Should The Government Decide What You Get Paid?
One of Obama’s Czars has actually done what he was hired to do. Kenneth Feinberg, WH pay Czar, has ordered that all bailed out executives that received any TARP monies, take deep pay cuts and make due with 90% of what they used to earn. This move will affect all seven companies that accepted monies from the Federal Fund : Bank of America, American International Group, Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.
The pay cuts will be directed at the top 25 highest paid executives. Those companies that accepted TARP funds and have paid them back, will not be affected.
THOSE IN FAVOR SAY:
The move was necessary because it sends a message to many Wall Streeter’s that if you are going to accept Government money or taxpayer dollars you cannot do business as usual. Some rules have to change and you will now need permission to give out perks like private jets, Green Fees at Augusta or front row season tickets to your favorite sports team/. You will now have to be more careful not to take those risky gambles that some say contributed to the current financial crisis. So whether your company raked in billions in profits, you will still be paid a max salary set by the pay Czar. A salary that will be no where what your talent says you are worth. A salary that will now leave you outside looking in when Obama comes back to NYC for his next $15,000 a plate Fundraiser to ask you guys for your support.
THOSE OPPOSED SAY:
It will be harder to retain top talent at those pay levels. Most of the top executives at these 7 companies will likely look to move elsewhere where their ability to earn more money will not be restricted by the government. The government is relying on the ability of these companies to turn a profit so that they can get repaid. In essence, it is the taxpayer that has a vested interest in seeing these companies perform well. But with that said, the financial market relies on the performance of top executives that know how to create wealth.
Risk taking is inherent in the Wall Street game. The best and the brightest in these firms must navigate thru periods of economic downturns, inflation, bull markets, bear markets, and political seasons to get the job done. If you reign in these guys, you take away what they do best. You will have mediocre returns, you will have disgruntled share holders, more layoffs and the taxpayer never gets paid back.
This cap on executive pay will eventually seep into other industries that are not as hated as the financial markets. Senator Chuck Shumer is already talking about enacting these rules across a broader spectrum of industries and organizations. Wall Street need not take this with their hands behind their backs. After all, it was Wall Street that donated their millions to Democrats to get them in office.
COULD THIS BE APPLIED IN OTHER INDUDTRIES?
The one industry that I try to draw a parallel with is the Sports industry. Imagine if the Commissioner of baseball, ordered that from now on, the top earning baseball teams would have to cut their team salary budgets by 90%. Any team paying over 150 Million dollars a year in salaries to its ballplayers must now get by with only 90% of that. How would that impact a team like the Yankees. Would they be able to go out and sign all the best players and increase their chances year in and year out of winning the World Series? Would any of these guys want to come play for the Yankees knowing that they will not be able to get a 50 million dollar contract? Those players would go play for teams that could pay them. Or every team would be forced to stay just below the cap.
It is not by coincidence that you see teams with microscopic payrolls such as Kansas City, Pittsburgh, San Diego, Washington ad to a certain extent Milwaukee or Tampa Bay finish at the bottom of their leagues yar in and year out. Why? Part of the reason is that they can’t pay the best players top money to play for them. They have to rely on less talented and cheaper players to compete. The best players seek the teams that will pay them the most money. The biggest example is the New York Yankees. They spend & pay the top players more than any other team in the major leagues. The results are tangible. The fans and the people that pay to see these teams play, don’t mind the high salaries as long s they put a good product on the field and it wins.
So it is the same with private industry. Top talent reaps rewards. We can’t castigate or neuter these guys take away some of their motivation to excel. I think in a perfect world, everyone would rather play for the Yankees and get paid a lot of money instead of the Kansas City Royals and get paid minimum wage. My instincts tell me, curbing anyone’s pay is not a good recipe to be used long term.
Sources / References:
http://www.foxnews.com/politics/2009/10/
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Well it's done. You got what you wanted. Why are you bashing it now?
