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Top Employees Flee Pay-Limited Firms

executive-runningRemember that plan by Obama’s pay czar to radically limit executive pay at bailed out banks? And how some of us were predicting that they’d just go to companies whose pay was not limited?  Well, it didn’t take long.

Even before the Obama administration formally tightened executive compensation at bailed-out companies, the prospect of pay cuts had led some top employees to depart.

[…]

Many executives were driven away by the uncertainty of working for companies closely overseen by Washington, opting instead for firms not under the microscope, including competitors that have already returned the bailout funds to the government, according to executives and supervisors at the companies. “There’s no question people have left because of uncertainty of our ability to pay,” said an executive at one of the affected firms. “It’s a highly competitive market out there.”

At Bank of America, for instance, only 14 of the 25 highly paid executives remained by the time Feinberg announced his decision. Under his plan, compensation for the most highly paid employees at the bank would be a maximum of $9.9 million. The bank had sought permission to pay as much as $21 million, according to Treasury Department documents.

At American International Group, only 13 people of the top 25 were still on hand for Feinberg’s decision.

Alex Tabarrok does the math and notes that 23 of 50 is “close to a majority.” He guesses, and so do I, that a few more will leave now that it’s official.

Again, the issue isn’t one of “feeling sorry” for the executives whose pay the administration wishes to limit. There’s no reason to: The ones who can are simply going to go where they can command what the market will bear. The taxpayers who are holding the bag on tens of billions of dollars in bailout loans, on the other hand, might prefer not to have to staff these companies with those who can’t find jobs at the hundreds of firms who pay more than Feinberg thinks fair.

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About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Marine Corps Command and Staff College, and a nonresident senior fellow at the Atlantic Council. He's a former Army officer and Desert Storm vet. He earned a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.

Comments

  1. odograph says:

    And what exactly would have happened if these same companies had naturally bankrupted?

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  2. odograph says:

    James can’t let this go, no matter how deeply irrational it is as a “free market” position.

    In the other thread he writes:

    If we’re talking about the decision-makers that led these companies into a mess, maybe. (When the global financial sector collapses at once, I hold out the possibility that even good managers failed.) But lots of these people are quite likely from other companies brought in to fix the problems. Why punish them for the sins of others? And why would they put up with it?

    What are you, a socialist? Do you think the government should step in whenever firms fail, determine who caused the failure, and protect the contracts of all others?

    GM? Chrysler?

    Don’t be a nut.

    And of course keep it clearly in mind that the US did not rescue these banks as a “goal,” it was only a side effect of (a bad plan to) save the financial system.

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  3. James Joyner says:

    And what exactly would have happened if these same companies had naturally bankrupted?

    Presumably, the most profitable bits would have been sold off and the employees would have been scrambling to find jobs elsewhere.

    The same people who are now trying to hamper their ability to compete, though, are the ones who decided they had to be bailed out at taxpayer expense. The logic of the latter suggests letting them do what they need to in order to succeed and pay back their loans.

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  4. James Joyner says:

    Do you think the government should step in whenever firms fail, determine who caused the failure, and protect the contracts of all others?

    I think firms should be allowed to succeed or fail on their own merits. I also think the Constitution explicitly precludes government from abridging contracts.

    In this case, however, I’m just arguing that the action is stupidly illogical. We decided to bail these companies out with huge loans. We want to get paid back. Making them compete with from a shackled position will hinder that objective.

    Oh, and the people whose pay we’re restricting won’t actually have their pay restricted since they can leave. That means the companies will only be able to hire people unable to command higher pay elsewhere.

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  5. sam says:

    James, it seems to me that your position is susceptible to empirical proof: If the companies now forced to soldier on with “lesser” talent succeed in spite of this burden, wouldn’t that show that the departees were not essential after all and, moreover, were overpayed to boot?

    We’ll see.

