Does Government REALLY want to fix these companies/economy?

[LockBeard]

Obviously you know the answer is NO. They just want more control and could care less about "Free" America's Long Term Health. Don't believe me, research card check and have an epiphany.



http://www.washingtonexaminer.com/politics/Beyond-AIG-A-Bill-to-let-Big-Government-Set-Your-Salary-42158597.html

All of these employees, like the executives, will just leave for normal pay from other companies who have yet to accept/be forced to accept government bail out money.

Therefore, what is the point in bailing them out in the first place if the companies you bail out will just be filled with lower end employees who are not equipped to dig the company out of the hole?

The few conservatives on here, and my many liberal friends on Spurstalk like to go at one another daily. It's all in good fun. Don't you guys think this is getting a little out of hand? I know you guys can do slippery slope thinking as you demonstrated during the Bush years. Do you not see this starting to get carried too far?

Does Barnie Freaking Frank belong anywhere near the business end of things and in a position to feel he can deal out such control over American citizens? I agree with almost everyone here that these idiots in these bailed out corps get what they deserve for being foolish enough to partner up with government, but damn.

"Too big to fail." Look what this mentality has done to our government. Look what is has done to the U.S. Dollar.

Do not be afraid of pain in the short term to preserve Freedom in the Long Term. Do not let your government convince you life is supposed to be painless.

Petty Tyranny sucks. Soft Tyranny is a bitch too.

[Winehole23]

As a harbinger of what autocratic rule by Rep. Frank might look like...


In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."...all the power is given to Treasury. :lol

[Crookshanks]

This is hilarious - you beat me by just a couple of minutes. I just posted this article right after you did.

[Winehole23]

The few conservatives on here, and my many liberal friends on Spurstalk like to go at one another daily. It's all in good fun. Don't you guys think this is getting a little out of hand? I know you guys can do slippery slope thinking as you demonstrated during the Bush years. Do you not see this starting to get carried too far?Well, it's just passed out of committee. I'm frankly less freaked out about garnishee-ing disliked execs than Congress ceding spending authority to Treasury and the Fed starting last year.

As for the vigilance of SpursTalk conservatives, startlingly few have cast their aspersions yet on the epochal transfer of wealth and power involved in TARP/TARP 2.0. I'll believe it when I see it. The proposed law is opportunistic and probably a bad idea, but suggesting it is some kind of turning point for the republic is overblown at best.

[RandomGuy]

All of these employees, like the executives, will just leave for normal pay from other companies who have yet to accept/be forced to accept government bail out money.


Supply curve + demand curve at intersection = price point.

"All of these employees" will not leave for jobs that do not exist.

The total amount of jobs from "companies who have yet to accept/be forced to accept government bail out money." is likely less than the total number of brainy finance types.

Respectfully:
It would seem that the total "brain drain" would be somewhat less than what you seem to think.

[George Gervin's Afro]

Obviously you know the answer is NO. They just want more control and could care less about "Free" America's Long Term Health. Don't believe me, research card check and have an epiphany.



http://www.washingtonexaminer.com/politics/Beyond-AIG-A-Bill-to-let-Big-Government-Set-Your-Salary-42158597.html

All of these employees, like the executives, will just leave for normal pay from other companies who have yet to accept/be forced to accept government bail out money.

Therefore, what is the point in bailing them out in the first place if the companies you bail out will just be filled with lower end employees who are not equipped to dig the company out of the hole?

The few conservatives on here, and my many liberal friends on Spurstalk like to go at one another daily. It's all in good fun. Don't you guys think this is getting a little out of hand? I know you guys can do slippery slope thinking as you demonstrated during the Bush years. Do you not see this starting to get carried too far?

Does Barnie Freaking Frank belong anywhere near the business end of things and in a position to feel he can deal out such control over American citizens? I agree with almost everyone here that these idiots in these bailed out corps get what they deserve for being foolish enough to partner up with government, but damn.

