Saturday, January 31, 2009

Claire McCaskill's Idiots

Who are the "idiots" Senator Claire McCaskill's denouncing in her Senate floor lecture attacking executive compensation? Wall Street's? Or Capitol Hill's?

Perhaps McCaskill's on to something, as the Wall Street Journal reports (here or here):

Wall Street's pay system isn't dead yet. But it is in trouble.

President Obama's rhetorical assault on "shameful" bonuses reverberated across trading floors, investment-banking desks and executive suites Friday. Officials at several securities firms acknowledged that compensation, already down sharply because of evaporating profits, could shrink even more in the next few months as Wall Street scrambles to avert a government crackdown that some fear could be even more painful.

Sen. Claire McCaskill (D., Mo.) introduced legislation Friday that would limit the salary, bonuses and stock options of executives at financial companies getting federal bailout aid to no more than what the U.S. president earns: $400,000 a year, excluding benefits. In 2007, Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein earned that much in about two days.
The editorial page at WSJ weighs in, "Idiots Indeed":

In our experience, political nuance has never been the strong suit of Wall Street executives ... Yet the hard truth remains that whether on Wall Street or across the American business landscape, compensation levels are a business judgment made under the pressure of competition. The "idiots" notwithstanding, Wall Street has lots of highly talented financial minds and mobility among firms based on compensation is routine.

If Congress is going to start setting legal limits on salaries and bonuses in the U.S., it is going to drive talent out of Bank of America and these other banks and into institutions without such limits, perhaps abroad ... The danger of targeting what capitalists we have left for abuse or prosecution is that they will stay on strike, as they did in the 1930s. It won't be pretty this time either.
Hat Tip: Memeorandum.

See also, Allahpundit, "McCaskill on capping pay of CEOs who take TARP money: “These people are idiots”.

9 comments:

Anonymous said...

It is being reported that Pres Obama is not going to take needed steps to limit executive pay. Many people assumed that Sen. McCaskill's Senate floor statements and her bill were being done at Obama's request.

According to Bloomberg News, Treasury Secretary Tim Geithner will make a statement on bonuses sometime this week.

Compensation Limits

Axelrod didn’t embrace a ban on bonuses for companies receiving bailout funds. He said the administration will take steps toward “limiting some of this executive compensation” as part of rallying public support for financial-rescue efforts.

“It’s very hard for the American people to understand how a bank executive should get a multimillion dollar bonus at a time when he’s asking the government to essentially bail out his institution,” Axelrod said.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atzSUhPUlwoM

Mike Roark said...

This is exactly why we should not be in the business of trying to manage these firms. They should live or die in the free market. Every rule we try to implement to manage them, will eventually be circumvented and beget another rule and beget another rule ad infinitum.

Tom the Redhunter said...

This post illustrates precisely the danger of government bailouts.

"If you take the king's shilling, you do the king's bidding."

I'm beginning to think the whole thing is a setup by the Democrats. Their plan is to take over as much industry as they can, whether de facto or de jure doesn't really matter. They start by demonizing executives.

Unfortunately, these idiots on Wall Street are playing right into their hands. They better wise up soon or it'll be too late.

Anonymous said...

Tom the Redhunter said, "I'm beginning to think the whole thing is a setup by the Democrats."

The plan started with Paulson and Bush - not Democrats.

Average American said...

Everything about this situation STINKS! We can't afford to let them die. We can't afford to bail them out. We can't afford to disallow their bonuses and have them jump ship. We can't afford to let CEOs take huge bonuses. Every aspect of it STINKS!! The answer lies in the board of directors of these companies doing what is right. A bonus implies that you did a good job. These frickin people DID NOT DO A GOOD JOB, or they wouldn't need to be bailed out!! The trouble comes when the CEO and other company bigwigs are on the BOD. Now you have the fox guarding the henhouse.

Grace Explosion said...

Hi Donald,

$400,000 for an executive?? Upper management?? Those must be 7 or 8 figure salaries or no one of higher caliber would take the positions. One can earn $400,000 as a top salesperson in many industries. The best executives would often also make the best salespeople. We would lose our executives to both other companies and higher paying positions within the same company. A demotion in position would equal an increase in pay if executive pay was controlled.

The American people didn't want the bailouts in the first place. Neither do we want more Government control. I think these communists are traitors to every principle of America. They are trying to "sell" a new Marxist America to the people, but they care nothing for the people. They just want to be the most powerful people in the nation and world - so they move to destroy the private sector and increasing the power of the Government to which they belong.

