I gotta call b.s. on this one:
[Sen. Chris] Dodd also said he thinks it would be a “travesty” not to confirm Federal Reserve Chairman Ben Bernanke’s nomination, and that in the absence of taxpayer money, the government should have no say in banks’ compensation practices.
Maybe Bernanke has performed well enough since the financial crisis set in to warrant keeping his job. But he certainly didn’t earn that with his performance prior to the collapse. It would not be a travesty to hire someone new and untarnished; it would actually be preferable.
As for banks’ compensation, let’s make it about executive corporate compensation in general. Why should we let these people make these enormous sums of money when that value could be rolled back into the company or the shareholders’ pockets. Not only do we have perverse incentives created through these compensation schemes that have led to short-sighted and destructive practices, but that money is drained out of the economy to make immensely rich people even richer. That doesn’t create jobs. That doesn’t lift all boats. It just feeds a culture of grotesque opulence.
I’m all for giving people incentives to get super rich. I’m not for paying people $70 million a year to do a job that is worth no more than a tenth of that.
Not one tenth. One hundreth.
I agree that their pay shouldn’t be as high as it is, but that’s not so much about government regulation/taxation as it is about culture.
There’s no reason to single our bankers, or executives of corporations in general; scrap the income tax and have pure capital gains taxes, or tax capital gains like income.
Speaking as someone who currently makes their income via capital gains and the stock market, this does not discourage me from investing at all. Of course individuals cannot be tracked like groups can, so I might not be very common, but I’ve always thought it to be a POS argument.
Maybe if they kept the money in the corporation for longer than 5 years?
Whatever the case, incentives need to be change so our culture can change–that’s the way to real change we can believe in. Executive compensation has nothing to do with competence, as many European and Japanese execs bring their corporation more money yet take far less in yearly bonuses.
Executive compensation should be a share in the profits, period – no salary. At that level, their careers should sink and swim with what they bring to the market.
That is one of the reasons that accounting has been gamed in many companies. And in some respects, the stock option valuations was one of the things that drove the gaming at Enron and Worldcom. The compensation for results was set for high stakes rewards.
The biggest issue is the conflict of interest on compensation committees. A director on a compensation committee is often a CEO on which the CEO being compensated is a reciprocal director on a compensation committee. Helping your golf buddies, as it were.
Travesty is a very strange choice of words:
-noun
1. a literary or artistic burlesque of a serious work or subject, characterized by grotesque or ludicrous incongruity of style, treatment, or subject matter.
2. a literary or artistic composition so inferior in quality as to be merely a grotesque imitation of its model.
3. any grotesque or debased likeness or imitation: a travesty of justice.
I’ll assume that number 3 was intended. Grotesque or debased would hardly apply here.
Holy Jeebus!! It’s good that Dodd got out when he did. Because I don’t see how he’d ever have won saying stuff like this. He’s showing he’s more out of touch than Harry Reid. Ugh!!
“absence of taxpayer money, the government should have no say in banks’ compensation practices.”
Well, since they are all operating under FDIC assurances, unless Dodd wants to claim the FDIC is not a government agency, the question is settled.
Weren’t these banksters failures? Didn’t we have a near collapse due to corruption? Britain is having the same issues with their banks.
Bernanke isn’t impressive. If he was knew so much about the Great Depression, how come he wasn’t sounding the alarm early on?
I believe that this is the key point. They get compensated for failure. They get compensated for success with federal bailout funds. They get compensated by passing through federal bailout funds instead or extending them to businesses needing operating capital.
Whether they fall off the bike or get help with government training wheels, they still get compensated.
…if that’s what the market says the job their are doing is worth in the marketplace.
However, a) their pay shouldn’t be subsidized by the taxpayer, and b) they should be paying higher taxes on every cent of that income, instead of using dozens of loopholes to pay a percentage less than their secretaries.
What market? I don’t see a CEO hiring hall anywhere. Or compensation listed in a newspaper want ad. It’s insiders looting their employers, who are the stockholders.
You’re all for giving people incentives to get super rich? What the hell does that mean? It has to be a new record for how much stupid can be packed into one sentence.
Well, banking is different since those who are members of the Federal Reserve System are, in every sense of the words, beneficiaries of legalized money printing from thin air. You or I do it, it’s called “counterfeiting”. They do it, it’s called “fractional reserve fiat money”.
Quite literally, they print $ billions, do business transactions, and then collect their hefty bonuses in good times and bad. Their ability to push segments of the economy, ala housing, in a massively distorted fashion (bubbled up by the liquidity (e.g. credit / money from thin air)) results in causing every day mortals to follow into that segment as if it’s genuine growth, only to watch it collapse and they lose their life savings.
Meanwhile, our friends at Government Sachs get the Fed to print money (which gets its purchasing power at the expense of everyone else, same as the counterfeiter gets his) to bail out the banking system.
In that respect, banking is different from the comparative shoplifting going on by corporate CEOs. Clearly the latter is a problem unto itself (although not all are so bad). The problem is the entire system of investments / securities in the U.S. given the blessing of the U.S. Gov via the SEC, yet it’s horribly corrupted and rigged to benefit not the average Joe, but the biggest players — and fully sanctioned by the Congress, both parties, that suck up all the contributions to allow it to go on unimpeded.
Why, just look at the secrecy of the Fed and the SEC and the Treasury to not show the public where all the $billions went. Bush-co covered it up. The new regime is no better if not worse.
That said, Bernanke is eyeball deep in this and needs to go. And we need the “Audit the Fed” law to be passed. Just watch out for what they find. Congress will probably shut it down and blame it for all the financial problems they enabled (again, both parties), and it’ll suck for all of us when they have to deem those Greenback Bernankes in your wallet worth 30 cents on the dollar or some such, since that’s about all they really can afford in this fiscal nightmare of corruption, deceit, and parasitism.
The political-banking nexus will not surrender until it collapses or there is a real revolution.