erice Wrote:

NoodleOwl Wrote:Time to do a rip-up and redo. In the past couple of weeks, this bill has gone from 3 pages to 457. Also, several alternatives have been proposed by financial minds from across the political spectrum, nearly all of which would cost the taxpayer less than the instant proposed monstrosity.

I suspect the presence of a more sensible (and less bloated) proposal in the pipeline will be the final factor that gets the current version passed.

But what will ACORN and the wooden arrow manufacturers do???

Whoever added that garbage to Bill deserves massive amounts of public humiliation.

texd Wrote:

WMD Owl Wrote:Was it just me or did W's speech tonight leave everyone less than optimistic?
I can't see the Democrats and Republicans forming any compromise agreement anytime soon.
This plan has more potholes than Kirby Drive.

Does bipartisanly telling Paulson to stick it count as a compromise agreement?

Best analysis I've seen:

This is a plan developed by George Bush, Nancy Pelosi, Harry Reid, and Barney Frank. There's no way it could be a good thing.

gsloth Wrote:Two notes to OO, as it would take too long right now to write up something else, on your question:

1. Personal opinion is that a lot of this markup in pay (particularly in the executive suite) is somewhat of a self-fulfulling prophesy, or bidding against oneself. (You see it in pro sports a lot.) Yes, the pool is somewhat limited, and yes, the cash is technically available, but do you absolutely, positively have to have that guy/gal high up the chain? Sometimes yes, oftentimes no. (And I'm speaking broader than just the CEO context.) I'd say that because someone else gets X money, then the next person in a similar role has to get X+Y. There's a lot more that goes into it, but that's the simplistic way I view it (rather disgustedly, if you ask me).

2. I think where the real restrictions are going to come are in bonus payouts and trying to recoup obscene bonuses paid out in prior years for what turn out to be inaccurate metrics (like earnings). The accounting at some of these public firms (no shock) have been manipulated, albeit within the structure of allowed accounting. A lot of these contracts that are close to worthless now have been marked in internal accounting as being valued much higher than they probably would have been if there were an active market for the securities (as opposed to a one-to-one sale approach more typical). Things have been escalating because some of these things were needed to be sold to raise appropriate capital levels, which resulted in pricing being available for certain classes, raising capital requirements further because assumptions had to be worse now in the accounting, which led to more sales, which people started not wanting, driving prices down further...

It's an ugly cycle. And until there are buyers willing to pay X price, it gets worse. That buyer of last resort may have to be the US Government, in this case. Otherwise?

BTW, personal opinion - this is not the end of things. Things are going to get worse. This will be a decent stop gap, but more damage remains to be unearthed and dealt with. I'm not ready to use the D word yet, but something ugly this way comes.

Agree 110% that it's going to get worse. Much worse. I'm guessing hyperinflationary depression--depression as everything loses value in real term, hyperinflationary because the at some point the government turns on the printing presses to pay off the debt. My prediction is 50 million unemployed with inflation at the rate of at least 50% per year. I'd be more inclined to go higher on the inflation number than lower on the unemployment number.

We could always look at what happens in the EU (generally by statute) and Japan (by custom). The highest paid employee of a company (and this would probably be restricted to publicly-traded companies in the US) cannot earn more than some multiple of what the lowest paid full-time employee earns. That multiple is generally 100 or 200, so that if the lowest paid employee works for the minimum wage and works about 2000 hours/year, making (round numbers for simplicity) $12,000/year, then the highest paid employee cannot make more than $1.2 million (if 100 times) or $2.4 million (200 times). This naturally forces CEOs in those countries to take a long-term approach to management, rather than the quick rape approach that happens all to often here.

We sorta kinda did something like that, but as is our tendency when regulating these kinds of areas, we screwed it up. We enacted a provision that the highest paid employee was limited to a multiple of the lowest paid employee, but that limit applies to guaranteed compensation only. In other words, it doesn't apply to incentive compensation. So, we come up with all these contingent bonuses to escape the limit. So I'm making $1 million base, but I get a $100 million bonus if earnings per share hit $20.00 at year-end. Middle of December and EPS is looking like $19.50. I call in the CFO, and he and I sit down and figure out how to change the depreciable lives of our assets, or how to recognize some sales that won't ship until the first week of January, or capitalize a bunch of costs that we probably should expense, or whatever--you get the picture. IMO we've actually made the abuses worse.

As for the idea that we have to pay these bonuses to attract talent, to whom exactly are we going to lose them? Suppose we capped compensation at 100 times for base and 200 times for additional contingent bonuses. We wouldn't lose managerial talent to Europe or Japan because their limits are lower than ours. We wouldn't lose talent to other US public companies because they'd be playing by the same rules. We might lose talent from publicly-traded companies who move to privately-held, but there are only so many of those opportunities. We might lose talent to companies somewhere like Dubai, but again there are a limited number of those opportunities.

Libertarian me thinks this is a good idea.