank lends out other people's money - managing this situation is what banks do.

So how does the pay system encourage excessive risk taking? The actual money they have is directly tied in with the share price, which means that the answer must lie somewhere there.

In some cases, it even encourages destroying the company to make the most money in the shortest term.
In what case could that possibly be? Even if we were to conclude that it encourages excessive risk taking, surely the encouragement would only go as far as taking the maximum possible load that doesn't break the entire thing, because as soon as it does, the share price falls to zero or close to it, as does the wealth the CEO has tied up in the firm. If the firm goes bankrupt alltogether, he won't even get any outstanding salaries, bonuses or parachutes.

If you are hired to run a company (rather than kill it), then you should not be rewarded for killing it.
Even CEOs who do get parachutes don't get them as a reward for killing the company. They get them as compensation for a premature termination of the agreement, which is a common practice in all sorts of contracts. Conceptually, that's a signficant difference, though I do share your concerns when the termination occurs because of the CEO is doing a crappy job. It is hard for me to believe that shareholders would tolerate such a clause being in a contract they're paying for, but apparently they do.

NL, fyi, please take note. THIS is the point of view from which I have been thinking of this issue.
Then why not a single mention of the issue of fraud or the breaking of laws? Why didn't you say any of the things Lacadaemon said? You could have saved everyone a lot of time and effort.

Actually, if the companies are bailed out by the government using tax money, doesn't that sort of make every US citizen their involuntary shareholder?
No, that would make them their involuntary debtholder. Slight difference. ;)

Of course, if the plan includes taking an equity stake, then yes, it would also make every US taxpayer a (tiny) shareholder. In any future employment contract, I fully expect you to be appropriately outraged at things you disagree with, as is your function in the system.

The unfortunate thing of course is that rather than simply allocating voting rights to the government in proportion to its equity stake, things like pay caps are instead decreed by law.

They can't claim the high wage without also claiming high responsibility.
So where is the cut-off wage at which the responsibility gets large enough to allow the firm to make the employee's personal wealth fair game in paying for mistakes?

Yes. The firm decides, until the taxpayer is asked to bail them out. If they want government cash, then it's up to the government (who should be looking at the will of the populace) to punish CEOs accordingly.
The will of the populace is the worst possible judge of this, just behind the CEOs themselves, who at least have the knowledge of the issue. And to the extent to which punishing CEOs is a populist rather than a technical measure, it's also counterproductive.

Claiming something is silly doesn't make is so, not to mention it's a weak debating tactic. If the CEOs couldn't spot what was coming, then they don't deserve their wage.
And as I said, I actually share your view that they didn't deserve it. That doesn't mean they have to be punished beyond any existing laws they may have broken. And it doesn't make the idea that this crisis was caused by the CEOs any less silly.

If you disagree with it being so, feel free to state a case.

I understand capitalism perfectly. I jsut think it has glaring problems. I find it wrong that on the same planet someone can work like a dog , work 7 days a week, 12 hours + a day, and get less money in their entire lifetime than 1 CEO gets in a day. That world system is wrong. Thus I am angry at CEOs.
And I wouldn't challenge your right to have whatever opinion you want. I just don't think anyone should have an obligation to listen to or share it, which you are creating by making your opinion law.

Even more importantly, you're not being constructive while you're being angry at CEOs. This crisis is a big deal, and I'd think we should be devoting all the energy and wits we have at ensuring both our personal futures, and stabilising and improving the system. Even if we conclude that they payment structures of bankers are one part that needs improving, that doesn't require any change in the absolute amount, for example - and that means your anger wouldn't stop.

So, if I owned shares in some of these investment banks, as part of my 401(k), can I complain about CEO pay?
Yeah, though ideally not to me. And as a tip, you'd probably be better off by targeting the pay structure rather than the amounts. Presumably that would yield better results for your investment.

A CEO, particularly one who has been with the company for a long time, has a significant amount of his wealth invested in the firm he's leading. If it goes bust, he loses a lot of money, as Dick Fuld did, for example.
Yes, but he also gets a golden parachute to compensate for that loss. Other employees don't get them.
Why should a regular wage employee with little contribution to failure get thrown out with barely enough to last until a new job, but a CEO, who is mostly responsible for the failure, get more than his annual pay as "severance" package?
This may be "the way it is", but this way is hard to defend.


So how does the pay system encourage excessive risk taking? The actual money they have is directly tied in with the share price, which means that the answer must lie somewhere there.
Pretty easily.
If a CEO raises company stock 10%, he's considered to do a great job and his pay rises at least 40% as a reward. In any way, much more than 10%. He doesn't just raise the value of his stock, he gets a big bonus. Well, fair enough.
But then, if a CEO, paid money/stock as 30/70, drops the company's stock 50%, his earnings only drop 35% (the stock portion is halved).

Thus, the game for the CEO has a higher payoff for success, but a reduced penalty for failure.

As a result, it's like playing in a casino where all your winnings are quadrupled, while all your losses are halved. With even the most reckless risks, on the average you still win. This clearly promotes very high-risk strategies over moderate-risk ones.


No, that would make them their involuntary debtholder. Slight difference. ;)
Debtholders get paid a guaranteed return on their debt and an interest. In this case, the budget only might eventually get back some of the spent money.

So it rather makes the taxpayers a cross between involuntary shareholders and outright involuntary sponsors.


So where is the cut-off wage at which the responsibility gets large enough to allow the firm to make the employee's personal wealth fair game in paying for mistakes?
Well, for instance, an engineer has civil and criminal responsibility for his mistakes - and that's just in the $100,000-$250,000 pay range. A doctor, at $150,000-$400,000, also bears responsibility for his mistakes. Airport traffic controllers, pilots, just everyone in a position of responsibility bears major liability for their mistakes. Almost everyone.

So it's not a question of cut-off wage, it's a question of executives being exempt from responsibility for their actions, apart from some drop in their stock portfolio.


And it doesn't make the idea that this crisis was caused by the CEOs any less silly.
If a ship runs aground, surely the captain can't possibly have anything to do with it. It's the fault of the idiots who let the shores be so rough. The captain just was taking a calculated risk, because he pockets the cost of fuel saved, but is at worst fired with a big severance package if he fails. [No, not a real captain, of course - unlike CEOs, captains are responsible for negligence beyond their payment.]

