I'm not sure what you are saying. Are you advocating firing minimum and low wage employees so that your proposed 10x cap would be a slightly larger amount of money?

If that is what you think is a better idea. If they aren't contributing to this success that has earned big raises for you, why would you keep them anyway? Just toss the dead weight overboard, or bring them along. Make the hard choices that these executives never seemed to want to make.

Would it hurt them to force a cap on wages during this tough time? If they are so desperate for cash that they are panhandling in D.C., they can accept limits on executive compensation to get through it.

Let me put it this way... If I am so desperate for cash that I run to a higher authority (parents, boss, government, etc) looking to be bailed out from my mistakes, I don't get to decide what conditions are attached to this money. I either decide to accept responsibility and fail on my own, or I accept their money and whatever new conditions it brings with it. So, equally, they can decide to fall on their sword and collapse, or swallow that tough pill and navigate through the crisis. If they demonstrate their talent under those conditions, they will do alright in the end. If they are too attached to excessive compensation to care, then we're better off in the long run for not helping to finance them.

Do you think it is realistic to expect people to take a pay cut for say 20 million to $120,000 (minimum wage x10) ? These are the same people who's greed got us in this mess.

CEO's actually require talent, experience/education, and decision-making ability. Well a line-level employee does contribute to the success to a firm, they are replaceable and don't have to make the decisions that executives do. Does this mean that you have crappy CEOs? Of course. Just like you have first-round busts in the NFL. You can vote to buy and sell shares in companies. You can vote for your board members.

The problem isn't so much CEO and what they earned, it's the way we value stocks and the way CEOs are compensation. If a CEO is paid $100 million a year in compensation, but what he has delivered in results merits such pay (both short-and-long term), I have no problem with that.

However, everyone is responsible for this mess. Home-owners who didn't have the money to purchase homes and people who took credit out of their homes to buy the latest cars and vacations, a government that loosen regulations, and a reserve board that kept cheap money flowing way too long.

But why would you want to leave the option open for public funds and then make it certain that the company will be unable to attract capable leadership?

Once the public funds are available if you want control of the hires, I see no
no problem there. You want to determine the appropriate compensation for those hires? Not an issue, you're an owner.

But the 10x factor you propose? Ludicrous to the extreme.

Let me put it in some perspective. I bill at an hourly rate of $100/hr just to do media planning & placement, about that 10x lowest you proposed. While I'm damned good at what I do, there's also a much larger pool of people who can do what I do than they're are who can navigate the waters of running a Fortune 500 type company. Scarcity affects cost.

Yes, it is. They need to learn their lesson and not be above taking a hit for their actions.

Hmmm. Is it really the fault of a homeowner who got a mortgage, or the fault of the lender that gave it to them? Assuming they did not falsify the requested documentation for the financing. If I make bad loans without properly vetting them, it is my fault.

Both.

Except it is not exactly market driven. I am simply not ever going to buy that the going rate for a WaMu executive was really $18 million for 3 weeks of work, especially when it resulted in the largest banking collapse in US history.

I don't think I agree. If I make a bunch of bad loans without making sure I had a good chance of getting paid back, I'm the bigger chump. Perhaps there is some blame to be shared, but I find it to be more like 70/30 at best, with that 70 on the side of the lender.

What hit? The existing management will simply walk away & find higher paying jobs in another sector. And an insufficient number of people capable of pulling off the recovery (that you now have a directly vested interest in, having invested public funds) are going to work for relative peanuts simply out of the goodness of their heart.

Hells bells Tek, there's a scarcity of competent leadership at the current compensation levels, why on earth would you want to reduce that pool even more?

Believe me, I don't disagree with you that there's some absurdity in executive pay levels. Work with the number of extraordinarily well paid idiots I've dealt with over the past decade & that problem becomes quite clear. It isn't the notion of some sort of cap that I'm taking issue with, it's the complete disconnect with reality that a 10x cap suggests that bothers me.

Yet, I have read that the top executives at companies in Europe average out to around 11x that of the lowest earner. In Japan, it is similar (though perhaps as high as 20x). In the US, it is around 40x. The difference in compensation from the top of Toyota to the bottom has been pointed to as one of the reasons they continue to perform so well compared to the Big 3 here, which tend to at least double the difference in compensation (compared to Toyota, which amazed me, because I was always supposed to believe that the difference had more to do with the excessive compensation paid to the union workers).

My point was:
They will not take the hit voluntarily and you can not force them.

So, what is the point of offering them a bail out with terms they will not accept?
If their company tanks, they will still walk a way with more then your proposed pay cut.

And we take their picture and post it around the nation at every soup line that we are lining up for when the economy collapses. This way we remember them properly for the decision they made. We don't let these people be forgotten in history like we did the last time that unbridled greed drove us into a massive depression.

I thought the whole point was to avoid this.

I'm expecting Wachovia to fall while they're procrastinating over what should be done ...