"Too big to fail." Look what this mentality has done to our government. Look what is has done to the U.S. Dollar.

Do not be afraid of pain in the short term to preserve Freedom in the Long Term. Do not let your government convince you life is supposed to be painless.

Petty Tyranny sucks. Soft Tyranny is a bitch too.





Please explain to me why the govt would want more control.

[RandomGuy]

As a harbinger of what autocratic rule by Rep. Frank might look like...

...all the power is given to Treasury. :lol

This is the point at which the following should be noted:

Shareholders, the ultimate owners of a company, decide, through their elected board members who comprise the "executive compensation committees", already determine what compensation should be.

Often, the existing management of a company is represented on a board, and the relationships between management and the board can be generously described as "cosy". I would use the term "incestuous" with all the repulsiveness ineherent in that word.

Quite frankly, having read my share of financial reports, and read a lot in business press, I have come to highly doubt that the high pay packages offered to CEOs and other top executives really maximizes shareholder returns, and there is some actual data to support this in the form of a study regarding the negative correlation between CEO pay and company performance. (note negative correlation = more CEO pay = lower company performance)

In economic terms utility determines total demand for any produce, and that is ultimately an entirely emotional judgement.

In this case, I am reasonably certain that the emotional judgment of most boards of directors, coupled with the rather clear conflicts of interest that are given a wink and a nod in corporate governance in this country, means that CEOs are highly overpaid for the value that they add to their firms.

Given all of this, if the government, as the newest, largest shareholder in a lot of these companies decides that its perception of added value is different from what is very likely an unethical market distortion of pay, I am not inclined to dismiss it out of hand as being inherently bad.

We, as passive shareholders, have allowed this market distortion to continue through the "free market". Quite frankly I am happy to have SOMEONE take an interest in what is best for us, as opposed to the wink and nod understanding between corporate boards and executives that seem to rob us of value anyways.

[RandomGuy]

To put it more simply:

What many conservatives think is a "free market" rate for executive pay, is not really truly representative of what a truly free market rate for pay would be, but rather a corrupt distortion created by a lack of attention to good corporate governance.

[DarkReign]

Reading through this, my mind wandered to Obama's perceived "redistribution of wealth" agenda.

I laughed a little when I realized the only "redistribution of wealth" going on was the poor, huddled masses of Americans giving all their tax dollars to billion/trillion dollar industries of finance.

Basically, the ultra-rich got big, fat checks from the poor.

What kind of fucked-up world is this?! :lol

Truly, I must question those who believe in God when you look at the world we live in. Unless of course the God you worship is cruel and sadistic. Otherwise, youve been lied to.

[mogrovejo]

To put it more simply:

What many conservatives think is a "free market" rate for executive pay, is not really truly representative of what a truly free market rate for pay would be, but rather a corrupt distortion created by a lack of attention to good corporate governance.

Of course there are governance problems, there's plenty of literature about that. E.g. : http://en.wikipedia.org/wiki/Principal-agent_problem

But the market is not supposed to be perfect. What you call "truly free market rate" is just nonsense. The market isn't a perfect meritocracy.

What you need to explain is why should good shareholders, or non-shareholders, pay for the errors committed by bad shareholders - and that's what the government, using the coercive force of the state, is doing. The outrageous consequences are obvious: creates a moral hazard and steals resources from the good shareholders to bad shareholders, deepening the problem.

To sum it up: in a free-market, people and corporations are supposed to be able fail. If shareholders overpaid their managers and are losing wealth because of that, that's their problem.

[Winehole23]

Given all of this, if the government, as the newest, largest shareholder in a lot of these companies decides that its perception of added value is different from what is very likely an unethical market distortion of pay, I am not inclined to dismiss it out of hand as being inherently bad.
That's very well put, and it puts the emphasis where it belongs IMO, on the de facto or incipient state of nationalization in the wake of massive financial default. AIG belongs to us, for better and for worse.

