Archive for Friday, December 26, 2008

Not earned

December 26, 2008

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To the editor:

I have been reading about the astounding remuneration “earned” by executives of banking and other financial institutions, many of which received bailout money from us. The extravagance brings to mind that of the French royalty before the revolution. Eighty-three million dollars for the head of Merrill Lynch in a year when the company lost $7.8 billion. The Bank of New York Mellon Corp. paid almost $180,000 for a car and driver for its CEO. Sixty-eight million dollars in stock options for the new head of Merrill Lynch, which received $10 billion in bailout money.

I don’t necessarily advocate the guillotine for the obscenely rich, but something should have been cut, their compensation at least. In their rush to save the country from financial ruin, our representatives did not place rational restrictions on compensation for the executives who led their companies and the rest of us into this mess.

We appear to be in the midst of a needed transition from a credit culture to one of actually paying for goods and services, and there will be a realignment of standard of living with actual income. It is time also for stockholders, workers and other citizens to demand a realignment of the incredible disparity between the income of business executives and that of the other 99 percent of employees.

Greed and immediate gratification have been the prime values of too many people in recent years. It’s time for change. For starters, our representatives should demand better limits on compensation for bailed-out executives.

Joe Douglas,
Lawrence

Comments

Godot 6 years, 3 months ago

This is what happens when you let government interfere with the private market: obfuscation, incompetence, greed and corruption run rampant. If these firms had been allowed to go bankrupt, as they should have, then these execs would have gotten what they deserved.

jaywalker 6 years, 3 months ago

Brilliant, bowhunter. And one has to do with the other.......how? Any of those 'famous' people receive millions in bailout money? Early leader for 'Moron of the Day'.

Leslie Swearingen 6 years, 3 months ago

Athletics get paid what they do because their employers can afford to pay them that much. Isn't punishing the execs and letting every one else go down with them, like cutting off your nose to spite your face? So, who, precisely, decides what these execs get paid? Do they think it was worth it? I understand that the execs have iron clad contracts that make the athletes look like peanuts. They get this amount because they promise great things for the company they work for, the business equivalent of a World Series or a Super Bowl. Ask Steinbrenner, sometimes, it just don't pay off like you thought it would.

Godot 6 years, 3 months ago

Well, Celopatra, these execs cheated and bribed and conspired, yet their teams still lost. They should have gone down in flames, as they so welled deserved to do. The stock holders who did not do their research and who did not demand more for their investment, deserve to lose, too. This whole mess was made exponentially worse when the government stepped in to save the losers. Taxpayers are now in the business of rewarding failure.

Leslie Swearingen 6 years, 3 months ago

Godot, I agree with you, totally. But, as I understand it, if these people go down, then a lot of others who had nothing to do with with will end up with nothing. If the execs do not get their bailout, then families will lose their jobs, and children will be roaming hungry in the streets. We will rapidly become a third world country. Well, I am not buying it. I read the execs are keeping their private jets. Am I disillusioned? Nope, I have come to expect that kind of thing. Business as usual. Are we all feeling like Yankee fans now?

Godot 6 years, 3 months ago

Are the victims those who owned shares of Bear Stearn, Citi, Bank of America, Countrywide, Goldman Sachs, Fortis, Societe Generale, Royal Bank of Scotland, JP Morgan, Wachovia, Washington Mutual, Fannie Mae, Freddie Mac, MBIA, AMBAC, Moody's, Standard & Poor, AIG, GM, Ford, GMAC, AMEX, or any of the hedge funds that turned money over to Bernie Madoff to manage? Maybe. I view them as part of the problem. The real victims are those who did not invest, but are being forced to bail out those who did, all in the name of "saving the economy."For those who own a mutual fund through a 401-K or 403(b) or IRA or some other qualified retirement plan, I empathize as you have probably lost somewhere between 40 and 50 per cent of what you had been told your investment was worth. Now we know that those gains were based, in part, on fraud. They never really existed. The lucky ones are those who got out before the jig was up. The unluckiest ones are those who bought into the myths both the housing bubble and easy credit, the ones who believed that their houses were worth three times their real value, who borrowed out all the "equity," and then invested it in a mutual fund.If you purchased a mutual fund without knowing how it worked, if you did not read the prospectus, if you borrowed money for a car or TV or vacation while investing in a retirement plan, if you threw away those proxy ballots without reading them or voting, if you did not know that you were paying a commission plus a management fee for the privilege of sending your money to Wallstreet, if you believed the mutual fund advisor who told you it is best to "stay the course," and, "buy the dips," if you did not pore over your mutual fund statements and peruse the financial news, then you are just as much of the problem as are the executives on Wallstreet. You were a willing participant in the massive monthly funding of the biggest scam in history.Investing is not a spectator sport, it requires active participation and an understanding of the nature of the investment. You cannot expect the government to protect you, and you certainly should not take the advice of anyone who stands to make money from your decision.