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  6. ptfe says:

    James, you make it sound like this has happened in the last few weeks (as does the Post). To be clear, the Post article cites a time frame from June of this year to the end of the year — 6 months. It’s pure speculation that the pay restructuring is related to many of these as opposed to the standard turmoil experienced by a near-collapse. Note that many of these banks recently went through mergers, which probably thrust many of these executives into jobs where they’re no longer satisfied (either because of prospects for advancement or changes in responsibility). I’d say it’s equally likely that people are departing for reasons specifically related to their jobs or related to their confidence in the banks themselves.

    Regardless of their reasons, though, it’s hard to be concerned that half the executives at these firms are leaving until we see evidence a few years from now that most of these execs are dominating in their new posts while their prior firm falls apart without them — thus showing that they truly are “the best of the best”. Wait, what’s that? This kind of data won’t be compiled because it’s much easier to trot out numbers that show almost nothing but can be used to support rampant speculation? Well, then, nevermind.

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  7. Idiot says:

    The pay czar forced Citi to sell Philbro to Occidental because the head trader at Philbro made close to $100 million per year based on performance. He was also making Citi over $500 million per year. Occidental paid for the net book value of the unit which was under $300 million so the deal should be a wash on Citi’s books.

    So here are the outcomes. Great deal for Occidental as they will or should earn it all back in under a year and there are additional synergies with their existing business lines as Philbro is an energy trading shop. The trader will continue to do very well. Citi,on the other hand, loses a lot of income going forward on a relatively minimal investment, loses solid market information, and taxpayers will find it that much harder for Citi to pay the government back.

    This makes no sense unless looked at through a political lens at which point it is perfectly clear.

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  8. Drew says:

    I’ve always said the wisest thing to do after you’ve shoveled billions of money into a corporate cap structure is chase away the stewards of your investment. Simply brilliant.

    Boneheaded Obama policy designed to appease the loons and malcontents.

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  9. Alex Knapp says:

    I also think the Constitution explicitly precludes government from abridging contracts.

    It precludes state government from doing so, not the Congress. That’s what’s explicitly in there.

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  10. PD Shaw says:

    James, you make it sound like this has happened in the last few weeks (as does the Post). To be clear, the Post article cites a time frame from June of this year to the end of the year — 6 months.

    I would go further and say that rats began abandoning the ships 18 months ago, the process accelerated in September of 2008 and in the following Spring when it was clear that political interference was probable, more left.

    I conclude from this however that it will cost more to keep employees at a government controlled company than in competitor businesses.

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  11. Herb says:

    First off, I appreciate the back and forth on this one.

    Secondly, it’s entirely predictable that these guys would leave. The sense of entitlement corporate executives feel is unsurpassed. It’s immense. It contains multitudes that come in the shape of a dollar sign.

    But these pay cuts? How many people are they affecting? 25.

    25 “good” people, no doubt, but nevertheless 25 people. Now I’m not saying it’s okay to screw over 25 people for no reason…but we have a reason (we bailed them out) and let’s be real, they’re not exactly getting screwed over. The good days are over, sure, but they’re still making more than anyone else at the company. (Maybe not on their block…but hell, move to a condo.)

    They pay no out of pocket and, as you have so ably pointed out, if they don’t like it, they can leave.

    They can even retire completely, rich men all of them, and go have cook-outs at Galt Gulch if they want, complaining about all the moochers and the looters.

    Good for them.

    But consider…taxpayers gave these firms $300 billion in bailout money.

    How much is that per person? Well, there’s about 300 million people in this country, so…do the math. Of course, it won’t hit everyone equally in practice…it will even hit these execs…but average it out.

    They are clearly getting the better deal. I don’t feel bad for them and I’m not worried about any economic effects of this move.

    I’m more worried about that $300 billion…

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  12. Gosh I’d hate to see these institutions lose the blithering idiots who ran them into bankruptcy and nearly destroyed the world economy. What the hell would we do without arrogant, clueless, vastly overpaid buffoons like these?

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  13. Wayne says:

    The wait and see if it fails and if it does we can play the blame game sounds like a typical liberal position. I go for lets be smart a prevent problems before they arise and forget the blame games.

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  14. MM says:

    I’ve always said the wisest thing to do after you’ve shoveled billions of money into a corporate cap structure is chase away the stewards of your investment. Simply brilliant.