The execs are getting paid what their talents deserve. Their talent bankrupted the company.
Wait a minut. You're right they should not even get paid, they should all be fired.
they shouldn't get stock options or anything else, they should all just be let go of.
I never was for cutting Exec pay. I have never written that anywhere. I am for getting paid what you are worth. Getting paid as much as you can. So please, get your facts correct. If you find one of my articles where I am in favor of pay cuts, I will buy you lunch.
The Yankee's salary cap has outpaced the rest of baseball for over two decade but they have not won a World Series in almost a decade. The Twins, White Sox and Marlins won World Series will lower salaries. Therefore, we know that salaries is not indicative of wins and loses. However, it is true that the Yankees chances are much better since they can afford to retool their team with free agents rather than bring them up through their farm system (and the Yankees have a good farm system).
With basketball, you have a salary cap and the players are limited as to what they can earn. Now, there is no salary cap in Europe so why do you think it is that Kobe Bryant is still in Los Angeles when he can make twice as much in Greece? Because the NBA is the biggest game in town when it comes to basketball.
The same would be true for most of those "smart" people on Wall Street. I doubt many of them will give up their posh Manhattan lifestyles to walk the deserts of Dubai.
In the NFL, you have to get your money upfront because there are no guaranteed contracts. If you don't perform, you get the boot. The way Wall Street works, you can be a number on draft pick, run for 200 yards all season and expect a $20 million payout to get cut. We have CEO's who run companies into the ground and walk away with $100 million. For what? Hell, I could ruin a company in a matter of months and only charge $2 million... if that's the criteria.
Yeah but not funny, just insulting.
I don't understand how someone in one article calls them greedy coporations and how everyone in the administration is in the pocket of these banks...and then in another article jumps up and say they are the best and brightest of the nation.
In one article they are the bad guys and in another they are our saviors.
The Yankee's salary cap has outpaced the rest of baseball for over two decade but they have not won a World Series in almost a decade. The Twins, White Sox and Marlins won World Series will lower salaries. Therefore, we know that salaries is not indicative of wins and loses. However, it is true that the Yankees chances are much better since they can afford to retool their team with free agents rather than bring them up through their farm system (and the Yankees have a good farm system).
With basketball, you have a salary cap and the players are limited as to what they can earn. Now, there is no salary cap in Europe so why do you think it is that Kobe Bryant is still in Los Angeles when he can make twice as much in Greece? Because the NBA is the biggest game in town when it comes to basketball.
The same would be true for most of those "smart" people on Wall Street. I doubt many of them will give up their posh Manhattan lifestyles to walk the deserts of Dubai.
In the NFL, you have to get your money upfront because there are no guaranteed contracts. If you don't perform, you get the boot. The way Wall Street works, you can be a number on draft pick, run for 200 yards all season and expect a $20 million payout to get cut. We have CEO's who run companies into the ground and walk away with $100 million. For what? Hell, I could ruin a company in a matter of months and only charge $2 million... if that's the criteria.
If a CEO doesn't perform - she/he should be fired. If they are pressured into actions due to government influence - they should be on FOX, or MSNBC telling their story to the world.
That's not what the Federal Reserve and FDIC claim. I'm assuming you're talking about the Community Reinvestment Act signed in by Carter.
I heard this argument made a few months ago, Liebowitz at the New York Post made this argument and so did Ron Paul.
The FED, FDIC, Comptroller of the Currency John C. Dugan, Tim Westrich of the Center for American Progress, Robert Gordon of the American Prospect, Ellen Seidman of the New America Foundation, Daniel Gross of Slate and Aaron Pressman from BusinessWeek.
these people and istitutions have said that CRA didn't have a negative effect on the subprime problem.
In fact banks not regulated by the CRA were involved in the subprime mess.
50% of the subprime loans were made by independent companies not regulated by the CRA. About 25% of the subprime loans were made by partially regulated banks and companies.
