Random Thoughts on Other Notable Headlines of the Day — Issue XVI

May 16, 2009  

• The Obama administration seems determined to play a role in limiting executive pay at financial institutes. The Washington Post says the Treasury Department may release a ruling on how to limit pay next week. The Post also says “administration officials want to stem the practice on Wall Street of rewarding investors and executives who make highly risky bets. Instead, these government officials say, compensation should be tied to the companies’ long-term health” . Here’s my argument in favor of some sort of control over pay limits — industry executives have just proven in the most costly way that they will destroy the financial system (and bankrupt the country) in their driven goal to personally extract hundreds of millions of dollars for themselves. In other words, they will not police themselves, so someone has to. The boards of directors won’t do it; the average share holders can’t do it; and there are no moral standards to be relied upon in the executive offices. But I doubt a government intervention of any sort will work. They are sly foxes, these “pay-me-for-failure” greedy executives — they will always find a way into the hen house.
• “After a long and very difficult conversation, the group concluded that it was no longer a viable enterprise. People aren’t up to taking the heat from publicly fighting with the government“: A statement by Tom Lauria, the attorney for the group of hedge funds who earlier refused to participate in the government’s bailout program of the Chrysler Corporation. This happened after “Chrysler won a major victory in bankruptcy court when a federal judge, over the strenuous objections of the lenders group, approved a key part of the automaker’s plan”. So the funds group went down after the first shot was fired, huh? What’s key here is the following: “people aren’t up to taking the heat from publicly fighting with the government“. The key word in that statement is “publicly”. The only way immoral, greedy business people can be successful is to do what they do in private — keeping the secret a secret until they have succeeded. And when they can do it privately, our elected and appointed officials’ are easily bought off.
• “Cheney, who had five deferments himself to get out of going to Vietnam, would rather follow a blowhard entertainer who has had three divorces and a drug problem (who also avoided Vietnam) than a four-star general who spent his life serving his country“: Maureen Dowd in one of her latest columns. “The man who wouldn’t list his office in the federal jobs directory, who had the vice president’s residence blocked on Google Earth, who went to the Supreme Court to keep from revealing which energy executives helped him write the nation’s energy policy, is now endlessly yelping about how President Obama is holding back documents that should be made public” [all bold added]. She also points out how Dick Cheney often criticized those in the past for being critical of a sitting Republican President, but now sees nothing wrong with that as long as it’s a Democratic President. Dowd even points out how other Bush insiders didn’t like or trust him, and how history will mostly blame him when we have another terrorist attack.
• This week we heard of the Obama administration’s intent to reform the antimonopoly laws. It’s easy to look back and see where a monopoly sucks consumers dry and builds kingdoms that are nearly impossible to penetrate. Even variations of a monopoly are not conducive to a free society of alternatives. A short article by The New York Times looks at the problem in “Return of the Trustbusters“. The opening paragraph says “during the entire Bush administration, the Justice Department’s antitrust division didn’t bring a single case against a big company for anticompetitive behavior to shut out a smaller rival. In the administration’s waning days, the division published a set of guidelines that bent so far backward to shield monopolies that it elicited a public rebuke from three of the four commissioners on the Federal Trade Commission” (a Democrat, a Republican, and an Independent). The writer rightfully points out that there is a thin line between not far enough and going too far with antitrust regulations, but says of the Bush administration “instead of finding the right balance, the Bush administration simply took the side of Big Business” [all bold added]. I’ve pointed out more times than can be remembered that W. Bush’s entire adult life has been driven solely with supporting big business. He did that before his political career started, as Governor of Texas, then as President of the United States. He stomped on common peoples rights more than any politician in history. And he had the perfect partner in that endeavor as President — “Slick” Dick Cheney.
• Casey B. Mulligan, economics professor at the University of Chicago, wrote this article for The New York Times. It’s about how the $700 billion for the bank bailouts never was going to be used for its intent. He points out that “bailout funds ended up with bank shareholders rather than adding to bank capital, as bailout advocates led taxpayers to believe. Banks paid dividends [at the end of 2008] that were far greater than what was commensurate with their profitability“. Mulligan also points out that “JPMorgan Chase’s chief executive, Jamie Dimon, told his employees that the $25 billion they obtained from selling equity to the Treasury would help them acquire competitors” [bold/underline added]. So with our money, the banks that were “too big to fail” intended to grow bigger by buying out their competition. Hellva’ deal!!