http://online.wsj.com/article/SB124416737421887739.html This is rich....."Special Master for Compensation"! Wow.....soon Obama will have more czars than the old Russian empire. What's next?
Actually, I don't have a problem with monitoring the pay of executives who run companies that can't survive on their own without Federal bailout money. Granted, it's a slippery slope, but it's been well publicized that the executive compensation practices of recent years show a clear trend of extremely high levels of compensation regardless of performance/profitability. It's a chicken and egg situation with corporate execs as much to blame as anyone.
Actually in that sense, nor do I.....I would think that falls naturally under their purview as "trustee or receiver. However, those that "can't survive on their own" would be a very limited group at present.....Fannie, Freddie, AIG and GM and Chrysler. The vast majority of companies the "Special Master " will oversee do not fall into that category.....very important to remember that the intial injection of public monies into the big banks was not discretionary.....it was a cram down. What then followed were the discretionary applicants who were compelled to accept the capital because to NOT do so, clearly puts them a material competitive disadvantage. Then, Congress decided to change the rules making TARP money in effect a "scarlet letter". Firms then began lining up to repay the money only to then be told, not so fast.....you must jump through all these hoops, satisfy all these conditions, etc, etc. Financial firms have been raising funds in the capital markets from private investors to the tune of billions and billions - in unprecedented amounts - in recent weeks to repay the TARP and get out of the cental government "'jail", clearly reflecting market confidence in their ability to survive and prosper on their own......AIG, Fannie, Freddie, GM, Chrylser do not have such prospects and zero chance of raising a nickel in private markets..... In their capacity as trustee/receiver, compensation falls naturally under their purview.....otherwise, compensation practices between consenting parties is strictly a private matter....slippery slope indeed. I shudder at the thought of the central government becoming more intrusive into the capital allocation process......the question comes down to who is in a better position to make the most efficent and effective resource decisons......the collective judgement of market participants in aggregate, or Pelosi/Reid/Barney and their comrades in Congress? :shock:
I agree with both of you. Of course the feds set a standard for waste, over spending and general incompetence that private industry could never duplicate but when these companies took bailout money I think that they inherently abdicated some of their own rights and in this context I have no problem.
In the last 10 days, BAC has raised almost $20 Billion in capital from investors in the private sector who obviously believe that they can survive and prosper....I'd say they were doing just fine. Citi....the jury is still out to be sure....they have a wealth of global assets at their disposal to weather the crisis and my guess is we'll see them raise private money in excess of the $20 Billion of the BAC offering .....but not immediately.
I think we're all on the same page here. Well, maybe most here. Anywho, the concern for me, just as it is with all new 'federal powers' is that they are always a Pandora's box.. once they are opened, it is only a matter of time.