According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts. most CRA loans were responsibly made, and were not the higher priced loans that have contributed to the current crisis.
A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.
And it is the reselling that actually brought the housing problem to Wall Street.
Big banks like the ones we bailed out sold and resold these loans as part of derivitives and security blah blah blah.
The banks increased their debt burden so much investing in high risk ideas, for short-term gains, that when trouble hit, most of the Banks didn't have any money to deal with the economic hard time.
It's not the government's fault that they deregulated Glass Steagall and allowed for money placed in banks to be invested by corporate America in high risk trades?
Of course not... it's always corporate America isn't it??? Except - that before the Steagall Act was lifted by the government (note the pen Clinton used to sign the bill went on display on the WALL of the single man who profited the most by Clinton's signature but was long gone well it all fell apart as was CLinton) and before the community investment act was forced upon banks via Carter's signature on the community reinvestment act... people actually got loans based on CREDIT worthiness.
If you do poorly at work you should be fired and so too should the government official if he's telling you what to do!
You disagree Amalgam?
I'm for it because it will be a deterrent for companies to seek such bail out funds in the future. Who are they to receive such subventions in the first place?
The companies that are forced to cut their benefits and pay are publically funded.
But I get where you're coming from.
This is the something they got done.
"I am for getting paid what you are worth"
If you are then you should agree that they shouldn't get paid anything.
Do you?
that without our tax monies they would not exist.
Let's take all that money and give it back to the government instead.
All the bonuses that they were about to give each other, and all the money that they were going to spend on the perks of the job, let's get that money in the form of paybacks for the handout the companies got from the tax payers, plus interest.
Especially since the reason for giving the companies the tax dollars was so they could start lending again, which they haven't done.
So if they didn't do what we gave them the money to do, why should they get a single penny in bonuses and perks, or even a salary.
these companies wouldn't be around right now. They wouldn't have a job right now, they wouldn't have a company right now.
it's time the companies and banks get treated like the beggars they are.
Clinton repealed the Glass Steagall act and Sandy Weill walked away before the collapse because all the real winners of Clinton's actions were long gone BEFORE deregulation and what it truly did was known. The bailouts for Mae and Mac - should never have happened and had Barney Frank told the truth and had our government done ITS job - it would not have been ok to say "they are not in trouble."
Since none of them did - let's fire Frank and the rest of his cronies too.
"Clinton repealed the Glass Steagall act and Sandy Weill walked away before the collapse because all the real winners of Clinton's actions were long gone BEFORE deregulation and what it truly did was known."
Sure would have been nice if the people after Clinton changed the decision to deregualte.
Clinton wasn't around to see what his actions have done.
W. was around when deregulation's problems were visible, what did the Republicans do to get rid of problems due to deregulation? They did more deregulating and tax cuts for the wealthy, cause that is what reagan would have done.
So Clinton with a Republican Congress repeals regulation, Then Bush with a Republican Congress decided to repeal more regulation.
And now it's Obama's fault for regulating again.
So just so I'm clear on this, are you for more regulation of Wall Street than now, the same level as now or less regulation from now?
Because right now the people you named are trying to regulate the companies more.
From the WSJ on Bush / Obama / TARP:
"Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.
Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics."
And that CEO - he's under the pay Czars claws.
The bills were passed by a Republican majority, basically following party lines by a 54-44 vote in the Senate and by a bi-partisian 343-86 vote in the House of Representatives.
After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions.
The final bill resolving the differences was passed in the Senate 90-8 (one not voting) and in the House: 362-57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999.
The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. There was a study conducted by Congress in '87 that did a pors and cons of repealing the ACT.
I wouldn't blame just Clinton for that one.
One of the points you bring up is great.
The repeal was Republican and Democrats - and special interests topped public interest. The purpose of the act to begin with was to prevent what happened FROM happening.
There was a time when the welfare of the people actually did matter to those elected. I will absolutely agree with you there.
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