gsloth Wrote: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).

Along a similar line, Gregg Esterbrook has argued that part of the problem is that executive salaries are typically set by the board of directors, which is made up of executives of other large companies. It is in their interest to approve ever higher salaries because it makes it easier for them to justify a raise when their turn comes.

jh Wrote:

gsloth Wrote: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).

Along a similar line, Gregg Esterbrook has argued that part of the problem is that executive salaries are typically set by the board of directors, which is made up of executives of other large companies. It is in their interest to approve ever higher salaries because it makes it easier for them to justify a raise when their turn comes.

I would put a limit on bonuses and severance packages. Bonuses should not be given to an executive if the company, say, is about to lay off employees to cut costs. Executive severance packages are a joke and should be eliminated completely.

unfortunately, I believe that this is one area where government oversight will be necessary.

They should set up a compensation committee... the more you sell to the government, the more oversight you get... the better the assets you sell do, the more freedom you get... the worse, the less.

If you earn $10mm and want to give it to shareholders and executives, but the assets you sold have done poorly, you have to add some of that earnings to increase your capital position/decrease your leverage. If you earn money and the assets you sold do well, then you can more freely distribute your earnings.

I mean, if we're bailing you out and you really have good assets, just bad prices... then you shouldn't be hit as hard as someone who made bad decisisions to begin with, right?

IMO, a significant portion of the bonuses should be in the form of a 2-5 year deferred comp with a claw back... again, based on the performance of the assets you sold.

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.

Gsloth - first, and most importantly, I love the sayings in your signature.

I think you are probably right in all you say. I have heard that Raines' $90M over 6 years was largely due to bonus based on meeting certain earnings marks, and that the accounting was skewed to reach those earnings marks. I guess the investigation will show if that is all or partly true. Still, on the basic question of compensation, i am pretty sure that the executives regarded the bonuses as something more or less certain, and thus part of their expected compensation, much the way Mack Brown regards his annual bonus for making a bowl game, or some All-pro regards his annual bonus for playing in at least 50% of the team games, etc. Whether bonuses are off the table or not, i expect that current and potential executives will look at all reasonably expectable income as "the package", and if it is not enough, adios.

I guess we will get a look at the solution soon. My prediction is that the average American will not be happy - I can hear it now - "Wish I could get punished by having to accept only half a million", yada, yada, yada, and it is important to the politicians that the American public feels the Wall Streeters are adequately punished. Heaven forbid (is that politically correct now?) they are seen as going easy on them, especially if/when it comes to light how much, how often, and how long these Wall Streeters have contributed to the campaigns of Senator X and Representative Y.

I agree with Hambone. The extent of limits should be based on how much the guv is doing to save that particular bank's bacon by purchasing the risky assets. The magnitude of the limits should be based on performance of said assets.

It would take someone with more understanding of the particulars than I to draw specific lines from those principles.

As of 7:00 PM, it looks like there won't be a deal... but in Washington, "magical" things usually happen between the hours of Midnight and 6 AM Eastern time--when the media and most of the Nation is sleeping.

Explaining the mortgage mess to an Aggie....

If you haven't seen it, the entire slideshow is amazing. Some pg-13 to R language... as is appropriate for all this bs.

http://docs.google.com/TeamPresent?docid...pauth=true

WMD Owl Wrote:Explaining the mortgage mess to an Aggie....

Some more food for thought on who is paying for this bailout.

Yeah, let's turn this into a tax discussion, too!

gsloth Wrote:Some more food for thought on who is paying for this bailout.

Yeah, let's turn this into a tax discussion, too!

Odd that he gets picky about the distribution of the tax burden while completely ignoring temporal considerations. In reality, nobody will be paying for this bailout now. We'll just borrow it and add it to the pile. We've been running deficits since 2001.

Talking heads on Cable News predict passage by a "narrow margin" in the House.

Senate votes Wednesday.

It looks like lots of "shoulder dislocations" going on.... more than just usual "arm twisting"

Looks like it isn't going to make it... down 227-206.

Dow down 409 at 12:53 P.M.

Pelosi couldn't deliver the Dems, with over 1/3 voting against the Bailout.

Back to the drawing board, if it doesn't have to get sold off to pay for current debt.

Quick and dirty.

George W. Bush, Nancy Pelosi, Harry Reid, and Barney Frank all favor this.

That means it can't possibly be a good idea.

Nothing substantive to add to y'all's observations.

WMD Owl Wrote:Pelosi couldn't deliver the Dems, with over 1/3 voting against the Bailout.

And McCain, Bush, Cheney, and Boehner, delivered what exactly?