    Boneheaded Obama policy designed to appease the loons and malcontents.

    Aren’t these stewards of our money the same people that oversaw the investments at the time when the banks required a bailout? I don’t think this is great policy, but I don’t see why we should encourage incompetent people to stay at their jobs. if they leave, someone will take the job and there’s nothing that says they will have to be worse. There’s a limited opportunity to be an executive and there are plenty of people (many with talent) who will take the opportunity even at a lesser salary to break into this group.

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  15. odograph says:

    In this case, however, I’m just arguing that the action is stupidly illogical. We decided to bail these companies out with huge loans. We want to get paid back. Making them compete with from a shackled position will hinder that objective.

    Now that is an off-the-wall argument. We could be paid back now if we demanded it, and then some them would (again) bankrupt.

    They are making exactly the same leveraged gambles they were pre-crisis (at a smaller leverage ratio), they are not showing us any particular skill.

    Shackled? LOL

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  16. odograph says:

    BTW, I hope you do all get that the evidence of skill, the claim banks have for profit, is just the TARP money (and other Fed programs) showing through.

    When the federal government is loaning you money at 0% interest, do you think you need to be a genius to make money?

    You have to be an idiot NOT to make money.

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  17. Steve Verdon says:

    Even before the Obama administration formally tightened executive compensation at bailed-out companies, the prospect of pay cuts had led some top employees to depart.

    In economics we call this rational expectations.

    The taxpayers who are holding the bag on tens of billions of dollars in bailout loans, on the other hand, might prefer not to have to staff these companies with those who can’t find jobs at the hundreds of firms who pay more than Feinberg thinks fair.

    I think the official Washington D.C. view of taxpayers if, “F*ck ’em.”

    And what exactly would have happened if these same companies had naturally bankrupted?

    Uhhmmm taxpayers wouldn’t be on the hook for billions?

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  18. odograph says:

    Uhhmmm taxpayers wouldn’t be on the hook for billions?

    Exactly, and we wouldn’t have the double-pain of paying these guys.

    Maybe I should go through the mechanics of this again. It comes out of Fooled By Randomness. Taleb called it exactly, with his analysis of both “performance” at Wall Street firms, and the unrecognized risks in VAR (Value At Risk).

    The quick way to visualize it is as a bet like this: 95% of the time you earn 20%, and 5% of the time you lose 1000%.

    Would you take that bet with your own money? 20% is good earnings, but a 5% of bankruptcy puts a chill on it. Probably most of us would not take that bet. (Maybe we’d take the “house” side.)

    Now consider that it isn’t your money, and you have a bonus based on your earnings. You can take the bets 3 or 5 years in a row and say “look at me, I am a great manager! I have earned 20% a year, for 5 years!”

    You’ve made your firm billions, and want millions at least as your share.

    And of course you keep at it … until that 5% chance comes up. BOOM!

    Now you need a bailout.

    (And extra credit if you noticed that other managers in your firm might have had other 95:5 odds bets going that didn’t fail in this particular year. They can say “the frim failed but ‘look at me, I am a great manager! I have earned 20% a year, for 5 years!'”)

    Get it? You can’t really tell the “good” managers in this levaraged/VAR model from the ones that didn’t blow up this year. Maybe it would have been them next year.

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  19. odograph says:

    If it wasn’t obvious, note that the managers never had an exposure on the downside. At the worst, when the 5% event came up, they’d make 0% bonus. They would not lose their fortunes. It’s a pretty sweet deal, isn’t it?

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  20. I like the phrase “top employees.” Its makes it seem like the “best” employees are leaving, when perhaps all that is leaving are the most “highly compensated” ones.

    I know some people still hold on to the fiction the free market does in fact accurately assess an executive’s value… but interestingly, there is very little evidence in support of that proposition. Not only does executive compensation poorly predict the long-term profitability of a business, but there seems to be little systematic ability of top executives to transfer successes from one business to another.

    Which is not to say that this sort of half-assed intervention into the private sector is a good idea. But let’s not overstate the affect of any of these policies.