Of course, the crisis isn't the fault of any specific CEO - but it's the combined result of their actions, and maybe largely of the system with major rewards for success and laughable penalties for failure. Yes, not only, there are other factors. But it's silly to hold them blameless.

It's not like this crisis is a sudden disaster nobody could foresee. It has been foreseen long ago, the ways to cushion it have been known. It's a result of the choices made by corporate management over the last years.

Yes, but he also gets a golden parachute to compensate for that loss. Other employees don't get them.
Dick Fuld didn't, because his company went bankrupt, and bankrupt firms don't pay out wages.

Why should a regular wage employee with little contribution to failure get thrown out with barely enough to last until a new job, but a CEO, who is mostly responsible for the failure, get more than his annual pay as "severance" package?
If you ask me, he shouldn't. But I also accept that it's not up to me to decide or judge these things, since it's really none of my business.

Thus, the game for the CEO has a higher payoff for success, but a reduced penalty for failure.
Don't you have a lot of assumptions in that model to make it work out to make your point?

Debtholders get paid a guaranteed return on their debt and an interest. In this case, the budget only might eventually get back some of the spent money.
As Lehman's debtholders found out, that guarantee has its limits...

So it rather makes the taxpayers a cross between involuntary shareholders and outright involuntary sponsors.
Well, it ultimately depends on the details. If the bail-out only consists of buying bad RMBS and credit derivatives, then the taxpayer has no direct relationship with the banks they're buying from at all. If they're taking an equity stake, they're obviously shareholders. If it turns out that the banks will have to pay back any losses as some sort of fee in the future, then it may well be more like debt.

But meh, that's all rather beside the point.

So it's not a question of cut-off wage, it's a question of executives being exempt from responsibility for their actions, apart from some drop in their stock portfolio.
Are they though? As was alluded to, there are a host of laws that may have been broken, and a host of lawsuits already underway. Hell, for all I know it may be possible for them to be sued for negligence just as an engineer or doctor might be.

Of course, the crisis isn't the fault of any specific CEO - but it's the combined result of their actions, and maybe largely of the system with major rewards for success and laughable penalties for failure. Yes, not only, there are other factors. But it's silly to hold them blameless.

It's not like this crisis is a sudden disaster nobody could foresee. It has been foreseen long ago, the ways to cushion it have been known. It's a result of the choices made by corporate management over the last years.
I think that's where the big difference lies. I don't hold these guys blameless, though I think it's a waste of time and effort to spend too much time pursuing them.

But I don't blame them for it either. The underlying causes for this are macroeconomic, they could have come out of a first year textbook. The banks are the conduits of money and the channels through which all this debt moved. They were always going to be the first ones to fall victim to it eventually blowing up. Of course they played their part by getting extremely involved in the particulars of how today's real estate/debt bubble blew up. But it's not like better behaviour on their part would have made the situation sustainable in the long run. It's all a bit grey and muddy of course, but any suggestion that this crisis was caused by the banks is just not the whole story. The banks were merely the cause of the shape the bust eventually took.

So you can see where I'm coming from here. Diverting too much attention to CEOs is a waste and too often motivated by anger or ignorance. Banking regulations will have to be fixed, leverage and off-balance sheets effects on it need to be accounted for much better. Perhaps bankers' pay structures need updating (and CEOs aren't at the top of the list there, I'd think, given that risk ultimately comes from the bottom upwards rather than the other way around) but you'd have to say shareholders will be able to manage that themselves.

And that is another thing worth mentioning: when Thain said Merrill Lynch would be "dancing all the way until the music stops", he didn't say it because he thought it would be fun when it came down, he said it because that's what the shareholders wanted to hear. Shareholders have been demanding big dividends, share buybacks and all sorts of other perks year after year. Taking on new debt for an exotic new deal was applauded, more money being taken aside for risk provisions resulted in the price getting smashed. The CEOs were taking these risks on behalf of their shareholders, and I didn't hear anyone telling them to slow down when times were good.

So you really can't say that there are rewards regardless of performance. More than in pretty much any other form of work, the pay of a CEO is directly related to how well they do what they're supposed to do.
Pardon. The only way to measure CEO performance is on what they disclose to the public. As has been shown too often to be the case, something that might show the CEO in a bad light is hidden, until the elephant in the room is so big it can't be hidden anymore. But so often, the CEO sells share and does lots of dodgy things before the crash happnes.
I can point to many examples of failed CEOs who got huge amounts of money even when it was known they were a failure. I don't think you will be able to show me a plumber, an electrician, a civil servant, etc who does his job badly, getting big payouts.

In what case could that possibly be? Even if we were to conclude that it encourages excessive risk taking, surely the encouragement would only go as far as taking the maximum possible load that doesn't break the entire thing, because as soon as it does, the share price falls to zero or close to it, as does the wealth the CEO has tied up in the firm. If the firm goes bankrupt alltogether, he won't even get any outstanding salaries, bonuses or parachutes.
Unless of course he leaves or cashes out before it goes belly up. Enron, World Co, TYCO, OneTel in Aus, ring any bells?

So where is the cut-off wage at which the responsibility gets large enough to allow the firm to make the employee's personal wealth fair game in paying for mistakes?
This has been answered much better than I could, by I think, Vault10. You also didn't answer the question about is this welfare for the rich.

The will of the populace is the worst possible judge of this, just behind the CEOs themselves, who at least have the knowledge of the issue.
So the voters in a democracy are all idiots, and the people who crashed the financial system know better? Was your minor economics and your major a course in arrogance?
And to the extent to which punishing CEOs is a populist rather than a technical measure, it's also counterproductive.
A standard refrain of those wealthy enough to have cool stuff to steal, is that to prevent people from stealing their cool stuff, harsher punishments need to be applied.
If this logic is correct for blue collar crime stealing $100s of dollars worth of stuff, then it must be correct for white collar crime stealing millions of dollars.
The lack of disclosure most of these lending institutions did, is a clear case of fraud. The CEOs of many of these banks should have criminal fraud charges against them.
It should mean the next crop of CEOs will be less likely to lie. That seems a productive change to me and one that matches up with rich person rhetoric. The poor get what they want (the heads of CEOs) and the rich don't have to be hypocrites. Everyone wins.

This is rather apt for this thread:
How the markets really work (http://hk.youtube.com/watch?v=SwRFoxgEcHc)
From 2007 yet still very pertinent. Almost Cassandra-like!

