The “banking bailout” [1] is turning into just one more example of corporate welfare. In fact, the bill presented to Congress is almost terrifying in its scope and lack of oversight, giving the treasury secretary an open checkbook to buy assets from companies that have no right to still be in business.
Read this post in the New York Times [2] that quotes a Republican making sense:
“Another expression of disgust came from Senator Jim Bunning [3], Republican of Kentucky, who said the plan would “take Wall Street’s pain and spread it to the taxpayers.”
“It’s financial socialism, and it’s un-American,” Mr. Bunning said.”
There are even bigger problems to sort out- like, no one knows the value of all these complex “investment instruments” that were devised by the very list of assholes who got us into this mess. They are the ones listed below, who have been taking home huge checks while robbing us.
If you need proof- read the salaries – and look at the performance:
- Lehman Bros. Chairman and CEO Richard Fuld Jr. made $34 million in 2007. Lehman (OTC:LEHMQ) filed for Chapter 11 bankruptcy protection earlier this month.
- Goldman Sachs (NYSE:GS), which Sunday gained Federal Reserve Bank approval to become a bank holding company, paid its Chairman and CEO Lloyd Blankfein $70 million last year. Co-Chief Operating Officers Gary Cohn and Jon Winkereid were paid $72.5 million and $71 million, respectively.
- Morgan Stanley Chairman John Mack earned $1.6 million. Chief Financial Officer Colin Kelleher got a $21 million paycheck in 2007. Morgan Stanley (NYSE:MS) also received approval to become a banking holding company, a shift that allows Morgan and Goldman to bring in bank deposit assets which offer more solid financial footing.
- Merrill Lynch CEO John Thain was paid $17 million in salary, bonuses and stock options in 2007. Merrill (NYSE:MER) is being acquired by Bank of America (NYSE:BAC). Bank of America CEO Kenneth Davis earned $25 million in 2007.
- JP Morgan Chase & Co. Chairman and CEO James Dimon earned $28 million in 2007. Chase (NYSE:JPM) acquired troubled investment house Bear Stearns earlier this year with the federal government promising to take on as much as $30 billion in Bear assets to help get the deal done.
- Fannie Mae CEO Daniel Mudd received $11.6 million in 2007. His counterpart at Freddie Mac, Richard Syron, brought in $18 million. The federal government announced earlier this month it was taking over the mortgage backers with Herbert Allison to serve as Fannie CEO and David Moffett the new CEO at Freddie.
- Wachovia Corp. Chairman and CEO G. Kennedy Thompson received $21 million in 2007. He was succeeded by Robert Steel as CEO in July. Steel is slated to get a $1 million salary with an opportunity for a $12 million bonus, according to CEO Watch. Wachovia (NYSE:WB) is one of the banks that could be sold in the midst of the financial crisis.
- Washington Mutual (NYSE:WAMU) will pay its new CEO Alan Fishman a salary and incentive package worth more than $20 million through 2009 for taking the helm of the battered bank, according to the Puget Sound Business Journal.
CEOs of large U.S. corporations averaged $10.8 million in total compensation in 2006, more than 364 times the pay of the average U.S. worker, according to the latest survey by United for a Fair Economy. In 2007, the CEO of a Standard & Poor’s 500 company received, on average, $14.2 million in total compensation, according to The Corporate Library, a corporate governance research firm. The median compensation package received was $8.8 million.
CEOs of troubled companies took home big bucks last year – Dayton Business Journal: [4].
Congress is afraid to go and collect the ill-gotten gains from the CEOs- that should be the first hint that this bailout plan is flawed. Secondly, while we keep hearing about how it’s all because of the “sub-prime loans” no effort is being made to restructure those and save our homes- no, we’re saving the homes of the people above- the ones with more than one home, with more than 3 bedrooms, 2 baths and an attached garage.