Wonder if anyone is listening to Galbraith. Hambone seems close? - not a criticism.

JK Galbraith posted again

“Senator Obama and his allies in Congress infused unnecessary partisanship into the process,” Mr. McCain said, before adding in almost the same breath: “Now is not the time to fix the blame. It’s time to fix the problem.”

Irony much?

If anyone is struggling with the implications for our current financial situation, this commentator gets pretty close to what I think is happening. This bailout really doesn't fix things for the long-term; it only addresses one facet of the problem. And yes, we are going to be forced on a severe financial diet as a nation - cutbacks in government spending and major tax increases. And the associated economic slowdown that will come with it. That's the odds-on course, IMO.

WMD Owl Wrote:Looks like it isn't going to make it... down 227-206.

Dow down 409 at 12:53 P.M.

Pelosi couldn't deliver the Dems, with over 1/3 voting against the Bailout.

I've read it the other way around -- apparently the Democratic leadership promised 140 "yes" votes, and that's what they got. The Republicans, in the end, didn't get the votes that their leadership had expected & committed to.

I'm getting the (unfortunate) impression that this is all intermingled in election-year politics. I think most of the Congresspeople know that some kind of action like this bailout is necessary, but they're also looking at polling numbers that show the public (by and large) doesn't like it. So they generally want it to pass, but many of them don't want to be the guy voting "yea." So I'm sure there are a lot of closed-door negotiations (who can afford to vote "yea" and who can't -- there's an article in today's WSJ pointing out that those who are in closely contested elections were much more likely to vote "nay") and in the end it sounds like the Republicans didn't get some of the votes they thought they had.

Now I'm no big Pelosi fan -- and if this speech some Republicans keep talking about was really so partisan that it turned a dozen Republicans against it, then I say run her AND the dozen idiots who put political "feelings" ahead of good policy decision-making right out of town. That's pretty sad.

Actually, the vote-down gives those who voted against it some political cover now. They can say they voted against it, it will get tweaked slightly, and then they can say that things got worse and we had to do something. So they can vote for it.

And I wish I could find the picture now, but it shows that the leadership just doesn't get it. There was a picture on an online Time article that had the key leaders in front of the microphone to announce the tentative deal on the weekend. It had Harry Reid, Nancy Pelosi, Judd Gregg (Republican Senate lead on the deal), and Paulson in the foreground. Pelosi was speaking and had this weird look on her face, but she was trying to smile. Reid had the goofiest grin on his face, like he was intentionally smiling for the camera. Gregg was also smiling. Only Paulson had an appropriate look on his face - not smiling, but not overly serious. To these Congressional leaders, it looks like they're just playing it for a game and happy at how things turned out. But as I said, Paulson looked like the only one who put on an appropriate face for the gravity of the situation. Everyone else is playing for the cameras.

That's how I view it, then and now. Current leadership and vision in Congress (on both sides of the aisle) is non-existent.

erice Wrote:

WMD Owl Wrote:Looks like it isn't going to make it... down 227-206.

Dow down 409 at 12:53 P.M.

Pelosi couldn't deliver the Dems, with over 1/3 voting against the Bailout.

I've read it the other way around -- apparently the Democratic leadership promised 140 "yes" votes, and that's what they got. The Republicans, in the end, didn't get the votes that their leadership had expected & committed to.

I'm getting the (unfortunate) impression that this is all intermingled in election-year politics. I think most of the Congresspeople know that some kind of action like this bailout is necessary, but they're also looking at polling numbers that show the public (by and large) doesn't like it. So they generally want it to pass, but many of them don't want to be the guy voting "yea." So I'm sure there are a lot of closed-door negotiations (who can afford to vote "yea" and who can't -- there's an article in today's WSJ pointing out that those who are in closely contested elections were much more likely to vote "nay") and in the end it sounds like the Republicans didn't get some of the votes they thought they had.

Now I'm no big Pelosi fan -- and if this speech some Republicans keep talking about was really so partisan that it turned a dozen Republicans against it, then I say run her AND the dozen idiots who put political "feelings" ahead of good policy decision-making right out of town. That's pretty sad.

This is what made me the angriest about her speech. If I were a Republican in a close contest, and my constituents didn't want me to vote for this, I'd want assurances that the Dems that they wouldn't use this against me... and she threw me under the bus.

Maybe she did so because in order to get to 140, she had to promise some dems that she would hammer the republicans

either way... bad move... bad politics.

This collaboration between This American Life and NPR gives a good overview of how serious the liquidity crisis is, and not for Wall Street but for businesses across the board.