Pardon. The only way to measure CEO performance is on what they disclose to the public. As has been shown too often to be the case, something that might show the CEO in a bad light is hidden, until the elephant in the room is so big it can't be hidden anymore. But so often, the CEO sells share and does lots of dodgy things before the crash happnes.
That's illegal under existing law.

I can point to many examples of failed CEOs who got huge amounts of money even when it was known they were a failure. I don't think you will be able to show me a plumber, an electrician, a civil servant, etc who does his job badly, getting big payouts.
Actually, people get termination payouts, or redundancy pay, all the time.

Unless of course he leaves or cashes out before it goes belly up. Enron, World Co, TYCO, OneTel in Aus, ring any bells?
If he leaves, he forfits future bonuses and salaries, doesn't he? That would make it less ideal than to stay in charge and always just right outside total failure. So I maintain that even the existing, imperfect CEO payment structure doesn't encourage the destruction of the company.

You also didn't answer the question about is this welfare for the rich.
How could it be? "The rich" don't get any of it.

And besides, if I were to present to you a new welfare system for poor people that came with similar strings attached to this bail-out package...something tells me the support I'd find among social democrats would be limited.

It is however an interesting similarity that just occured to me with regards to taxes and welfare. There have been a few posters who told me that welfare isn't a matter of charity, but rather a pragmatic and sensible way to maintain stability. In essence, they were saying that without welfare, angry masses would wreak havoc on everyone and we should be paying a glamorous form of protection money. This is quite similar to that concept, isn't it? Either the taxpayer pays, or he suffers the havoc - let's hope the person I'm thinking of in particular (Abdju) comes back and reads this, so he can perhaps understand where my issues were with his argument.

But I'm rambling.

So the voters in a democracy are all idiots, and the people who crashed the financial system know better? Was your minor economics and your major a course in arrogance?
No, just economics and business management, I'm afraid. I'm just a natural pro at arrogance without any studying.

And yes, from what I've been able to observe over these past few weeks, the vast majority of voters are idiots when it comes to high finance, while the statements of CEOs, while sometimes less than honest, at least conveyed some basic understanding of what was going on.

A standard refrain of those wealthy enough to have cool stuff to steal, is that to prevent people from stealing their cool stuff, harsher punishments need to be applied.
I think the argument is shared by those with less cool, yet no less important, stuff to steal. Unless of course you contend that poor people don't in fact care when their houses get broken into and their stuff taken away.

If this logic is correct for blue collar crime stealing $100s of dollars worth of stuff, then it must be correct for white collar crime stealing millions of dollars.
The lack of disclosure most of these lending institutions did, is a clear case of fraud. The CEOs of many of these banks should have criminal fraud charges against them.
And the investigations are ongoing, believe it or not. But even more amazing is that this will change nothing, and while it may be the right thing to do, it shouldn't even qualify as a footnote in a second-rate newspaper. Instead, it makes headlines.

It should mean the next crop of CEOs will be less likely to lie. That seems a productive change to me and one that matches up with rich person rhetoric. The poor get what they want (the heads of CEOs) and the rich don't have to be hypocrites. Everyone wins.
Is this some sort of allusion to class warfare here? Because I'm quite sure that a very good portion of very angry shareholders calling for investigations into the dealings of the people they had in effect trusted to manage their cash would qualify as "rich" by most standards. Hell, if we wanted to get marxist about it, most of them would be properly defined as "capitalists".

Dick Fuld didn't, because his company went bankrupt, and bankrupt firms don't pay out wages.
Wasn't Lehman reformed under Chapter 11, where they aren't liquidated?

If you ask me, he shouldn't. But I also accept that it's not up to me to decide or judge these things, since it's really none of my business.
Not up to you to decide, sure. But are you forbidden to have an opinion based on that? Especially since it's also your tax money.

Don't you have a lot of assumptions in that model to make it work out to make your point?
Not really.
Good results, i.e. increasing company's value, reward the CEO proportionally more than they reward the company - fact (otherwise there wouldn't be any appreciable income growth for CEOs). And this part is fair, bonus paid for good work is always an increase in proportion paid, not just figures.
Company's collapse hurts the CEO less than it hurts the company - also fact. A CEO, at any case, won't have 100% of his money in company stock, 30/70 seems like the average, that's without trading the stock.

The result is that winnings are multiplied, losses are reduced.



Are they though? As was alluded to, there are a host of laws that may have been broken, and a host of lawsuits already underway. Hell, for all I know it may be possible for them to be sued for negligence just as an engineer or doctor might be.
We'll see. If those responsible for negligence actually end up sued to large amounts and those responsible for fraud in jails or on probation, and most of them leave the big business scene for a while, then we know that CEO's job indeed involves fair responsibility. If in a couple years we find them suffering no loss and running the big banks again, then we know it doesn't.


But I don't blame them for it either. The underlying causes for this are macroeconomic, they could have come out of a first year textbook. The banks are the conduits of money and the channels through which all this debt moved. They were always going to be the first ones to fall victim to it eventually blowing up.
So the CEOs were running big banks without having read the first year economics textbook? Or have they consciously ignored what they knew were coming, to forestall the inevitable and take as much as they can before their companies run aground?


But it's not like better behaviour on their part would have made the situation sustainable in the long run.
Of course it would. Not this situation, it would simply create a sustainable one. There are macroeconomic reasons behind the crisis, but ultimately there are also distinct, specific decisions responsible for everything. Someone without creditworthiness got a credit. Some property was overvalued. Some wrong investment was made.

And some decisions always could be different. It wouldn't make it all a happy sea of gold - but it would make it a slower growth and a shallow valley in stock prices, deepest trenches compensated by reserves, rather than a big crisis which cost has to be borne by the budget.


Shareholders have been demanding big dividends, share buybacks and all sorts of other perks year after year. Taking on new debt for an exotic new deal was applauded, more money being taken aside for risk provisions resulted in the price getting smashed. The CEOs were taking these risks on behalf of their shareholders, and I didn't hear anyone telling them to slow down when times were good.
So why do we need CEOs, then? If they were simply doing what the shareholders wanted, and that's what they should do, surely it would be easier to get rid of the middleman and just do what the shareholders want. Keep a few secretaries to sign the papers, but that's it.