It’s time to realize- no “bailout” is going to help the American people until some sort of controls are put on Wall Street- starting with limits on executive pay. Interestingly, we’ve already stopped “Short selling” on financial stock [5]s- which is somewhat akin to telling Vegas you can’t bet against the Browns or the Bengals or the Buckeyes in a title game, when what we really need is to stop the volatility- a company like Apple can’t change its value by a billion or two in a day if our markets actually had some relationship to a company’s net worth and business model. Cutting the trading of stocks by large institutional investors by the minute- would be a good step in the right direction.
Last but not least, before we go spend $700 Billion- maybe we should consider just buying each individual house that’s in one of these stupid loans- and giving the conventional financing, cutting out the bankers altogether? That would be a government for the people, by the people- using our tax dollars to reward those who pay taxes. In fact, I’d take a look at how much each of those CEOs above paid in taxes last year- and tell each of them that’s their cap of what they get to keep- and see how fast they start crying.
The other option to spend our $700 Billion would be to force credit card companies out of business. That’s right- put the control of credit cards into the hands of the Fed. Technically, the Fed is the only one who is supposed to “create money” and we’ve allowed banks and the cc system to create way too much debt. How many offers for credit cards did you used to get in the mail? How many have you got recently? See?
If we want to help the taxpayer- it’s time to force credit card rates down- and fast. It’s a much better solution to get the economy back on track than by bailing out the banks- and the rich assholes who failed, but still got paid.
If we invest another dime in the banks- we ought to own them, or at least own everything belonging to every one of those bankers.
Start reading more about this- it may be the biggest skirting of our Constitution ever- all to protect a bunch of rich, spoiled assholes- with friends in Congress.
This is truly an Excellent Write-up; one that is not only delightfully thought-provoking, but also right on target!
In Sparky’s humble opinion the unfortunate bottom line is this: America is in far, far deeper trouble than always-a-greedy-banker Hank Paulson, thoroughly-confused Ben Bernanke, and always-smiling Christopher Cox are presently telling glossy-eyed congressional committee members.
Trading in Credit Default Swaps (CDSs) tells the real story; and it’s a very ugly one.
Look out below ~
Sparky
Great post, David. But isn’t this fiasco, in part, rooted in our “gimmie, gimmie, gimmie” culture (see posting by Gregg Easterbrook below). As George Carlin put it, maybe it’s not only the politicians that suck, but the public-at-large as well. “Yet there’s scant outrage. Maybe this is because in an era of fiscal irresponsibility by both parties, everybody wants a bailout. Wall Street, bankers, homeowners who lied on their mortgage applications, Detroit automakers, farmers — gimme, gimme, gimme! Rather than asking whether the $700 billion giveaway is too large or being structured in a way that benefits the rich, numerous members of Congress are instead demanding more bailouts be appended: for seniors (see below), cities, states, more “stimulus” checks, you name it. Give money to whoever will fund my re-election! The money is being forcibly extracted from the pockets of our children and their children. Every dollar borrowed today by the irresponsible old of Washington will subtract two dollars from future economic growth, leaving our children and their children a legacy of stagnation. The 1980 Chrysler bailout, which was nationally debated for months before happening, cost $3.2 billion, in present-value dollars, and was financed by revenue rather than by borrowing. Here is the borrowing that’s happened in 2008 alone, with precious little public debate: • $29 billion to bail out Bear Stearns. • $40 billion in the first mortgage-holder bailout. • $80 billion for an additional year of Iraq war operations. (Another $150-$200 billion in war costs such as future veterans’ disability benefits were incurred but not funded.) • Up to $85 billion to bail out AIG. • $153 billion to households for “economic stimulus.” • $200 billion, and possibly more, to bail out Fannie and Freddie. • $290 billion in farm subsidies, despite agricultural prices and grains profits being at record highs. • $700 billion general bailout of securities backed by bad debt. (The International Monetary Fund estimates this figure will rise to at least $1 trillion.) That comes to $1.6 trillion, explaining the debt-ceiling rise, and does not include roughly $300 billion in essentially interest-free cash issued to… Read more »