http://www.bloomberg.com/apps/news?pid=20601087&s…
President Barack Obama called bonus payouts at banks getting rescue funds “shameful” as he and Treasury Secretary Timothy Geithner announced the government will require financial companies getting aid in the future to cap compensation of top officials at $500,000 a year.
“To restore our financial system, we’ve got to restore trust,” Obama said at the White House as he set out new rules for companies that seek “exceptional” assistance from the Treasury. “And in order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street."
Wow...500k, just wow
You take their money, you have to play by their rules.
Still too high for someone whoe mismanages a company and then has to beg the taxpayer for money.
If they don't like it,tthey can walk.
Its important to note a few elements to this provision:
salary cap is only relevant to those banks seeking "exceptional" help (Citi, AIG)
salary cap pertains to cash compensation; the executive could still receive ample amounts of stock options/warrants/restricted stock
There 3 main purposes behind this... quell joe the plumbers bitching and crying and secondly to prevent CEO from bloodletting companies to line their own pockets at the expense of Uncle Sam's handout, third to compensate executives where the bulk of their comp is linked to the long-term well being of the company. Because obviously Dick Fuld, Ace Greenberg and all the other Wall Street execs don't/didn't own any stock in their own company and were being paid ALL CASH.
A few complete jackasses really opened this can of worms.
1 is John Thain between demanding a $10m bonus, redecorating his office with a fucking 40K rug and 90K for 2 chairs, and paying out billions in bonuses. I don't know the details about the bonuses, but you could have atleast been more discreet about it. Delay bonuses or pay them mostly in stock or something.
2 complete and utter idiocy among executives. You've got the auto execs flying down to DC in private jets, Citi order a $50mm private jet, Well Fargo keeping their vegas bash on schedule. The jet was already ordered, the trip had little to do with TARP money, and the auto execs already owned the jets they flew down there. You could argue that it prob costs around the same the keep it hangered or to fly it down to DC. But the bottom line is, these guys are completely fucking stupid. They have absolutely no concept of public opinion or the way politicians are looking for a reason to bend them over unlubricated.
If these jack asses kept a little bit more of a low profile, politicians and joe the food stamp using, back tax owing plumber wouldn't have so much ammunition to crucify Wall Street.
The above reasons are why they don't deserve more than 50k a year. An AV club geek with a GED would have enough social grace and intelligence to not do the above. Basically, a successful CEO is being paid to plan a successful future, sell the future company to stockholders and the public, and be a profitable face/salesman for the company and they're failing on all three.
I guess unless you own stock in the company you shouldn't complain, but what are the shareholders doing?
Marcus...I completly agree with you except for one thing. Dick Fuld did NOT get paid in all cash, he was in fact held the most stocks of any individual in Lehman Brothers- though as a whole I do not think that this diminishes your argument.
So what do you do? -I work for an investment banking firm. Oh okay; you are like my brother, he works for Edward Jones. -No, a college degree is required in my profession
I agree with Marcus as well.
This is stupid though.
How? WHy should someone who has failed be rewarded with excessive pay?
500k is NOT excessive, you can't attract any quality executives for that little. If you'd prefer the TARP money goes to companies that can't attract decent leadership, then say good-bye to that 700bn. Giving restricted stock is a decent approach, although the government getting in to this territory is horrifying stuff; I just heard a commentator say she felt this cap should be applied to all companies, which is just ludicrous on its face, but at the rate we're going it may be a matter of days before that is the new hot idea. For now though, I'll hope that this is the limit of the posturing over compensation, as it is far from what we should be worrying about now.
"The rules won’t be applied retroactively to companies that already have received aid from the Treasury Department through the $700 billion Troubled Asset Relief Program fund."
I LOVE it!! So basically, everyone who has done a phenomenal job in screwing us over are exempt!! ha ha - great job President Obama!! In a nutshell, its the intelligent guy who did not take the TARP, made all the right decisions and worked very hard will be getting affected by this.
To all the geniuses and intelligent people who did not f-up and begged for TARP money, all I can say to you is "Looking sharp in the 500k cap." We live in a very cynical world and you, too, should have enjoyed it while you had the chance!