bearded_gnome 6 years, 3 months ago

Godot,besides the bailout victims, all americans are the victims, as all this money flowing out of washington is diminishing the value of the dollar. diminishing the value of the dollar by increasing the money supply hurts everybody. ***Greed and immediate gratification have been the prime values of too many people in recent years. It’s time for change. For starters, our representativesshould demand better limits on compensation for bailed-out executives.okay,psychiatrist Joe is apparently antiamerican, as "enlightened selfinterest" is a cornerstone of our system. i.e. that means greed. you do what is in your own best interest!also, apparently psychiatrist Joe thinks the guvment should be in the business of deciding when each american has enough money, and when to confiscate what is deemed excessive. um, I think there's a word for that ... and it ain't american. he really wants the u.s. government in the business of deciding when we each have enough money? just think of the corruption that would bring. and, just think of how that would put the breaks on natural inclinations to innovate, work hard, and invest. all of these create jobs. so, why is psychiatrist Joe against creating jobs? why does he want to punish success? oh, that word above, guvment deciding when you've got enough money, I think it starts with an "S." S-----ism. sure, its fine in psychiatrist joe's far left mindset to attack the CEO's, but what about the union bosses living high and wide? the UAW that's killing the domestic automakers? no, psychiatrist Joe wouldn't tap them.

Godot 6 years, 3 months ago

Joe, you want to keep the problem from getting worse? Call up your contacts in the Obama transition team and tell them to repeal TARP/EESA.

jaywalker 6 years, 3 months ago

bowhunter: "it looks like I touch a nerve on jaywalker when I mentioned NASCAR….....so some guy has you drinking Busch Light and using Tide… and you're insulted because he 'deserves' everything he earns? how sad."This is a toughie. Can't decide if your second post is more ignorant and off the point than the first.Nothing you said 'insulted' me, moron, and I can't stand NASCAR. No, I'm appalled at your exceptional lack of education evident in the pathetic attempt to tie the sins of those on Wall Street to athletes somehow. I ask again, how do the two correlate? You didn't answer before because you can't. They don't compare. Do athletes and entertainers make obscene amounts of money? Of course. But how your simple mind is able to corrall the two wholly different industries and occupations in relation to this article is beyond my imagination. And now for some reasoin you bring in marketing and sales abiity? From the LTE:"Eighty-three million dollars for the head of Merrill Lynch in a year when the company lost $7.8 billion."Able to read? That's the crux of the argument in the letter. Now, how the hell does a CEO miraculously get that kind of money when his company has a major meltdown? The only thing more stupefying than that is how you can jump to what athletes earn from the LTE's topic. Now THAT is sad.

Leslie Swearingen 6 years, 3 months ago

It is easy to jump from Wall Street to athletics. CEO's are paid a lot of money to take the firm to the top and make it number one, just as an owner may think that getting a certain player is going to make him the owner of the Super Bowl team. The thinking is the same. I want to be better than everyone else and I don't care what it takes to do it.

Godot 6 years, 3 months ago

Well, Cleo, if you run your company so far into debt that its failure threatens to take down the world economy, then you certainly do not deserve a bonus, let alone to retain your job. But, thanks to Obama, Pelosi, Frank, Dodd and Bush, these charlatans not only get to keep their jobs, they get taxpayer money to pay for their bonuses, yachts, private planes, mansions, pensions and country club memberships. This is government intervention in the most evil of manners. And Obama is retaining the Bush economic team. Change? Chump change.

jaywalker 6 years, 3 months ago

Sorry Cleo, there's no relevant 'jump' to athletics from this perspective. No athlete has cost his team billions, and you won't see a player or a coach receive a gi-normous bonus for losing every game that season. NASCAR is predicated on success. Have success = more sponsors = more money. Stink it up and you ain't racin' no more, hic. Beo and Godot hit the nail on the head.

gisele 6 years, 3 months ago

I also thought about the French revolution and though bringing back the guillotine is tempting, I think a greater punishment would be to have the CEOs of failed companies who still gallivant in jets work in some of the jobs described in Nickeled and Dimed for a few years. It'd make a great reality show watching these clowns try to make it in the 'real world.' It'd also be nice to have their bonuses confiscated and redistributed to the taxpayers, but I imagine all that money is already in offshore accounts.

Godot 6 years, 3 months ago

Gisele, I agree, as long as your punishment applies only to companies who would have failed had it not been for taxpayer bailouts. And, as for "redistributing" their bonuses to taxpayers, I say lets prevent them from getting their bonuses from the taxpayers in the first place. Tarp/Eesa, passed by Congress in July and September of 2008, are the bills that gave the Treasury the power to distribute unlimited sums of taxpayer dollars to whatever entitiy the Treasury deems deserving, and in whatever amount, without Congressional approval, to "save the economy." As it has been proven so far, the definition of "save the economy" has been to save the fortunes of the world's most powerful families and most threatening governments.It is time to stop this robbery and subjugation of the American taxpayer to the wealthy and powerful of the world. Demand, demonstrate, and protest to make Congress repeal Tarp/Eesa!!!