It seems to me the question isn't are we getting our money's worth, but are we even trying, even at this late date? The price to paid for failing to manage the problem could still be considerable.

[Indazone]

Reading through this, my mind wandered to Obama's perceived "redistribution of wealth" agenda.

I laughed a little when I realized the only "redistribution of wealth" going on was the poor, huddled masses of Americans giving all their tax dollars to billion/trillion dollar industries of finance.

Basically, the ultra-rich got big, fat checks from the poor.

What kind of fucked-up world is this?! :lol

Truly, I must question those who believe in God when you look at the world we live in. Unless of course the God you worship is cruel and sadistic. Otherwise, youve been lied to.

Trickle down economics of the Republican Party is a farce and so is the tax and spend policies of the Democrats. Only one politician tells it like it is and the powers that be paint him as a Charlatan, Fraud, Kook, and Imbecile.

That Politician my friends is non other than Congressman Ron Paul.

[Winehole23]

To sum it up: in a free-market, people and corporations are supposed to be able fail. If shareholders overpaid their managers and are losing wealth because of that, that's their problem.Of course, what we do in the USA is introduce socialism for our defunct financial sector, pawning our future to keep investors on life support.

[LnGrrrR]

To put it more simply:

What many conservatives think is a "free market" rate for executive pay, is not really truly representative of what a truly free market rate for pay would be, but rather a corrupt distortion created by a lack of attention to good corporate governance.

You forgot to add, "... due to lack of easily visible transparency to shareholders in many cases" to the end of your last sentence :D

[LnGrrrR]

To sum it up: in a free-market, people and corporations are supposed to be able fail. If shareholders overpaid their managers and are losing wealth because of that, that's their problem.

I agree with your basic premise. However, many economists and some financial guys on here also state that doing such would put those poor people out of jobs, and while everyone would suffer, the poor would suffer disproportionately. Which would probably lead to civil unrest, and possibly even worse circumstances.

I don't think EITHER option is wonderful. I think option A is the more fair, and moral way to do things. I think option B is better in the sense that there will be less national turmoil.

It sucks all around, frankly.

[Winehole23]

What you need to explain is why should good shareholders, or non-shareholders, pay for the errors committed by bad shareholders - and that's what the government, using the coercive force of the state, is doing. The outrageous consequences are obvious: creates a moral hazard and steals resources from the good shareholders to bad shareholders, deepening the problem.Agree 100% It should work that way. But it doesn't.

I think the fear is that an unrestrained unwinding of credit will lead to an even more catastrophic failure of confidence in the US.

The spectre of systemic collapse has rendered "moral hazard' *temporarily* quaint, but the theme will surely reappear in the denouement.

The theory of the importance of moral sentiments in economics perhaps is no more than just that. Actually existing *free trade* trumps all theory. Expedience trumps all values.

Morality is clearly lacking wherever it is authoritatively emphasized. I have little doubt genteel theories of moral sentiment in economics will see their vogue revived in the wake of our default, but I am not sanguine there will be any great corresponding moral inclination in the American people to receive this message and put it into effect in their lives.

[DarrinS]

Reading through this, my mind wandered to Obama's perceived "redistribution of wealth" agenda.

I laughed a little when I realized the only "redistribution of wealth" going on was the poor, huddled masses of Americans giving all their tax dollars to billion/trillion dollar industries of finance.

Basically, the ultra-rich got big, fat checks from the poor.

What kind of fucked-up world is this?! :lol

Truly, I must question those who believe in God when you look at the world we live in. Unless of course the God you worship is cruel and sadistic. Otherwise, youve been lied to.



Just wait until cap and trade kicks in.

[101A]

Truly, I must question those who believe in God when you look at the world we live in. Unless of course the God you worship is cruel and sadistic. Otherwise, youve been lied to.