If it isn't CEO's job to assess the risks, if the CEO doesn't make the actual decisions, if the CEO doesn't and shouldn't slow down unless Joe and Mary the Shareholders tell him to, then it's a useless position.

Wasn't Lehman reformed under Chapter 11, where they aren't liquidated?
Finance companies are subject to a special rule though where they basically lose all their licenses to work in the industry. If a finance company goes bankrupt, it never comes back. As it is, there are plenty of Lehman employees still eagerly waiting for their final paychecks. It seems unlikely to me that Fuld will be getting his though - but if he does, you can be sure to hear about it in the media.

Not up to you to decide, sure. But are you forbidden to have an opinion based on that? Especially since it's also your tax money.
I have an opinion, and I have stated it. But just as my opinion with regards to Tiger Woods' wages are ultimately irrelevant, so are they on the pay of CEOs, and the price people pay for weird art I don't understand.

Good results, i.e. increasing company's value, reward the CEO proportionally more than they reward the company - fact (otherwise there wouldn't be any appreciable income growth for CEOs). And this part is fair, bonus paid for good work is always an increase in proportion paid, not just figures.
I still don't see why it has to be that way, but given the growth of CEO pay over the past decade or so compared to the growth in corporate profits, you may have a point.

The result is that winnings are multiplied, losses are reduced.
Hmm, I had actually been thinking more along the way of the criteria in which bonuses are determined and so on, but in theory you're right - the rewards are open-ended upwards, the costs are limited at some point.

We'll see. If those responsible for negligence actually end up sued to large amounts and those responsible for fraud in jails or on probation, and most of them leave the big business scene for a while, then we know that CEO's job indeed involves fair responsibility. If in a couple years we find them suffering no loss and running the big banks again, then we know it doesn't.
I don't think the failings of the legal system and the conceptual position of the CEO can be tied together in such a way. At any rate, why would you think any bank's shareholders would have any interest in hiring one of these guys in the future?

So the CEOs were running big banks without having read the first year economics textbook? Or have they consciously ignored what they knew were coming, to forestall the inevitable and take as much as they can before their companies run aground?
The latter is more likely, but it's difficult for me to believe that any of them would have actually thought their own firms might crash. Their internal risk modelling was telling them they'd be fine, and they were probably confident enough in their abilities, their existing reserves and their ability to use their brands to raise more in case of emergency.

See, when people put it in the way you did, you leave out the part where there was massive groupthink going on with regards to these risk modelling techniques and the ability to quickly turn RMBS into cash that could be used in emergencies. It's not that they were consciously ignoring the risks, it was that they didn't think of them. That's so stupid to be entering into negligence, but it's not malicious and intentional.

Of course it would. Not this situation, it would simply create a sustainable one. There are macroeconomic reasons behind the crisis, but ultimately there are also distinct, specific decisions responsible for everything. Someone without creditworthiness got a credit. Some property was overvalued. Some wrong investment was made.

And some decisions always could be different. It wouldn't make it all a happy sea of gold - but it would make it a slower growth and a shallow valley in stock prices, deepest trenches compensated by reserves, rather than a big crisis which cost has to be borne by the budget.
And the banker who would have said that would have been removed by his shareholders. The shareholders who had believed him would soon have been the only ones left holding these shares.

Hell, had you told people two years ago to stop buying shit with their credit cards and taking on a second mortgage to take advantage of their higher house price, or told some poor person they better not move into this house and do the whole 'American dream' thing - what would they have told you?

It's always easy after a bubble to come out all guns blazing. But actually going against collective idiocy while it's going on is a lot more difficult.

So why do we need CEOs, then? If they were simply doing what the shareholders wanted, and that's what they should do, surely it would be easier to get rid of the middleman and just do what the shareholders want. Keep a few secretaries to sign the papers, but that's it.

If it isn't CEO's job to assess the risks, if the CEO doesn't make the actual decisions, if the CEO doesn't and shouldn't slow down unless Joe and Mary the Shareholders tell him to, then it's a useless position.
Shareholders don't have time, plus it would be a bit of a pain to organise. But CEOs are quite literally just the chief executive officers. And the thing they're executing is the thing the board wants. He can hope to convince the board and the shareholders in general that his strategy is a good one and in their best interest, but he can't pursue anything against their will. And a CEO who had suggested deleveraging as a reason for a lower dividend payout two years ago would have been drawn and quartered. Sad (with hindsight), but true.

How does Barney Frank sleep at night?

Neu Leonstein,

I am not going to respond point for point to your last post to me because it is clear that you are attempting to shift from attacking the issue to attacking me, the poster, since your response focuses more on my choices of words than on the sense of what I said.

Furthermore, other posters have already made the exact same arguments in response that I would have, and have done so far better than I could have, so I refer you to Lacadaemon, Fishutopia, Sdaeriji, and yes, even my friend Vault10.

But there is one thing I do want to address, and that's is your constant insistance that Dick Fuld (who you seem so focused on) has lost everything, as if he walks away destitute from the destruction of Lehman Bros. Let's take a look at some facts relating to Mr. Fuld:

FROM 1440WALLSTREET.COM:
http://www.1440wallstreet.com/index.php/site/comments/dick_fulds_bonus_is_bigger_than_yours/

Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage bonds, awarded Chief Executive Officer Richard Fuld $35 million in stock for 2007 after he helped limit damage to the firm from the collapse of the U.S. subprime mortgage market.

Fuld, 61, received 551,442 units of restricted stock, valued at $35 million as of the Dec. 7 grant date, according to a filing today with the U.S. Securities and Exchange Commission. That’s an increase from Fuld’s $33.5 million stock award for 2006. It doesn’t include salary, cash bonus or any other compensation. Fuld’s total pay in 2006 was $40.5 million.

FROM BLOOMBERG WORLDWIDE:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWX6lKFjxrEQ&refer=home

By contrast, top executives and workers who hung on until the end took a beating, including Lehman Chief Executive Officer Richard Fuld.

His stock and options once worth $1.2 billion became almost worthless in the firm's Sept. 15 bankruptcy. This week, Fuld sold 2.88 million shares for 16 cents to 30 cents apiece, or less than $500,000, according to a regulatory filing. Fuld, 62, took home at least $168.5 million when Lehman had record profit from 2005 to 2007, according to proxy filings and pay consultants.