Richard Heckler 6 years, 3 months ago

Yes Joe you are on to something as usual. Why don't the stockholders wake up and smell the roses aka fire the CEOs',BODs' and other top level management? Why fire the workers?Additionally this might also be contributing to our economic mismanagement in a very big way:USA has 761 bases on the planet that is never talked about... because we do not knowIsn't it time to do inventory and bring several billion maybe trillions back home? http://www.alternet.org/audits/97913/

Godot 6 years, 3 months ago

Capitalism is not failing; socialist government intervention has destroyed capitalism in the US. If we had true capitalism, these companies would have failed, there would have been no government bailout, and the CEO's and Boards of Directors would be penniless as a result of their mismanagement.

Leslie Swearingen 6 years, 3 months ago

Godot, you wrote " if you did not read the prospectus". Well, I was watching PBS, Wall Street Week, I think it was, and someone went out on the street and asked a lot of people if they ever read the prospectus. No, way, too boring, and too confusing, they just tossed it. The answer would seem to be to put a summary in plain English at the top and the investor would be saved the trouble of reading the rest. http://www.retirementplanblog.com tells us:" Both modern art and a fund prospectus can be totally incomprehensible. 401(k) participants may not be exposed to modern art, but they sure are provided mutual fund prospectuses - at least by those plan sponsors looking for 404(c) protection.Understanding modern art will have to wait for an Art Apprec course. The Securities and Exchange Commission ("SEC") is trying to do something about making the fund prospectus more user-friendly."Bollix, says I, double bollix, (pun intended), if you got the money then you make the time to read every last word. Otherwise you will end up researching how to cut your wrists because you can't understand how that would kill a person. The devil is in the details. That is why Boston will always have superior teams. Sports is always pertinent so best not be dissing my Red Sox, Patriots, or Celtics.

jaywalker 6 years, 3 months ago

Ooooo! That really stings! 'not worth insulting'? Is that supposed to be .....insulting? Thanks for the chortle.You'd have to have a clue to actually 'insult' someone, bowhunter.

Godot 6 years, 3 months ago

Bowhunter, the CEO's of these failed companies would not be getting the bonuses and big salaries if Paulson, Geithner, Bush, Obama, Dodd, Frank, Reid and Pelosi had not threatened Congress with marshall law if they did not give them authority to determine who should get billions of dollars from the taxpayers with absolutely zero restrictions on how the money was to be spent. If the companies had not received the government bailout, there would have been no money to back up their paychecks. Our President, President-elect, current Treasury Secretary, future Treasury Secretary, and the current and future leadership of Congress are 100 per cent to blame for the fact that taxpayer money is being used to provide outlandish salaries and bonuses for the excecutives of Goldman Sachs, Bank of America, AIG, Fannie Mae, Freddie Mac, JP Morgan, and every institution that tapped the T.A.R. P.

jafs 6 years, 3 months ago

Godot is right in a way.Bush rushed this package through with dire warnings that something needed to be done immediately. Congress went along and passed a bill without sufficient oversight. It is a ridiculous situation.However, if you really believe in capitalism and allowing the companies to fail, it won't be just the CEO's who do so - all of the employees will fail as well. And, they probably weren't responsible for the stupid decisions.What will happen to all of those people? Will we see new jobs spring from nowhere? Will we have massive poverty and crime?The problem is that our corporate culture has managed to insulate the guys at the top and punish the guys in the middle and bottom generally. When companies run into trouble, they close plants and lay people off - they don't lower executive compensation and perks.Also, the contracts which award compensation/benefits and severance packages regardless of performance are obviously wrong - even if they run the company into the ground, they make out like bandits.

Godot 6 years, 3 months ago

jafs, Bush can't rush anything through Congress; Pelosi and Reid control what happens there. They are the ones who pushed through the twin pieces of legislation - the one in July, and the followup in September, that transferred from Congress the power to tax and spend to the Executive branch, via the treasury.

Godot 6 years, 3 months ago

and, jafs, if those execs that ran these companies into the ground had not used their influence, bought and paid for with campaign contributions, to coerce Congress into allowing the Treasury to steal from the American people to bail them out, they would not have "made out like bandits," unless you mean they would have wound up broke, and in jail.

