Pay Czar Decides to Collect a Few Scalps, a Sign of Weakness
The Wall Street Journal reports that the pay czar, Kenneth Feinberg, is going to cut executive comp at 7 TARP recipients for the 25 most highly paid employees.
Does this really mean anything? The press will noise it up as significant (and some outlets will no doubt finger wag at this “interference”) but the short answer is no.
First, recall Feinberg’s hollow mandate. He is limited to only TARP recipients, not the beneficiaries of other forms of government largesse. And as anyone who has an operating brain cell knows, the number of firms on the dole and the degree of subsidies is much greater than the TARP. Have a look at the Fed’s balance sheet for a reality check. Even Larry Summers said,
There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.
So let us look at the list of companies affected. AIG, Bank of America, Citigroup, General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial. AIG is effectively nationalized but is allowed to operate as a private company, a simply bizarre state of affairs. Pay cuts falls well short of the oversight the government should be exercising (any private owner with that big of a stake would have thrown out the board and installed new management, for starters, and be all over AIG like a cheap suit). So this is an overdue, token measure to appease the public over the AIG retention bonuses that were also extended to clearly non-essential support staff, which is a clear tipoff that they were also extended to non-essential management.
Four of the companies are auto bailout related, so we can exclude them as far as implications for big financial firms are concerned.
Citigroup is an obvious ward of the state too, and he AIG argument applies there. The government should have more control there too, which does NOT mean micromanagement. When the Swedish nationalized their banks, they replaced management and set strict goals and targets, but did not interfere in operations. Bank of America may look like a borderline case, but it would be dead now had it not gotten emergency infusions. Given its credit card losses, Merrill, and Countrywide (for starters) combined with the sudden exit of Ken Lewis, it may well be in worse shape than is now perceived.
The point is that the collection of these scalps will do nothing to comp levels ex these firms. The companies that also enjoy implicit government guarantees are free to do the “heads I win, tails you lose” game of privatized gains and socialized losses. And Ken Lewis is the poster child of why these measures are completely meaningless. He sacrificed his 2009 pay, but will still collect $125 million when he departs Bank of America.
If the government is going to backstop the industry (and this isn’t an “if” anymore), it needs to limit those firm’s activities to what is socially valuable and regulate them heavily to contain risk taking. As we have said, reining in executive pay (and note there is no will to do that anyhow) is not an effective approach. Those employees who don’t like that are free to decamp and raise money in ways that do not involve the regulated firms in any way, shape, or form, save perhaps counterparty exposures on very safe, highly liquid instruments.
No comments yet.
Leave a comment
Categories
- 911, False Flag and Government Cover Ups
- Administration
- afghanistan
- Alex Jones
- auto loan
- Bail-Outs
- Banana republic
- Bank Failures
- bank of america
- Bankers
- Banking industry
- Bankruptcy
- Barack Obama
- Ben Bernanke
- Big Brother
- bullion
- car loan
- CEO compensation
- China
- CIA
- Civil War 2.0
- collapse
- Commodities
- Consolidation
- Constitution
- consumer credit
- Corporate governance
- Crash
- Credit Cards
- Credit markets
- Curiousities
- Currencies
- Currency War
- Debt
- depression
- Derivatives
- dollar
- Doomsday scenarios
- Downgrades
- drugs
- Economic Crisis
- Economic fundamentals
- Economy
- Employment
- End the Fed
- FDIC
- Featured Stories
- Federal Reserve
- Flu Pandemic
- Fuel Shortage
- Fun With Economics
- General Information
- Gerald Celente
- Glenn Beck
- Global Warming
- Globalization
- Gold
- Gulags
- Headlines
- Health Care
- Hedge funds
- Higher Rates
- house loan
- Housing
- housing bubble
- HR 1207
- hyperinflation
- illuminati
- Inflation
- infowars
- interest rates
- investment
- Investment banks
- Investment outlook
- iraq
- Jim Rogers
- JPMorgan
- Judge Napolitano
- Legal
- Letters
- liberty
- links
- Lost Generation
- Macroeconomic policy
- Martial Law
- max keiser
- Max Keiser Video
- MBA
- media
- Media Distortion
- Media watch
- Middle East
- Middle-Class
- Militarism
- Miscellaneous
- money
- money dollar
- MONEY AS DEBT
- moral hazard
- morgage
- Morning Report
- mortgage applications
- mortgage rates
- NAHB
- NAR
- New World Order
- News
- North American Union
- nwo
- obama
- oil
- on the edge
- Outsourcing
- Peak Oil
- Peter Schiff
- Planet Money Podcast
- Police State
- Politics
- Poster Revolution Contest
- precious metals
- Protectionism
- Protests Revolution Activism
- Quotes
- Rand Paul
- Real Estate
- recession
- Regulations and regulators
- Revolution
- rolfe winkler
- RON PAUL
- Ron Paul News
- Science & Technology
- Science, Healthcare
- sec
- September 11
- silver
- Social policy
- Social values
- socialism
- Soup Kitchens
- Sovereign Wealth
- stock market
- Store
- Stupidity
- Suicides
- Surveilance State
- Swine Flu
- Taser
- The dismal science
- the dollar
- THE OBAMA WATCH
- Torture
- total unemployment
- Tyrrany
- U.S. News
- Uncategorized
- Understanding The Crisis
- unemployment
- unemployment rate
- vaccines
- Video
- Wall Street
- War on Terror
- Washington Politics
- wayne madsen
- wells fargo
- world news
- World at War
- World War 3.0
- Write-Downs
Archive
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- October 2007
- August 2006
- July 2006
- June 2006
- May 2006
- April 2006
Links
- Al Jazeera English
- AL JAZEERA ENGLISH (BUSINESS)
- Americas Gone Bankrupt
- bernankepanky.com
- Change of Address
- Chink In The Armor
- Credit Card Watcher
- Credit Fucker
- Debt Binge
- Democracy Now
- Drink Atlas
- France 24 English
- Free Squat
- Fuck Bankers
- Go Sell It
- Greater Fool – The Troubled Future of Real Estate
- Greg Palast
- Gulag Blog
- Gulag ETF
- Gulag Planet
- HOUSING FEAR: The Truth about Inflation, Unemployment, Massive Deficits and the Real Estate Market
- Implode-O-Meter
- iOwnTheWorld.com
- iTulip.com – News
- iTulip.com – Video
- Karmabanque
- Kitco Forums – Economics & Politics
- Local Adult Services
- Local Gay Personals
- M3 Data
- Max Keiser
- Max Keiser
- Max on Huffington
- Mish’s Global Economic Trend Analysis
- naked capitalism
- Nathan’s Economic Edge
- NPR Blogs: Planet Money
- Official Gerald Celente Blog
- Paper Economy – A US Real Estate Bubble Blog
- Paper Economy’s Bubble News Network
- People of WalMart
- Peter Schiff Blog
- Peter Schiff Blog
- Recent Blog Posts
- Revolutionary Politics
- Rolfe Winkler
- Surviving the Crash
- the Economy Collapse
- The Market Ticker
- Weather Warfare