Once that happens the press will look for the next victim, rinse and repeat until something is done to help prop up the system.

The WaMu debacle* has imho hurt things hugely because all the banks who might have considered merging now look upon the 'lame ducks' in the same way vultures circle an injured animal ... they're waiting for them to fall so they can get their pickings easily.

*I'm still trying to get my head around exactly why the regulators forced the bank down when it falling and leaving god knows how many billion in debt defunct must have hurt other institutions hugely - making them much more suspectible to failing themselves; While WaMu was a functioning entity the debt had at least a chance of being made good upon.

I always though Wachovia was in one of the stronger positions of the failing banks. Guess not. I think JP Morgan will jump in.

Let's put it the other way: I walk into the bank to get a loan for a house that costs a $400,000. I don't have to put down a down payment, with a meager income and little savings, don't you think, "I don't think I can afford this?". Nope, you just want it.

I think people wanted to keep up with the Joneses, and they seem willing to get do whatever they can. And it's not just mortgages. It's HELOCs, cars, vacations, credit card debts, ect. This doesn't mean that banks weren't greedy, but that everyone shoulders the blame.

Color me stupid but ... what's a HELOC?

Home Equity Line of Credit.

Just out of curiosity why do you expect Wachovia to fail? As of this moment they're talking about making a legitimate deal with another bank as opposed to being bought for pennies by one of the "vultures circling the carcass".

I'm assuming WaMu was forced down because the people who had large sums of money with them pulled it out and the bank was then undercapitalized. I'm not sure why else they would have to come in and take over right then. However it's not like nobody saw it coming. There was speculation for quite some time that WaMu would not survive.

Self-fullfilling prophecy. They have a little time, but as people see them as the next failure, it will get worse.

Oh I agree, fear will eventually bring down Wachovia as well as probably most other financial organizations the longer we wait for something to be done. I would expect that if the bailout is not done very quickly then Wachovia probably has no choice but to sell before they are sold by the feds but from what I've seen their failure isn't imminent, at least not today, like WaMu's was.

There was also the fact the way many of these loans were sold. They hooked people by telling them they'll easily either re-fi or sell with gain in a couple of years, so don't worry about the balloon, variable interest, etc. Then people wake up one day, their payments explode and there is no new loan options. Buyer beware, but the companies selling these loans sold a bill of goods.

This is what happened to me. However, I have some locking options and other things that work in my favor. Plus, the balloon isn't for another 10 years at which time I plan to be out of the house.

I'm still in a variable, but it has worked for me. It can't go up over .5 a year, and this was the first year it could adjust and it dropped a whole point. Hopefully in the next few months or at least next year I can lock a fixed rate.

NPR's All Things Considered did an excellent story on Friday about how the U.S. financial system (mostly dealing with day-to-day kinds of things) almost collapsed over the past two weeks, which spurred the latest round of activity.

I highly encourage everyone to read or listen to it here: The Week America's Economy Almost Died : NPR

Supposedly that is what it is about.

Isn't it the job of the bank to determine who is a good candidate and who is not? When I bought a home, we only put 3% down, but I can tell you that we went around with our broker a few times and had to put up plenty of documentation about our incomes, tax history, etc. They didn't just take our word for it. They even got concerned about some items in our contract and we had to jump through a few additional hoops. Oddly enough, our mortgage was with Washington Mutual back then (2001) until we re-financed.


It was all about greed. Banks hoped these people might either find a way to pay the mortgage, or that Fannie Mae/Freddie Mac would back it up, or maybe that they would be able to package it up and sell it around to spread the risk. They weren't worried about whether these people were good risks because they thought they had a system that allowed them to bank some value on the mortgage regardless.

I heard it in the car yesterday and it was very good. Check out the article and read it if you don't want to listen to the audio version that's about 9 minutes long.

SI

Yeap. When you think about it, it's your money that is on Wall Street. Your 401k, retirement, your savings, ect. They are investing through these banks and investment funds. If they went down without any help, the baby boomers are screwed. And unemployment will skyrocket will no liquidity in the market.

haahah, yeah, i thought it was slang for "helocopters".

Neighbor: "oh my God, Bill, is that a helocopter in your driveway."

Bill: (beaming) "yep, i got it with financing at the Wamu on Main St."

here's Mr. and Mrs. Bill Fitch, with kids in tow, proudly displaying their new helocopter they were able to afford thanks to their friends at Wamu.

this makes no sense at all. why would people w/ no income or money in financial institutions need to be a part of this nonsense $2300 per person bailout of yours? so a kid in your family who makes money from their lemonade stand and deposits their money in a FDIC insured savings account deserves $2300, the same as a business exec who invests large sums of money with a brokerage firm that has actually failed? the whole purpose of a bailout is to make right all the people affected by Wall St., you just want every citizen in this country to get $2300 for no reason. if you could kindly exit this thread and never come back things would be much better.