Not gonna make this a religious thread (had plenty of those), but God never promised me a rose garden.

[RandomGuy]

Of course there are governance problems, there's plenty of literature about that. E.g. : http://en.wikipedia.org/wiki/Principal-agent_problem

But the market is not supposed to be perfect. What you call "truly free market rate" is just nonsense. The market isn't a perfect meritocracy.

What you need to explain is why should good shareholders, or non-shareholders, pay for the errors committed by bad shareholders - and that's what the government, using the coercive force of the state, is doing. The outrageous consequences are obvious: creates a moral hazard and steals resources from the good shareholders to bad shareholders, deepening the problem.

To sum it up: in a free-market, people and corporations are supposed to be able fail. If shareholders overpaid their managers and are losing wealth because of that, that's their problem.

You are correct: The market isn't a perfect meritocracy.

It should be, and we collectively can do things to move it in that direction. Doing so would benefit us all.

As for "stealing" from the "good" shareholders, you are inherently assuming that the government is a "bad" shareholder AND that the "good" shareholders actually have something to steal.

In an insolvent bank, the "good" shareholders automatically lose EVERYTHING they had.

If the "bad" government comes in and gives that bank a capital/equity infusion, then the "good" shareholders, by defintion, share in that proportionally, and still hold something of value. Such actions do not steal from the original shareholders, and actually do the exact opposite of what you seem to be implying here.

Your analogy and underlying assumptions fail.

ANYBODY who provides capital to a business entity does so under conditions that serve to protect that capital and that meet the ultimate goals of the provider of that capital.

Bond holders provide capital, AT THE MINIMUM, with the understanding/condition that they be ahead of common/preferred stockholders in liquidation. Often, there are a host of other strings attached to the bond contract.

Providers of equity stakes in large companies often have similar requirements, including having a seat on the board of directors.

Quite frankly, if the government provided capital to any company to keep it from tanking, I want it to look out for that capital in the form of reasonable requirements. It should do its fiduciary duty, just as any other entity with capital should.

[RandomGuy]

Trickle down economics of the Republican Party is a farce and so is the tax and spend policies of the Democrats. Only one politician tells it like it is and the powers that be paint him as a Charlatan, Fraud, Kook, and Imbecile.

That Politician my friends is non other than Congressman Ron Paul.

Because we all need someone to vote against big bad government and get rid of the national Do Not Call Registry.

Telemarketers are a vital part of our economy, and the constitution says nothing about government prohibiting marketing calls at all hours of the day. :rolleyes

[RandomGuy]

You forgot to add, "... due to lack of easily visible transparency to shareholders in many cases" to the end of your last sentence :D

I am all for putting, right at the front of the financial statements, a per share total of what the top 25% of management makes in all forms of compensation, and putting that as a percentage of profits per share.

I am not entirely sure what that percentage would end up being, though. Probably more than many might think.

[ChumpDumper]

Yeah, the Democrats want total control. That's why they nationalized the banks and auto industry.

You guys are idiots.

[mogrovejo]

You are correct: The market isn't a perfect meritocracy.

It should be, and we collectively can do things to move it in that direction. Doing so would benefit us all.

It shouldn't, we can't and it won't.

The market isn't some Platonic concept. The market is the sum of the economic agents, imperfect men, making imperfect decisions. There's no objective standard to measure a "better market". What would be the market if it was a perfect meritocracy? One where a theoretical physicist would make more money than a basketball player? Where a doctor would make more money than a whore? Where VS Naipaul would sell more books than Danielle Steel?

There's no way of "we collectively" moving things in this or that direction - because human beings are individuals with different and often conflictual interests. I mean, there is: violating the sacred liberty of each one of us. Historically, those attempts always finish the same way: in a blood bath.

The free-market isn't an optimal solution - it's the others that are even worse.Not only it offers better incentives than central planning but, more importantly, it's the only one consistent with an essential part of the human being: to be able to dispose from his own free will.