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  21. odograph says:

    BTW, if you want to tie the bad behavior at banks back to government, you could look at how Basel II accords encouraged the use of VaR (sorry, not VAR) as a risk metric.

    Of course, Basel II probably just put in what Wall Street and The City wanted.

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  22. Steve Verdon says:

    Maybe I should go through the mechanics of this again.

    I would right please don’t, but I see it is already too late.

    The quick way to visualize it is as a bet like this: 95% of the time you earn 20%, and 5% of the time you lose 1000%.

    Would you take that bet with your own money? 20% is good earnings, but a 5% of bankruptcy puts a chill on it. Probably most of us would not take that bet. (Maybe we’d take the “house” side.)

    I would take the bet, but only with some of my money and not using leverage. Yes, I’d be limiting my upside, but also my downside too.

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  23. Trumwill says:

    If the execs are the people that lost the money and are thus incompetent, they should have been fired for that reason. Cutting everybody’s salary in half and seeing who goes is far less sound a strategy.

    Let’s say you’re in charge of a group of workers that you can’t afford to keep anymore. You have some performers and you have some that are not performing. Cutting everybody’s salary in half and seeing who splits is a pretty poor way to make that decision.

    Those that are the most competent, have the best track records, and have the most options are those most likely to leave. Those that were here during the crash will have fewer options and will be more likely to stick around. Those that came in to take on the onerous task of trying to put Humpty Dumpty back together again, on the other hand, don’t need this.

    Even people for whom money is not the utmost concern are unlikely to take a 50% pay cut when they could be getting 100% (or 75%, even) doing nearly the same job somewhere else. Particularly when the rationale for doing so isn’t “Look, we’re just doing what has to be done” but is instead “You stinking, thieving bastard!” At some point, self-respect comes into play.

    Odograph could be right that it doesn’t take particular talent to make these businesses profitable again. I certainly hope he is. I am pretty skeptical, though.

    And maybe I’m wrong and talented execs will gladly take a beating, doing a relatively thankless job (indeed, getting yelled at for doing it) for half the market rate, out of some sense of civic duty. Again, though: Skeptical.

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  24. odograph says:

    But you remember Steve that Wall Street firms were leveraging in the ballpark of 30:1, and betting (through MBS) that house prices would always go up?

    The downside potential, as practiced, was 3000%?

    Maybe it was useful that I went through it after all.

    (At the same time they had currency operations, and leveraged merger operations, etc., all monitored through VaR. The actual risk had divorced itself from the management of these deals.)

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  25. odograph says:

    Trumwill, it might be useful to go through a copy of Fooled by Randomess. It really drills in the difficulty of judging performance when risk is opaque.

    Risk is often uncertain, in a way that never can be quantified by any equation. In those cases, as Steve says, the prudent thing is to make small bets without leverage.

    … or you could do what Taleb did to make his fortune … you could bet on the long odds event. Then you lose small amounts each year, until you win big in the crash.

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  26. PD Shaw says:

    I think many people here are assuming that these top employees are the same one’s working for the TARP companies two years ago. I believe that was not determined to be the case with AIG when the issue of their bonsues came up several months ago.

    In other words, the moralists are on a witch-hunt and prepared to burn anything in their path.

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  27. odograph says:

    PD, why are you assuming they are not?

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  28. Drew says:

    For all of you making these silly arguments about the managers, and for the Obama Administration, you can’t have it both ways.

    If the executives are such incompetant boobs then pouring billions into the companies they run is an abrogation of fuduciary duty of incalculable measure.

    However, the fact of the matter is that the bailout money is now in place. Restricting compensation at these firms, either for past or prospective executives, is irrational. It does not maximize the possibility of success and the best outcome for those capital investments.

    You guys really should put aside your petty jealousy of big money execs and consider what is best for the investors – the taxpayers. The die has been cast.

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  29. PD Shaw says:

    PD, why are you assuming they are not?

    Because we’ve had a steady drip-drip of CEOs leaving these companies for the last year (sometimes pushed by the government). Also, that was the justification for the AIG bonuses: a bunch of people left, including one’s most responsible for risky practices, so AIG paid huge retention bonuses to keep others from leaving.

