Wednesday, August 19, 2009

Nail on the Head, Alfredo!

Robert Reich on executive compensation--

"Comparable" pay is a ridiculous standard to begin with, and the argument that $10 million, or even $7 million, is necessary to keep talent is absurd on its face. I needn't remind you that over the last several years Wall Street has exhibited a truly astonishing lack of talent. So why do any of Wall Street's big banks have the audacity to offer this sort of pay? Because the Street is back to the same, relentlessly untalented tactics that made it lots of money before the meltdown -- which also forced taxpayers to bail it out, caused the world economy to melt down, and tens of millions of people to lose big chunks of their life savings. Goldman Sach's chief financial executive asserted recently that its business model hadn't changed one bit from what it was before the meltdown. Goldman is making big money again, but its business model got it into such deep trouble it needed a multi-billion dollar taxpayer bailout as well as a bailout of AIG, which owed it money. Without these bailouts, there'd be no "talent" because there'd be no Goldman, no Citi, no Street.

Even if you believe Wall Street needs "talent," I suspect that firms such as Citi can get all the talent they need for far less than an average of $10 million each. Maybe even $1 million? The whole system of "comparable" pay is propped up by a zero-sum self-perpetuating competition in which the price of so-called "talent" is determined by how much every other bank is willing to pay for "talent." If every bank decided to pay $1 million, that would be the "comparable" price of talent on the Street. I mean, it's not as if this economy has so many other $1 million-a-year positions begging for Wall Street executives and traders.

There's a more basic issue here. The fact that these big banks have been judged "too big to fail" means their top executives and traders know they can take even bigger risks now, because we taxpayers will bail them out. So inevitably part of their firm's earnings, based on such risk-taking, now come as a result of this public insurance policy. When risks pay off, as many are doing now that the stock market is showing signs of life, they reap large rewards. When the risks turn really bad, you and I and other taxpayers will pick up the pieces.

back to me. This is absolutely correct. Why pay outrageous sums for those who failed? It is the same stupidity that elects a deserter for President and calls Kerry a war criminal and faker. In order for them to get the big money, the government had to interfere, give them cash and then gets castigated for interfering. Note this only happened on Wall Street. For car manufacturing, CEOs were let go (with huge bonus packages), companies were scuttled, downsized or sold. But Wall Street is too big to fail. If the same practices were followed we would give meth addicts money and then be surprised when they got high again.

Bang my head on the wall. Bang my head on the wall.

Part of me just once wants the chance to to ruin a multi-national corporation just for the platinum parachute. Then I can run for politics like HP destructor Carly Fiorina, or whatever her name was. Going for the Senate against Boxer. Wow! Just what we need, another failed leader who kisses business' ass.


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