So, let's see, the value of his shares fell to a mere "less than $500,000" -- an amount I have never seen all at once in my entire life -- which means that, if you count only his Lehman shares, he still got paid close to half a million dollars for destroying that company. Of course, as 1440WallStreet points out, Fuld's shares are NOT his only income. There's still his "salary, cash bonuses and other compensation" to be accounted for. According to the NY Post, below, he received a "total compensation package of $71.9 million last year." What's harder to pin down is how much of that he actually lost. Your constant insistence on the value of his Lehman shares does not cover it all.

Now let's take a look at what he did to walk away with "only" "less than $500,000" plus some undisclosed amount in "salary, cash bonuses and other compensation."

AGAIN FROM BLOOMBERG WORLDWIDE:

`Destroyed Us'

Lehman's filing wiped out as much as $13.7 billion in company stock held by employees, who owned 30 percent of the shares when the stock peaked at $85.80 last year. Lehman encouraged stock ownership and has said about 20,000 of its 26,000 workers got at least some equity in 2007.

``Dick Fuld destroyed us,'' said Mohammed ``Mo'' Grimeh, Lehman's global head of emerging-market debt, in a Sept. 14 interview. ``He had the board in his pocket and the board never challenged him.''

Lehman spokesman Mark Lane didn't return two calls seeking comment from Fuld.

And what of that obedient and cooperative board of directors? According to TheStreet.com, the average compensation of those board members was $360,000.00/year -- a nice wage to sit by and do nothing.

In addition,

FROM THE GOTHAMIST AND THE NEW YORK POST:

http://gothamist.com/2008/10/04/lehman_employees_say_goodbye_to_sev.php

Lehman Employees Say Good-Bye to Severance Packages

The NY Post reports on the overall unfairness of former Lehman Brothers employees' severance being cut off, while "former Lehman Brothers CEO Dick Fuld received a total compensation package of $71.9 million last year." Though a former employee--who was laid off in March after 16 years with the firm--had signed a severance agreement giving her pay and health insurance through April 2009, she received a letter last month saying it was ending because of the bankruptcy. A few weeks ago during the chaos, Dealbreaker heard from more recently laid-off Lehman employees who were told their severance would run out soon or be non-existent.

http://www.nypost.com/seven/10042008/news/regionalnews/lehman_staff_gets_the_shaft_in_severance_132071.htm

Ann Harvey, 45, of Staten Island, said she received a letter in the mail Wednesday informing her that the company had cut her off as of yesterday.

"This is terrible," she said. "I could lose my home. I can't pay my mortgage while I'm on unemployment." [Note: Ironic, huh? -- M]

Harvey, who worked as a telecommunications analyst for Lehman Brothers for 16 years, was let go in March.

In a one-page letter dated Sept. 30, Lehman told workers that it "unfortunately [was] no longer able to provide the salary continuation or other benefits" because it had declared bankruptcy.

"As a result, you will not receive a payment on October 3, 2008 or thereafter," the letter states.

While Harvey and scores of other former employees worry about how they will pay their bills, former Lehman Brothers CEO Dick Fuld received a total compensation package of $71.9 million last year.

"I've worked hard my whole life," said Harvey. "This is a real kick in the behind. It's not fair."

Harvey, who made an annual salary of $65,000, said she signed paperwork entitling her to the severance package, which promised her a paycheck every two weeks and health insurance for 13 months ending in April 2009.

The letter also states that workers can pay - about $70 a month in Harvey's case - in order to keep their medical and dental coverage.

"I have been unable to find a job," she said. "I can't live on the $405 a week that unemployment will give me. I can't even afford the medical benefits."

How much do you think Dick Fuld has to pay to keep his COBRA coverage going?

Now tell us again how much Dick Fuld has suffered because of his destruction of Lehman Bros., and explain to us again why the public has nothing to say about this unless we have suffered as much Fuld has.

You pick out just ONE aspect executive compensation and expect us to believe it accounts for everything Fuld got from Lehman. That kind of argument is misleading.

You ignore the effect of Fuld's failures and act as if they were not attributable to him or otherwise did not matter. In other words, you are trying to take this question out of its context, thus destroying all sense of the scope of Fuld et al's misdeeds. That is also misleading.

Finally, you make sweeping assumptions about who was affected and how by Lehman's collapse and who was not affected. Based on those assumptions you attempt to invalidate criticisms by claiming that people who didn't lose money have no right to complain. But clearly, your assumptions are wrong on the facts. Far more people are being directly affected in dire ways than you account for. Not only have Lehman's employees lost far more proportionally than Fuld, but if you are going to deny the broader economic impact of the loss of Lehman, then I'm sorry, but I would call you a liar for that to your face.

In short, your entire argument in defense of Dick Fuld is misleading and wrong on the facts.

How does Barney Frank sleep at night?

Snuggled up to his boyfriend.

Snuggled up to his boyfriend.

Nah, Herb Moses isn't a big wig at Fannie Mae anymore, so they broke up.

If there's no money in it, Barney won't top.

Nah, Herb Moses isn't a big wig at Fannie Mae anymore, so they broke up.

If there's no money in it, Barney won't top.

I thought Herb left Barney?

Ah, I was not aware of poor Barney's heartache. But I'm sure he'll find another love soon enough.

Neu Leonstein,

I am not going to respond point for point to your last post to me because it is clear that you are attempting to shift from attacking the issue to attacking me, the poster, since your response focuses more on my choices of words than on the sense of what I said.

Furthermore, other posters have already made the exact same arguments in response that I would have, and have done so far better than I could have, so I refer you to Lacadaemon, Fishutopia, Sdaeriji, and yes, even my friend Vault10.
That's unnecessary. You had a point earlier, which I acknowledged. Hence I followed with post #68, which wasn't about your wording, it was about what you wrote.

You seem to have some sense of what you're saying, which everyone else apparently manages to get across, but you don't. So I am to talk to them, but not to you, since what you're saying is overshadowed by your choice of words.

But fine, whatever floats your boat.

But there is one thing I do want to address, and that's is your constant insistance that Dick Fuld (who you seem so focused on) has lost everything, as if he walks away destitute from the destruction of Lehman Bros.
This time you're the one not reading properly. I said he lost a lot. To the extent to which money is a motivator, that should be discouraging him from doing things that will make the company fail.