    But this is burden-shifting. If the argument is that we want to punish the people responsible, it would be nice for someone to have evidence that these are the people responsible. If the argument is that we want to punish the company responsible, I pity the poor, stupid shareholders.

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  30. odograph says:

    Drew, that is not only the same old childish argument, it isn’t even based in fact.

    Obama didn’t do these TARP bailouts, Paulson and Bush did.

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  31. Dave Schuler says:

    If the executives are such incompetant boobs then pouring billions into the companies they run is an abrogation of fuduciary duty of incalculable measure.

    If Cal Trillin’s semi-humorous suggestion is right, then the underlying problem is that the guys at the top aren’t smart enough to manage the smart guys who are working for them. In that case this might be exactly the right move.

    Drew, I’m more inclined towards the earlier part of your comment:

    If the executives are such incompetant boobs then pouring billions into the companies they run is an abrogation of fuduciary duty of incalculable measure.

    Pretty much what I said at the time. IIRC, my vote was to buy the companies outright and liquidate them. Based on their stock value at the time it would have been cheaper.

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  32. odograph says:

    So give me a list PD, don’t make it up.

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  33. odograph says:

    Drew thinks that since Bush/Paulson hosed down banks with unrestricted funds, Obama needs to “respect the market” and let those banks pass the funds to whichever execs they choose.

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  34. PD Shaw says:

    Odograph, look up burden shifting.

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  35. devildog666 says:

    Aren’t these stewards of our money the same people that oversaw the investments at the time when the banks required a bailout?

    The government and ACORN coerced the banks into giving loans to borrowers that were unqualified and unable to repay loans and are now blaming the bankers for it.

    Yes, let’s cut their pay and half and double their taxes that should really help NYC’s budget problems.

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  36. odograph says:

    No PD, you made a fallacious argument. It’s called the “missing data argument.”

    Someone might say that Europeans did not discover America because the Japanese were here first. You say “but where is the archaeological evidence?” … would you be happy if he said, “well, I’m sure it will be found.” Or worse yet “you look, and you’ll find I’m right.”

    Burden shifting indeed.

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  37. odograph says:

    BTW, Dave S, here’s another one to head off (if at all possible)

    http://www.ritholtz.com/blog/2009/10/why-expanding-home-buyers-credit-is-a-mistake/

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  38. PD Shaw says:

    odograph, I responded to the arguments made over and over again in this thread that the top employees shouldn’t be paid because they were the stupid, feckless, negligent people who got us into the problem in the first place. It is a moral argument premised on the culpability of people whose background is assumed and not in evidence.

    My view is the same as Drew’s. It doesn’t matter whether these employees were responsible or even there at the time. I don’t care. We bought the cow, please stop kicking it.

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  39. Drew says:

    odo –

    I’ve read the entire thread. You really need to be careful with the word “childish.” And you really need to deal with the thrust of my point.

    Dave –

    On your first point, if true, they are chasing that second level away as well. That’s not a good thing now that the money is out the door. Also, see my comment over at your hacienda.

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  40. odograph says:

    Well Drew, I’m frustrated. You wrote:

    For all of you making these silly arguments about the managers, and for the Obama Administration, you can’t have it both ways.

    Did you think that was a true-telling? It wasn’t the Obama administration that did the first act of this play, was it?

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  41. odograph says:

    PD, you’ve made the repeated suggestion that these 25 were not involved in the crash. Either you have evidence, or you are making an argument from missing data.

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  42. Steve Verdon says:

    But you remember Steve that Wall Street firms were leveraging in the ballpark of 30:1, and betting (through MBS) that house prices would always go up?

    Yes Odograph, I’m quite well aware of what was being done. In fact, the example you use should be obvious to everyone that it is a losing bet. The expected payoff is $-0.31 for a 1 dollar bet. Do it long enough, and you will only be a loser.

    Maybe it was useful that I went through it after all.

    Only to yourself.