As for "stealing" from the "good" shareholders, you are inherently assuming that the government is a "bad" shareholder AND that the "good" shareholders actually have something to steal.

In an insolvent bank, the "good" shareholders automatically lose EVERYTHING they had.

If the "bad" government comes in and gives that bank a capital/equity infusion, then the "good" shareholders, by defintion, share in that proportionally, and still hold something of value. Such actions do not steal from the original shareholders, and actually do the exact opposite of what you seem to be implying here.

Your analogy and underlying assumptions fail.

ANYBODY who provides capital to a business entity does so under conditions that serve to protect that capital and that meet the ultimate goals of the provider of that capital.

Bond holders provide capital, AT THE MINIMUM, with the understanding/condition that they be ahead of common/preferred stockholders in liquidation. Often, there are a host of other strings attached to the bond contract.

Providers of equity stakes in large companies often have similar requirements, including having a seat on the board of directors.

Quite frankly, if the government provided capital to any company to keep it from tanking, I want it to look out for that capital in the form of reasonable requirements. It should do its fiduciary duty, just as any other entity with capital should.You misunderstood my point - and the way you interpreted the "good/bad" shareholders image is quite revealing.

An insolvent company doesn't have good shareholders by definition.

When I said "steal", I didn't mean the government take over of the companies. The steal is here: by throwing money at zombie companies, to protect to some extent their shareholders/managers/unionised workers/shareholders from companies that are creditors of the ones bailed out/etc., the government is taking away precious resources that could be used by other companies - potential sales, capital, etc. How is this fair? You blamed shareholders who didn't care about having a correct corporate governance for the crisis (or how their savings were being managed, etc.); yet, you're okay with taking away money from those who cared (via taxes and/or inflation) to bail out the first ones. Plus, the assets - from liquidity to human capital - aren't relocated efficiently.

The same thing happens with jobs: in order to save "visible" jobs, we are killing "invisible" jobs - those who could be created if money coming from taxes/inflation wasn't wasted on saving the visible ones.

[RandomGuy]

You misunderstood my point ...

I am beginning to think that you don't have a point at all.


When I said "steal", I didn't mean the government take over of the companies. The steal is here: by throwing money at zombie companies, to protect to some extent their shareholders/managers/unionised workers/shareholders from companies that are creditors of the ones bailed out/etc., the government is taking away precious resources that could be used by other companies - potential sales, capital, etc.
How is this fair?

What would the collateral damage be if we didn't throw money at them? hmm?

Do you even know? You seem to labor under the delusion that if the companies fail, only the people involved in the company would be the ones to lose out.

Would it be fair to a third party supplier to a company, if, through no fault of their own, one of their major customers goes tits up? What happens to the vendors of *that* company?

Is that "fair"?

There isn't any fair here. Everybody loses.

I'm not saying that we prop the companies up with blank checks forever, but there is a huge difference in overall disruption between chaotic collapses and controlled winding down of businesses.


The same thing happens with jobs: in order to save "visible" jobs, we are killing "invisible" jobs - those who could be created if money coming from taxes/inflation wasn't wasted on saving the visible ones.

That does indeed happen at times.

That isn't the case here. If we did nothing and stopped "wasting" our resources, then we would simply see greater losses. We wouldn't create any "invisible" jobs. We are just preventing "invisible" losses.

That is the danger I see in your thinking. You think that things aren't quite so bad now, and therefore it wouldn't be *that* bad to just let everything collapse in a chaotic frenzy of cascading losses and self-feeding negative feedback loops.

I'm sorry, Mr. Hoover, but nothing is what we have done throughout most of human history, and although people remember the Great Depression and the inaction on the part of society, that was by far not the only nasty downward destructive economic spiral in US history.

[DarkReign]

Not gonna make this a religious thread (had plenty of those), but God never promised me a rose garden.

I rescind my statement. It was rather stupid.

Point taken.