Godot 6 years, 3 months ago

Kunstler tends to follow my line of thinking: www.kunstler.com"Legitimacy DwindlesZounds! Public sentiment toward the accelerating economic fiasco has shifted, seemingly overnight, from a mood of nauseated amazement to one of panicked grievance as the United States moves closer to an apparent comprehensive collapse -- and so ill-timed, wouldn't you know it, to coincide with the annual rigors of Santa Claus. The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake. It's like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve. And out in the heartland, of course, there is the spectacle of Illinois governor Rod Blagojevich trying to desperately dodge a racketeering rap behind an implausible hairdo.What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. His pick last week for chief of the SEC, Mary Shapiro, is already being dissed as a shill for the Big Bank status quo. In a few days we'll discover what kind of bonuses are being ladled out by the remaining Wall Street banks with TARP money and a new chorus of howls will ring out.This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal -- trillions! -- that the death of our currency seems assured. And in defiance of congress's express intentions, none of the TARP "money" has been applied to its targeted purpose of buying up "toxic" (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios.George W, Bush's personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy -- when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering ("...we pretend to work and they pretend to pay us....")... continued below

Godot 6 years, 3 months ago

continued from www.kunstler.com"The years since Jimmy Carter have produced an astoundingly flaccid public, sunk in various addictions and distractions, but this is about to change. The darkling mood of political protest and violent activism that saturated my own young adult years is scudding up again on the horizon. Mr. Obama's pick for attorney general, the mild-looking Eric Holder, may be the key figure in the early months of the new government. If he doesn't commence some aggressive investigations and prosecutions -- beginning with Henry Paulson for insider trading when he was in charge of Goldman Sachs and shorting his own company's mortgage-backed securities -- then the whole Obama enterprise could fall under suspicion of illegitimacy. The bums who ran the US banking sector into a ditch have to account for their turpitudes. They can't be allowed to hide under a TARP.Unfortunately, the legal system, and probably the legislative system, will be so buried in procedural bull* from the unwind of countless enterprises and institutions, and the sorting out of the remnants, that it remains to be seen whether this generation of people-in-charge can even embark on a fresh start of anything connected to real everyday life in America. All this is starting to alarm the tattered residue of the middle classes, and from here it's a very short path to them being really *ed off.When legitimacy erodes, anything goes. Nothing is respected including rules and personalities. The center doesn't hold and the new vacuum there is a tumultuous place. The same crisis of authority and legitimacy is spreading from nation to nation now. Soon, China will contend with a discontented army of the unemployed. Greece has been in an uproar for two weeks. Belgium's government just collapsed. Trade barriers are going up. Exports are falling away. The world's energy markets are not immune to these disorders. I would expect problems with the currently seamless supply lines that bring America two-thirds of the oil we use. Even a mild disruption of oil supplies could attach an anvil to the ankle of an economy already falling off a cliff.Right now, the overwhelming sentiment is to get this country back to where we were, say, ten years ago, when everything was humming nicely: Clinton nostalgia. We're definitely not gong back there, though. It's an idle wish. And any set of policies designed to lead in that direction will prove very disappointing. Our destination is a land of much smaller-scaled local economies. We could retain our federal ties if the federal government can scale back appropriately from the bloated, feckless enterprise it has become. Otherwise, it might only get in the way and make matters worse, and the public in one region or another of North America might reach a decision that they are better off without it. That would be what's called a revolution."

Godot 6 years, 3 months ago

Here you go. Do you think any of these employees, from the CEO down to the clerks, deserved a taxpayer bailout? They knew that what they were doing was wrong, but they did it anyway."By saying Yes, WaMu built an empire on shaky loans."http://www.nytimes.com/2008/12/28/business/28wamu.html?pagewanted=4

Godot 6 years, 3 months ago

The answer, invictus, is to separate the Federal Reserve Bank from the US Treasury. That is the first baby step.

jafs 6 years, 3 months ago

Godot, I agree generally with your position.However, when executives get contracts with guaranteed compensation/benefits and severance packages, they can run the company into the ground and still walk away (even if fired!) with tons of money.It's happened more than once.Also, what happens to all of the people who are then out of work if you just let large corporations fail? That's a serious question.

Godot 6 years, 3 months ago

jafs, first of all, thousands and thousands of financial services employees have been laid off or fired since these so-called financial institutions received hundreds of billions of taxpayer dollars. Second, since the corporations failed, then the services all these employees were providing apparently was not needed. Keeping a corrupt, inept entity alive through infusions of taxpayer dollars just to keep unnecessary jobs in place is not the answer.We need a "reboot."

jafs 6 years, 3 months ago

Yes, that's my point, Godot.When the institutions got the money, they didn't use it to help their employees or their customers. They have spent it on upper level compensation and/or are sitting on it. None of the banks interviewed by the AP would even disclose how they're using it.Your second point is a little broadly drawn. If upper management is corrupt and inept, does that mean that the folks who work at the bottom and middle are unnecessary?Also, you have still not answered the question of what happens to the folks without work.The "let it fail" model only works if those who are responsible for the mess are the ones who suffer - then it seems just to me.

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