    PD,

    I think many people here are assuming that these top employees are the same one’s working for the TARP companies two years ago. I believe that was not determined to be the case with AIG when the issue of their bonsues came up several months ago.

    F*ck them too. Sheesh, what you want things to be fair. We need a sacrificial lamb.

    Drew,

    If the executives are such incompetant boobs then pouring billions into the companies they run is an abrogation of fuduciary duty of incalculable measure.

    Remind me again….where did Larry Summers and Tim Geithner work before Obama was elected?

    Odograph,

    Drew, that is not only the same old childish argument, it isn’t even based in fact.

    Obama didn’t do these TARP bailouts, Paulson and Bush did.

    Uhhhmmm geez is that partisan foolishness or what? Yes, Bush and Paulson, and just how many Democrats in the House and Senate? And wasn’t Bush consulting with Obama on TARP Funds? And was all the money released under Bush? Oh yeah, I know Obama inherited the problem…so its all okay.

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  43. odograph says:

    Sure Steve, add the Congressional Dems. No problem.

    That still doesn’t make it the Obama morality play that some so need.

    BTW, as an aside, a surprising biological feedback.

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  44. odograph says:

    BTW, why would Bush have been consulting with Obama back in October 2008, rather than McCain? Or for that matter, Hillary?

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  45. newch says:

    It seems to me that much of this discussion has veered off into ideological conflicts.

    On a more practical level: Is it more likely that the CEOs of companies that have received TARP funds will move quickly to repay the Federal Government if they cannot receive significant bonuses until they do so?

    That question seems critical to evaluating this restriction.

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  46. Drew says:

    Odo –

    I’m hoping you are drunk, or high.

    My reference to the Obama Administration is their decision to regulate salaries, which is the focus of James’ post. Now, do you want to respond to my point on this subject, or just hurl your juvenile invective again corporate executives?

    Steve –

    I have some inside skinny on Summers, but it would be a violation of confidentiality to divulge. I know that’s a real tease, but there is nothing I can do about it. Suffice it to say: not a fan.

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  47. Drew, Steve, et al, this is like trying to teach a pig Spanish. All you will accomplish is to annoy the pig.

    odograph is too busy flinging feces, positing strawmen, and bringing up red herrings to respond directly to your comments. I would just note for his benefit again that many of us complained loudly about this when Bush and Paulson were doing it, Obama and friends have embraced those policies and expanded upon them, and that predictions made then about the bad effects downstream have been spot on.

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  48. Drew says:

    “odograph is too busy flinging feces, positing strawmen, and bringing up red herrings to respond directly to your comments.”

    In the immortal words of David Byrne: “same as it ever was.”

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  49. Steve Verdon says:

    Odo,

    BTW, why would Bush have been consulting with Obama back in October 2008, rather than McCain? Or for that matter, Hillary?

    He consulted with Obama about the disposition of the remaining TARP funds after the election. Really. And Obama has not brought better oversight to the issue, nor did he stop the program.

    Drew,

    I have some inside skinny on Summers, but it would be a violation of confidentiality to divulge. I know that’s a real tease, but there is nothing I can do about it. Suffice it to say: not a fan.

    No worries mate, I have a post here pointing out the following:

    1. Summers had a multi-million dollar gig where he worked 1 day a week…for a Wall Street Quant firm, IIRC.

    2. Did lots of speaking engagements and made alot of money there…speaking to Wall Street firms.

    3. In 2 above may very well have been paid after these insitutions recieved TARP funds.

    Yes…not a fan. He maybe smart, he may know his economics, but over all I find him thoroughly repulsive.

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  50. Steve Verdon says:

    Larry’s Cush Job

    Larry Summers $8.5 Million Dollar Man

    That second is great. After the updates the usual suspects amazingly stopped posting.

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  51. Tlaloc says:

    Gosh I’d hate to see these institutions lose the blithering idiots who ran them into bankruptcy and nearly destroyed the world economy. What the hell would we do without arrogant, clueless, vastly overpaid buffoons like these?

    What he said, repeat as needed until it sinks in.