It's like if the waterboys were demanding to control Michael Jordan in his playing years and bring his salary below their own. In the end, it would make more sense for Michael Jordan to be a waterboy rather than an athlete.

Many, many people at these companies make over $400,000 - not just management. These lawmakers are insane.

Waterboy revenge based on athlete envy. Politician revenge based on business executive envy.

I've turned down 6 figure salaries. I've been offered a track to the 7 figure salaries therein. The 6 figure salaries could not move me. The 7 figure salaries... might. I'm moving right now to do what it takes to be offered the 7 figure salaries skipping the interim step of middle management. (I'm just posturing myself.) Could others do what I'm about to do (should I be successful)?? I doubt it. I rank in the top 99.99th percentile in a number of things. I may accept in the next year or two (should I still be here) a 7 and 8 figure salary. I"d consider it. But I wouldn't consider a 6 figure salary. I can make too much money doing other things in the next 2 years.

This is a real case in point to me. It would deny a company my contribution if the salary of upper management were lowered.

And, yes, absolutely - these things have been discussed with me - but I'm creating my own track. Plus, as a believer, I am not primarily driven by monetary reward. I have to have a calling to keep a company strong in trying times, etc, etc, etc. But, to me, this is a real discussion - and it matters.

Obama would only sink a company with his "give away" programs. He'll destroy an entire nation.

He's not worth the $400,000 he's being paid. He's a detriment to our nation - not even a proven US citizen. He's overpaid to be paid at all for a job he hasn't even proven that he's eligible to take.

Grace.

Grace Explosion said...

Just a further thought - I really thought these companies should have been allowed to fail. Other companies that are better managed would have taken their market share RIGHTFULLY. Any limit to any compensation is one step towards communism that will destroy our free enterprise system. But so was their market intervention in the first place. They are even throwing around money they don't even have. The Government are the WORST fiscal managements in our society - and are responsible ultimately for the meltdown of Wall Street. I am angry that the Wall Street institutions were destroyed by Government programs and interventions in the free market. Wall Street and brokerages have been something I felt a desire to engage in since I was a child. I look forward to the crash of this Government. The politicians are the evil greedy destroyers of our economy - NOT Wall Street. Wall Street and banks had their strict profit model "overtaken" by Government demands that banks, thus Wall Street, actively participate on nonsensical Government largess without ability to pay. The Government should have issued straight bonds or other instruments of grants themselves to "support" the CRA and the giveaway programs of housing - and not involved the private sector. That way, Government would have born their complete responsibility for the mortgage crisis without involving the private sector banks, etc. Our Government is the entity that is receiving constant non-stop "bailouts" from foreign borrowing - and it is the politicians who need to be placed in straight jackets and hauled off to the mental institution. They are literally insane - and if the American people are so stupid as to not see it - that is to their own loss and ruin. These politicians are power mad - they are not following any business models - they're worse than hypocrites. They are blaming others for the ruin they themselves are ultimately responsible for as an institution. The American people should be calling for a moratorium on Government action and should be stripping power from this Government. This Government is sending the American people to the poor house. What has happened in Europe is going to happen here. And when people don't really comprehend causation - what a train wreck. It really is angering that politicians have destroyed what was a great nation. However, this is what happens (yep, I'll say it) when the people forsake God. Their sanity leaves, delusion takes over, and evil men gain power. I look forward to the collapse of this Government. Hypocrites. They are blaming the private sector for what they have done and demonizing executives when actually it is the politicians themselves who are responsible for and behind the entire debacle. Enough said. This really angers me - the bait and switch blame-shifting and the whole con game of the organized crime of our wicked Washington DC socialists.

repsac3 said...

In my opinion, these Wall Street folks are not being forced to do anything...

I agree with AA. If they deserved the bonuses, they wouldn't need the bailout. Since they do need the bailout (according to them, anyway--we're not forcing them to take the money), they don't deserve the bonuses...

I'm fine with our saying these execs have to choose short-term between bonuses & perks for themselves, or bailout for the companies they built... They're welcome to go back to using thousand dollar pencil sharpeners (or whatever) once they've paid us back for the money we give 'em to keep their companies afloat...

CS said...

Yes Grace,

Bailing out Multi-billion dollar corporations is somehow "marxist".

Where you a marxist scholar in your time?

I am looking for a political science degree in a cracker jacks box too, so let me know where yah got it.