It's probably more of a plan to appease the taxpayer than it is to punish the executives at these companies. Really, if you think about it, you can't just pin this on Wall Street execs. It wasn't WS execs who issued loans to under qualified borrowers, it wasn't WS execs who failed to regulate the mortgage market, and it wasn't WS execs who walked into their local bank and demanded a loan for a sum of money they had no business borrowing. They did purchase the mortgages and they did turn them into ridiculously complicated securities, but you can't sit back and say, "Wall Street, you screwed us all on your own - it's your fault we're in this recession!"
Capping executive compensation would cause people throughout the ranks of these banks to leave, and right now is the WORST time to lose the top talent these banks have. As much as you want to think any one could do these jobs, it's wrong. Put people that do not deserve to be there in these positions and shit will get even worse than it is right now.
...as there WERE healthy companies who the feds pushed to take TARP funds on the grounds that it would carry a stigma if they refused; for them to exert some special control over these companies who did them a favor is ridiculous. I can accept the PR aspect of the cap, and agree with the idea that top execs should be compensated in equity. I do think lower level guys should still be paid in cash; if you can't significantly alter the path of your company, I don't think it's fair that you're liable for its outcome (look at all the guys who had everything in Lehman).
Even if they do apply the 500k cap to healthy companies though, those guys shouldn't be too worried about simply taking equity and buying out the government so they can cash out.
IMO, I'd like an exec. who has a personal incentive to stick with the company and do his best.
I'm not saying they deserve to get outrageous salaries while their companies fail, but the last thing I want is more Ken Lewis's running around. This may please Average Joe in the short run, but harms the strength of these companies in the long term
Thats why you go to Temple.
Looks like Goldman won't be capping compensation: http://www.bloomberg.com/apps/news?pid=20601087&sid=a3xTcf52kEZM&refer=…
Marcus: That was my UG. I'm now MSF at a reputable school and I'll be at a top5-10 MBA in a few years. Seriously, is that all you got?
I'm not saying that all future leaders should be capped. I'm saying the guys who guided them to ruin should be capped.
You can't make the case that the companies will suffer from their departure. They are not that good. Or else the bank wouldn't be on welfare.
It's not that simple though. The way this bill is structured will cap anyone who takes over, not just the guys who screwed up. I agree if they ruined their companies they don't deserve large payouts, but once the Feds made the decision to save these companies it doesn't make sense not to attract quality leadership; unfortunately, if they announce they'll throw out the leaders at companies that accept TARP, no one would choose to accept TARP because it wouldn't be in their self interest, and you've got another problem.
Also, shouldn't there be some work somewhere in the progression of UG-Masters-MBA? Or are you content to stay in academia and accumulate debt until you're 30?
[quote= Also, shouldn't there be some work somewhere in the progression of UG-Masters-MBA?
Yeah, I said a couple years.
I'm reasonably sure I read somewhere in that the stock comp in excess of 500k cannot vest until the companies pay back the money to the government.
Over/under on Citi being able to pay back the US government? Clearly, they won't actually be paying it back, they'll just borrow at a higher interest rate to pay back the government debt, so their execs can cash out their options. Talk about a principal/agent problem...
Yes, that's how I understand the program as well. Exactly right about what Citi and others will do as well... not that the government sees fit to recognize the disparity between paying 20mm in salary now or 5bn in interest two years from now.
I have mixed feelings about this salary cap. I'd hope that what top talent BofA and Citi have does not immediately jump ship to firms without salary restrictions. These companies need their top talent to help pull them out of this ditch, pay back the government, and return to profitability. It will be interesting to see how this all plays out.
When a company generates an average profit of negative 100k for each employee, a 500k salary is not only justified but central to capitalism.
That is why I'm still buying LEH.
GM is the greatest company in the world, and the salary that the UAW demanded only benefited them in the long run. They are run by the best and the brightest; they are profitable and admired. GS, MS, et al are only emulating the best. You can't blame them. The evidence is there--look at the CLEAR data and don't get caught up in populist crap. Just read their quarterly reports and create a few models: the cash flow is just overwhelming and compelling.
GM @ 60; GS @ 200; MS @ 50; Enron @ 60. The market has validated this overwhelming talent.
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