    Here’s to putting maximum wage caps on the rest of the private sector. It’d literally be the single best thing you could possibly do for the american economy. In one move you’d free up trillions of dollars for investment, research, etc and you’d also ditch the useless parasites that currently sit at the top of the heap.

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  52. Herb says:

    After the updates the usual suspects amazingly stopped posting.

    I’m confused about this, Steve.

    Is this just a neaner-neaner “Your mama is on welfare” taunt?

    Or is this part of some kind of coherent argument that you’re advancing? I’ve scrolled through previous comments and clicked over to the Larry Summers posts and I’m genuinely confused.

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  53. odograph says:

    You guy’s can’t face reality, that’s all. You like your make-believe argument that this is all about Obama and wages.

    Anyone who knows the saga will give that a WTF?

    But of course, if you can’t deal the Bush’s bailout, and how it sets the stage for “Obama’s wages” you’ll lash out, won’t you?

    You’ll start calling me names?

    Let me make this absolutely clear: The argument as presented, is a play argument. It carefully avoids real world history and the ongoing behavior of these same TARP firms.

    You don’t understand VaR. You want to forget Bush’s bailouts. This didn’t become political, James’ article started political with its very careful framing.

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  54. odograph says:

    odograph is too busy flinging feces, positing strawmen, and bringing up red herrings to respond directly to your comments. I would just note for his benefit again that many of us complained loudly about this when Bush and Paulson were doing it, Obama and friends have embraced those policies and expanded upon them, and that predictions made then about the bad effects downstream have been spot on.

    But this is the contradiction of the new conservative position. You call me names because I call you on it.

    You say “predictions made then about the bad effects downstream have been spot on”

    But this post DEFENDS the bad effects. It says the government must do the wrong thing, and heap lavish pay on failed companies.

    THAT is the contradiction.

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  55. odograph says:

    Shorter: The conservative position is to make sure the bailout is UNLIMITED.

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  56. odograph says:

    You know, I said a day or two ago that you can’t tell the difference between crony-capitalism and socialism. Maybe that is still the problem.

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  57. odograph, please point out in the block quoted segment where I called you a name. Any name. Go ahead, I’ll wait.

    Or stop making things up out of whole cloth. Your choice.

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  58. odograph says:

    Close enough in my book, Charles:

    odograph is too busy flinging feces, positing strawmen

    You know, I thought I made very careful and patient posts when I explained VaR and the way banks blow up. I thought I made a good, rational, case why this argument that “salaries only for good managers within bad banks” was silly.

    Did you engage with any of that?

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  59. odograph says:

    Wait a minute … are the actual mechanics “strawmen?”

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  60. odograph says:

    If you want to understand my frustration, why I view one-line arguments “childish,” it is because they don’t engage with the mode of failure at these banks, or their current mode of operation.

    These banks failed because division managers took bad risks, and top managers let them (often not understanding at all what they were doing, just that they were making 20% a year). They survive because they’ve been given a tap with free money (0% interest loans, and the government pipe through AIG).

    Now the most way to look at this as contract fairness? The most important way to look at is that Obama shouldn’t mess with the status quo?

    Do you understand the status quo?

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  61. odograph says:

    Here’s another one on “do you understand the status quo:”

    The Fed’s balance sheet expanded again in the latest week, rising to $2.183 trillion from $2.174 trillion. The bulk of the increase came from more than $13 billion in new purchases of mortgage-backed securities. The Fed also expanded its purchases of Treasurys and agency debt. The central bank started a program in March to ramp up such acquisitions in order to keep long-term interest rates low. The Fed announced in August that it will be buying more Treasurys through the end of October, and said last month that it will be buying MBS into 2010. The makeup of the balance sheet continues to shift as most emergency facilities to prop up the financial system posted declines. Direct-bank lending dropped to its lowest level since the week following last year’s collapse of Lehman Brothers.

    When the Fed buys junk from banks, do you suppose that gooses income? Makes certain people look like “good managers?”

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  62. Raoul says:

    In reality-this is only half the story- only once we know where “they” went (retired?) can we then speculate on its meaning- as of now, it is premature.

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