It didn't, which means either the money wasn't the issue weighing on his decisions, or he didn't lose enough. But that would bring us back to an earlier point you vehemently deny having made, so I'll leave it at that.

Now tell us again how much Dick Fuld has suffered because of his destruction of Lehman Bros...
Didn't your articles mention that?

Anyways, assuming the comments made below this article (http://postcards.blogs.fortune.cnn.com/2008/09/15/wheres-dick-fuld/) are accurate, he lost almost $700 million (it's 2am here, and I don't have the nerve to do calculations to answer a rhetorical question).

That doesn't mean he's poor, but I never claimed he was. I just said that he suffered, and significantly.

...and explain to us again why the public has nothing to say about this unless we have suffered as much Fuld has.
Suffering really doesn't entitle you to stuff. I'm sure you're aware enough of my objectivist leanings to follow that one.

The reason shareholders have a say is because it was their money, and it was Fuld's contractual responsibility to them. The size of their loss is ultimately irrelevant in principle.

You pick out just ONE aspect executive compensation and expect us to believe it accounts for everything Fuld got from Lehman. That kind of argument is misleading.
I did? People kept talking about money he'd get from running the company down. He didn't, because there was no severance pay. The money and options he got before the company was going under was hardly paid with that event in mind - and I've been repeating my stance that if laws were broken, lies were told and so on, I'm all in favour of asking for money paid as a result thereof to be paid back. Though realistically, he wouldn't be able to, since he's lost most of it in the collapse.

You ignore the effect of Fuld's failures and act as if they were not attributable to him or otherwise did not matter. In other words, you are trying to take this question out of its context, thus destroying all sense of the scope of Fuld et al's misdeeds. That is also misleading.
I'm saying that going after CEOs is not a solution. I'm also saying that bubbles happen from time to time regardless of whether CEOs get paid a lot, or even exist for that matter. And so I call the public outcry, and the public hearings and that stuff a smoke and mirrors act, and him a particularly convenient scapegoat.

Finally, you make sweeping assumptions about who was affected and how by Lehman's collapse and who was not affected. Based on those assumptions you attempt to invalidate criticisms by claiming that people who didn't lose money have no right to complain. But clearly, your assumptions are wrong on the facts. Far more people are being directly affected in dire ways than you account for.

Not only have Lehman's employees lost far more proportionally than Fuld, but if you are going to deny the broader economic impact of the loss of Lehman, then I'm sorry, but I would call you a liar for that to your face.
That's a fundamentally different point you make here. If someone works for an amusement park and doesn't tighten the screw on the rollercoaster properly, resulting in a big accident, he may well be prosecuted for criminal negligence because of the impact his act had on society. He may also be sued by the park for not having done his job properly.

Both of these are conceivable options with regards to CEOs, though I personally don't see them as any credible part of a solution strategy. Plus, I find the whole way in which the public discourse is running distasteful and often just plain wrong.

But all this doesn't mean that the public should have a say on how much maintenance guys in amusement parks get paid.

In short, your entire argument in defense of Dick Fuld is misleading and wrong on the facts.
Well, I hope my response will allow you to reassess what you believe to be my argument.

<snip for length>

Well, I hope my response will allow you to reassess what you believe to be my argument.
Nope, sorry, it just reinforces my interpretation.

how do i failed bank?



that's how I read this at first glance.

I'm saying that going after CEOs is not a solution. I'm also saying that bubbles happen from time to time regardless of whether CEOs get paid a lot, or even exist for that matter. And so I call the public outcry, and the public hearings and that stuff a smoke and mirrors act, and him a particularly convenient scapegoat.

You also have to accept that this has moved beyond the purely financial or philosophical realm. Everyone has now admitted that the solution will have to be political as well as just fiddling with monetary policy and messing with taxes around the edges.

So here we are, and the general public is being asked to suffer cuts in .gov services and subsidize the largest spending bill in history to bail-out banks, for reasons they don't fully understand. They also know that this bailout was passed against overwhelming public opposition and that they were basically threatened by the same clowns they are now bailing out with all kinds of doom and Armageddon in order to ram the bill through in a completely improper fashion. (Threats of martial law were bandied about, google rep. sherman).

However the one thing they do know is that they are going to take it up the arse for the next few years, so they are thinking: "Hang on, I'm being stuffed here, WTF? How about the people who are caused the mess? What do they get? Retirement in Barbados, no fucking way!". Now, if you want to get all libertarian about this, you are right, it's none of the public's business who made what; but the flip side to all that is there shouldn't be any bailout, the federal government should disband the FDIC, the SEC should be abolished...so it really isn't any of the public's business anymore.

But as long as you accept the notion that it is now a public/political solution, and that fixing this problem in this matter is really a desperate matter of life or death, you have to accept that we are now in the realm of what is possible, not what is ideal: as long as the financial industry has its hand out like an indigent beggar, it has to accept the good with the bad, the fair with the unfair. That's just the reality.

And of course that reality is that the J6P who is now being asked to pay (and lets not kid ourselves, there is no way the government is going to make money from this, they are called losses for a reason) is thinking, I am going to suffer, but I did not benefit from this on the supposed way up (undeniable, looking at the expansion of household debt) so I will be buggered if these people get to keep what they made when they were selling their snake oil. We are in the middle of an epic politically facilitated wealth transfer here, and when that sort of thing happens you are always going to run into populist politics. The theoretical rights and wrongs are a secondary issue, perception is everything, that's just the way it is.

Bottom line, Mr. Joe Six Pack has been invited (compelled?) to come to the rescue table, and his wishes are going to have to be taken into account, no matter how wrongheaded some of them are.

Of course, there is a lesson to be learnt from all this. Don't be an arrogant, mendacious, deluded prick. If these people (CEOs now suffering the public ire) were even remotely sympathetic, there wouldn't be so much popular anger directed against them. But they have been rubbing people's noses in things and telling everyone how shit hot they were for the past two decades - unjustifiably I would add, considering the number of .gov bailout interventions they have benefited from since 93 - so it's to be expected.

I guess it comes down to the fact that we have been seemingly operating in a system where - broadly - profits are private, losses are socialized, and now that people have grasped, or at least believe, that they want to re-socialize some of the profits. It's an eminently understandable position. Even if you do not agree with it. It's not as if either side is behaving in a particularly principled fashion, so I wouldn't bother going to bat over it. Frankly, I'd throw the public its bone, because if it doesn't get it now, it's going to end up demanding a hell of a lot more later. Compromise is always prudent in these situation. Doubly so since the ire is only directed at a fairly small group of individuals and not the business community at large.