I did not create any bailout.


What is so hard about math for you? Going by the estimated population of this nation, which includes people of any age, this appears to equal about $2300 PER PERSON. It's not whether I want it to equal that or not, it is simply that the math appears to work out that way.

Maybe a vote today on the bailout - courtesy of CNBC

but your math involves people who weren't even affected by the collapse of our economy.

put it this way, i'm going to give you an analogy for your idea and you tell me if you'd still be in favor of it:

i throw a huge party at my house and have 20 people come by. they all park their cars on my property, underneath my massive car port. for whatever reason, the car port collapses and destroys all the cars underneath it. "no problem", i say, "i will personally reimburse you for the damages you suffered".

everyone else in my neighborhood then lines up outside my gates looking for reparations also, even the homeless people who didn't own any cars.

why on earth would the people not directly affected by the collapse be entitled to reparations?

that is your idea.

What people, living in this nation, would not be affected by the collapse of the economy? I can only presume you are talking about some portion of the population that does not eat, wear clothes, or need shelter from the environment. Be as detailed as possible.


How does this have anything at all to do with the bailout being a total amount that appears to break down to about $2300 per person in this nation? I'm not sure where you're failing to understand the math. All I said was that, if the math is right, and the bailout is effectively priced at $2300 per person in the US, I would choose to opt for a per person payout instead of handing it to the industry that created the problem. It really isn't more complicated than that.


I don't know. Since it was your proposal to bring "reparations" into the picture, you must know better than I.


Nope. My idea has only been that I would prefer the government pay each human being in the nation an equal portion of this bailout money instead of concentrating it on the entities that created the problem. It has nothing to do with you holding a party or taxes or anything else.

Is it a cool idea? Sure. However, it would do nothing, except maybe starve off the depression that would possibility happen without it.

By giving Wall Street and banks the liquidity it needs, they can secure and save your savings and investments (401K, IRA, stocks, ect). They can give you loans that they wouldn't be able to give you without this package (and I suspect it would be a long time before credit was available it this doesn't happen). They help create jobs we need and a paycheck we need to get the economy moving. Without any liquidity in the banks and investment firms, you won't have these things, and it will get ugly, really ugly. It will have a enormous impact on Main Street USA on if the bailout does or doesn't get passed. Should Wall Street and bank CEOs be held responsible for their roles? Of course. However, it's about how we can avoid another depression and provide liquidity in the economy.

i'm dumber because of reading Tek's posts. this thread is bad for my health.

You know, I'm sorry I ever went to bat for you in the past when you went on some irrational asshole rampage. Now I see through the mirage that made me think you actually had something to offer.

I'm with you, more or less. I mean I guess there are factors that are hard to understand, like smaller banks get their cash from bigger banks, and there are things in the background that without big tubes of credit maybe the economy would seize up... but lending to people with good credit has always been profitable, and there's no reason that should suddenly change.

It is important to note that not all economists agree with this position. More than a few out there believe Wall St could fix it themselves, if they simply decided to. Instead, the possibility of a bailout looming over the horizon has motivated them to do something else.

The reason is that the money isn't there for the small banks to borrow to lend it out.

In fact here in Australia, where we haven't had banks failing or anything like the problems you are suffering because of greater oversight and regulation, nevertheless the Australian government has just released $4 billion (equivalent to $60 billion by American standards - we have one fifteenth the population) specifically for the use of small banks and non-bank lending organisations to borrow to keep the housing market from tanking. That's because the credit system has frozen and the small banks simply can't borrow the money to re-lend.

Fortunately we hear this morning that a deal has been made and we can breathe a sigh of relief. The next step will be "just how effective will this buyout be?".

I agree, and I'm certainly not against the bail-out (or what little I understand about it), but I really don't think that EXTREMELY difficult credit at this point is a bad thing for the long-term health of the economy, nor is a recession.

Recessions, historically in the Untied State, are very short. It feels as if we're so afraid of a natural economic correction that we're willing to spend years in a sluggish economy for an outside chance of avoiding a limited recession.

I think sometimes, the free market is about allowing oneself to fall and recover.

The consensus opinion of economists outside of the US is that you (and we) would suffer much more than a short recession had this deal not gone through. The main doubt is whether this buy out will succeed but there is no doubt the situation would be dire without it.


But that's a bit like saying we shouldn't fight a disease epidemic because the reduction in population will eventually sort that out too.

Nature's solutions, including economic ones, are not always conducive to humanity's interests.

Nikkei's up 0.40% (50pts) in the first 45 minutes...hang seng opens soon

Definitely, and that's kind of enlightening for me because I do think of the world's bigger picture in those kind of terms - i.e, when Bono talks about curing every disease known to man, my first thought is how the hell the earth would manage a population of 50 billion people.

This time and this year are so unimportant in the bigger picture - I obviously could never run for office.