Silly topic.

If the bonuses were public and people didn't like they could've voted with their wallets and moved their cash elsewhere.

If they werent then making them public SHOULD be enough assuming free market works....and why wouldn't it?



ROFLMAOLOLHAHAHAEHEHEHEEEeh.... :D

Out of an overall bitter but totally reasonable pill to swallow:
<snip>

Bottom line, Mr. Joe Six Pack has been invited (compelled?) to come to the rescue table, and his wishes are going to have to be taken into account, no matter how wrongheaded some of them are.

Of course, there is a lesson to be learnt from all this. Don't be an arrogant, mendacious, deluded prick. If these people (CEOs now suffering the public ire) were even remotely sympathetic, there wouldn't be so much popular anger directed against them. But they have been rubbing people's noses in things and telling everyone how shit hot they were for the past two decades - unjustifiably I would add, considering the number of .gov bailout interventions they have benefited from since 93 - so it's to be expected.
Indeed, and I think we can file this under "beggars can't be choosers," on the grounds that those who come begging for bailouts have a fat lot of nerve trying to dictate the rules of that bailout to those who are footing the bill for it. Regardless of whether punishment of those most culpable in this mess will have any effect on the mess or not, Joe Six Pack is within his rights to simply point out to Mr. Fallen Fat Cat that "payback's a bitch." The Fallen Fat Cats might get less of that attitude if they stopped complaining about threats to their bonuses. If you (rhetorical) don't want the people bailing you out to give you what they think you deserve, you should perhaps not keep going on about what you deserve.

<snip> Doubly so since the ire is only directed at a fairly small group of individuals and not the business community at large.
Which is fairly remarkable, imo. People seem legitimately interested in realistic assessments of culpability, not in just getting a pound of flesh from whomever.

My stance is that, while it would be personally satisfying to see the worst corporate offenders pay a real price for their bad decisions in this, it is far more important to adjust the systems by which corporations operate so that this sort of thing does not happen again in the future -- so that it will be harder for arrogant, mendacious, deluded pricks to pillage the system with impunity. If punishments will help the public to trust the financial system again, then so be it. Let the right examples be made. But that trust will be quickly destroyed again, possibly to an far worse degree, if it turns out that a few heads got stuck up on pikes to mollify the mob, while the corporate bigwigs went right back to business as usual.

But one thing I cannot and will not stand is listening to people claim that none of these CEOs did anything wrong or anything that contributed to this crisis. It's one thing if someone doesn't want to punish them for it, but please, do not bullshit us about it.

Frankly, I'd throw the public its bone, because if it doesn't get it now, it's going to end up demanding a hell of a lot more later. Compromise is always prudent in these situation. Doubly so since the ire is only directed at a fairly small group of individuals and not the business community at large.
Mankind sucks.

Anyways, I see what you're saying. But that doesn't mean I have to call this anything other than what it is, or pretend I enjoy it. Trial, or policy for that matter, by public opinion is the one constant in everything bad people have ever done to each other on a large scale, and every time I have to witness it, it makes me feel queasy.

I don't think, by the way, that CEOs getting done for misrepresenting stuff will stop the confidence crisis. These trials will take some time, and analysts on all sides should be smart enough to know that other CEOs will continue to operate under some form of "it won't happen to me", just as they did when they were presented with the possibility of going bust. And by the time any convictions will have led to a substantial cultural change, this immediate crisis will be over and you'd want to encourage people to be sceptical and to handle their risk management properly. The last thing you want is people feeling too confident again and writing CDSs by the trillions.

But one thing I cannot and will not stand is listening to people claim that none of these CEOs did anything wrong or anything that contributed to this crisis. It's one thing if someone doesn't want to punish them for it, but please, do not bullshit us about it.
Look, either leave it, or don't. What you're saying my stance is, isn't. If you dispute that, feel free to answer my previous post. Otherwise, stop patting yourself on the back.

Mankind sucks.

Uhuh. This is how it has always been though. And in this case I don't think the anger is all that unreasonable. I mean come on, how many corpses has government created to save the banking industry from itself over the past couple decades? They have relied upon unprecedented government interference on their behalf to get them out of a jam time and time again, and have not cared at the number of honest, more competent people it has bankrupted or burned. Surprise rates cuts while the market is open? No problem. Burn people who are in index options to blow out the shorts with a surprise disco cut on opex? You got it. Cash settle instead of returning physical leased gold? Why not! Sudden ban on shorting? Yes indeedy. All these actions were, as far as I am concerned, nothing short of gangsterism. But this is the way the game is played apparently. That the tables have turned isn't something to get upset about. If you play the game that way, expect to lose the odd hand, especially if you've drawn a busted flush.

I don't think, by the way, that CEOs getting done for misrepresenting stuff will stop the confidence crisis. These trials will take some time, and analysts on all sides should be smart enough to know that other CEOs will continue to operate under some form of "it won't happen to me", just as they did when they were presented with the possibility of going bust. And by the time any convictions will have led to a substantial cultural change, this immediate crisis will be over and you'd want to encourage people to be sceptical and to handle their risk management properly. The last thing you want is people feeling too confident again and writing CDSs by the trillions.

I disagree. Financial industry leaders have lived charmed lives. The odd scapgoat gets thrown out of the lifeboat, but nothing substantial has ever happened to the leadership. Some quick punishments may very well serve to discourage the others. (At least force them to get their houses in order).

But you are right that this alone won't address the problem. There has to be balance sheet transparency before any of this will go away.

(I'm not worried about CDSs in the future. They are going to go onto something like the OCC - where they should have been all along. Those guys are margin fascists, so it won't be a problem. It's really going to damage the profitability of financial cos. going forward though. But really, who the fuck couldn't appreciate the danger of the damn things in the first place. There is a reason stock options and futures aren't OTC.)

<snip>
Look, either leave it, or don't. What you're saying my stance is, isn't. If you dispute that, feel free to answer my previous post. Otherwise, stop patting yourself on the back.
You're the one who chose to read that comment as being about you.

And I did respond to your last post addressed to me. I told you it did not change my view of your argument in this thread. It merely reinforced it. That was because I did not see anything in it that was different from the way I've been reading your posts from the start. If you want a detailed explanationg of that, you could ask for it.

Or not. Your call.

But I'm not going to stop speaking my mind about the topic just because you're not satisfied with my reading of your arguments. Not everything is about you, you know.

I don't think, by the way, that CEOs getting done for misrepresenting stuff will stop the confidence crisis. These trials will take some time, and analysts on all sides should be smart enough to know that other CEOs will continue to operate under some form of "it won't happen to me", just as they did when they were presented with the possibility of going bust.
Th only reason the CEOs think it wont happen to me, is in the past, no matter how bad it gets, how bad a big name CEO has screwed it up, nearly all of the bad CEOs get out with millions. If a CEO goes to a proper jail for 10 years, that will change things. Losing some money, getting fines, so what. They'd have squirreled some money away in untracable accounts, etc. Jail on the other hand.
And by the time any convictions will have led to a substantial cultural change, this immediate crisis will be over and you'd want to encourage people to be sceptical and to handle their risk management properly. The last thing you want is people feeling too confident again and writing CDSs by the trillions.
There's no way people will be confident with what has happened now. If criminal convictions are on the table, there will also be a lot less people pushing sub primes, as the CEO will make sure it doesn't happen as he wont want jail time.

Free market solution: A CEO who ahs profited from the collapse of a company should be subjected to lawsuits and ought to be sued out of everything he owns. maybe those he has stolen from will gain comparatively little, but the crook gets what he has coming. If crooked CEOs find themselves destitute, there won't be much incentive to be a crooked CEO. Furthermore, every CEO will be veeeery careful about the honesty of his accountants.

Th only reason the CEOs think it wont happen to me, is in the past, no matter how bad it gets, how bad a big name CEO has screwed it up, nearly all of the bad CEOs get out with millions. If a CEO goes to a proper jail for 10 years, that will change things. Losing some money, getting fines, so what. They'd have squirreled some money away in untracable accounts, etc. Jail on the other hand.
How does the principle change? Fact of the matter is that an increase in punishment is not a reliable way of preventing people from doing things, especially if the people aren't consciously setting out to do something wrong, think their actions are just minor transgressions or think they won't get caught.

I'm not a CEO and I can't read their minds. Maybe I'm being too nice, but I think that people don't actively set out to do unethical things. They just kid themselves over time into thinking it's justifiable - and when you then come in at the end and threaten punishments, they'll have a hard time connecting their "little fibs" with the sort of horrible injustices you're threatening punishments for. They're wrong, of course, but that's not going to matter with regards to how they react to other CEOs going to jail.

There's no way people will be confident with what has happened now. If criminal convictions are on the table, there will also be a lot less people pushing sub primes, as the CEO will make sure it doesn't happen as he wont want jail time.
This hasn't been about subprime for months. It's more basic than that.

Subprime loans were the trigger in which a classic housing bubble could get into the financial system. Because they were securitised and traded, that went much faster and involved bigger sums than it did traditionally when the first to go were the banks your loan officer works for.

But the scale of that particular problem is largely known. The problem now is that a collapse in one market triggered one in the next one, knocking out one asset class after another until the banks are left with no cash. Worse, the collapse in these values isn't even obvious at times when the assets aren't being traded on exchanges you can watch going down. And in an environment in which something like that is possible and can happen very quickly, they won't lend to each other, not even if a CEO says his bank is doing fine. What Lacadaemon meant was that if CEOs were punished harshly, presumably they'd be more truthful and other banks could trust what they're saying. But I don't think they would make the connection between Fuld, for example, going to jail and Ken Lewis speaking the truth, certainly not in the immediate future.

Lacadaemon meant was that if CEOs were punished harshly, presumably they'd be more truthful and other banks could trust what they're saying. But I don't think they would make the connection between Fuld, for example, going to jail and Ken Lewis speaking the truth, certainly not in the immediate future.

No. It wouldn't restore trust overnight. But it wasn't thrown away overnight. I told you shenanigans like Bear would lead to this.

What harsh punishment would do is give the impression that someone was actually doing something about it. It's a first step towards getting the trust back. And honestly, you can't seriously argue that the prospect of ending up in bankruptcy court and spending the rest of your life saying "you want fries with that" after a forty year career in banking wouldn't alter people's attitude towards little fibs.

Thing of it is, everyone got a pass with Sarb-Ox, more or less. So just passing reforms at this point isn't going to do it. Fool me once etc.

But unless there are reforms in respect of ethics, trust in the system is never going to come back.

Look, I'm not saying that guys who have done nothing fundamentally wrong should be punished at all, even if their institutions have collapsed. I freely admit, there are some innocents. What I am saying is that the .gov has to get proactive and stop protecting the ones that weren't. Names should be taken, books should be thrown. Right now the government is protecting the guilty.

Fact of the matter is that an increase in punishment is not a reliable way of preventing people from doing things, especially if the people aren't consciously setting out to do something wrong, think their actions are just minor transgressions or think they won't get caught.
In the context of blue collar crime, I agree. Most blue collar crime is done out of desperation. I'm not excusing blue collar crime, and I'm not suggesting that if these people had made better choices they wouldn't be in this desperate spot, but desperate people do desperate things. They don't think about the consequences.

I think white collar crime is less desperate and more calculating. It depends more on getting away with it, rather than being desperate (as most of the white collar crime we are discussing here isn't by desperate people). I think most of the corporate crooks know their behaviour is wrong. I think white collar crime would drop if the punishments were harsher.

I'm not a CEO and I can't read their minds. Maybe I'm being too nice, but I think that people don't actively set out to do unethical things. They just kid themselves over time into thinking it's justifiable - and when you then come in at the end and threaten punishments, they'll have a hard time connecting their "little fibs" with the sort of horrible injustices you're threatening punishments for. They're wrong, of course, but that's not going to matter with regards to how they react to other CEOs going to jail.
So all those psychos in Africa who kill, loot, maim and rape think they are being ethical? I don't think so. People go out and do things they know are unethical. They just decide the payoff to them is worth being a real prick, and some of them don't lose a seconds sleep over it. If CEOs know the payoff to being dodgy and siphoning company money in to your bank account and lying about the companies fiscal position has a big risk of jail, then the risk/reward calculation gets much harder for a CEO.