Dodd The Burden.
POTUS flies to Stamford, Connecticut to raise money from Wall Street hedgies for the lonely, weary, troubled, and far, far side-stepped Chris Dodd, chair of Senate Banking, potentate of the lurid and piratical hedgies and the zombie banks. Dodd has been down to all comers for about a year, ever since the crash and the full revelation of the ruin of the banks, the housing, the hedgies, the Street, all financial regulation. Dodd knows; Dodd knows the Coutrywide stooge Angelo Mozila; Dodd knows where the bodies left unburied are (or should be); Dodd knows he is doomed. Dodd needs a miracle. What he got tonight was POTUS choppering in and making remarks about the big houses of the hedgies he spotted around Stamford. Chortle, guffaw. Dodd's campaign-check-writing people are opposed to everything POTUS says he wants form the Street, from banks. The Ken Feinberg Pay Czar folly of the last forty-eight hours illustrates the base cynicism of the Street and banks toward the Obama administration. They pretend to govern, and we pretend to behave. A WSJ tout asked the question with no answer re the Feinberg make-believe: If Citibank is 34% owned by the American people, why do the American people's elected representatives aim to hobble the bank's recruiting and retention rates and guarantee that second-rate and has-been talent occupies critical or make-work or civil service manque posts. The Post Office on Wall Street. Why work at a place that won't pay you for beating the other guy when you can work for the other guy and get rewarded for pounding the Post Office on Wall Street? Profit means reward, not ceilings. Feinberg is a crank. The pay cuts are theatrics. Citibank is dead. Dodd is a heavy, heavy, heavy has-been. Without co-pilot Ted Kennedy, Dodd is the Last Hurrah who no one hears. If Dodd wins next year, the GOP is a Democratic hire, and Barack Obama is luckier than TR.
POTUS Blame-Shifting
The POTUS rhetorical style is to show up these days and blame George W. Bush. It works. POTUS gets loud cheers for a strange joke he tells everywhere: "...we don't mind cleaning up the mess that was left for us, we're busy, we got our mops, yknow, we're mopping the floor here, but, I don't want the folks who made the mess to just sit there and say, you're not mopin' fast enough..." The laughter is edgy. More of the blame-shifting continues with regard energy. Late in the news cycle, word arrives from London, via inference and hint, that POTUS will not attend the December UN Copenhagen meeting on climate change and global warming. The excuse is that POTUS is jetting to Oslo for the Nobel Peace Prize, and he will make green remarks to the Swedes. Still cleaning up George W. Bush's mess, he avoids the UN -- where Gordon Brown among others has asked for help -- and goes for the weird and empty applause lines for his peace prize for promise.
There's a very old saying in business that the worst mistake you can make is to throw good money after bad. I see some contradictions in your reasoning, John. The complaint that if they underpay the Citi execs they'll get second-rate talent doesn't hold water if, as you suggest, the bank is a zombie anyway. What you've described is a dutch book of sorts. Either the bank has a chance of recovery, in which case you're right that the pay matters but wrong that it's a zombie; or the bank doesn't have a chance of recovery, in which case you're right that it's a zombie but wrong that they shouldn't slash the bejeezus out of these people's bonuses. I have no sympathy whatsoever for any institution that takes bailout money from the Feds. Or anyone that works for such an institution ... right down to the janitor who mops up the mess that Bush made. Hey.... that's racist! Obama calling himself a janitor - he ought to be ashamed.
Billionaire CEO Linda McMahon (of WWE wrestling) has spent a million dollars already. I'm getting a postcard a week from her campaign. Her ads on cable are well made and polished. Get Hulk Hogan and a few wrestling celebs to campaign for her (Husband Vince should not, he looks juiced up) and she becomes a new star in the New England GOP.
Potus showed up early, it was scheduled for Friday evening to avoid inviting Sen Joe Lieberman, adored in Connecticut. Sen. Joe is an Observant Jew and will not campaign on the Sabbath. Technically he could have walked to the Hilton, it is less than a mile away from his home. The White House, Lieberman himself, or Dodd did not want Senator Joe there.
Stamford, Greenwich, and Darien is Hedge fund central. The AIG office that bet the company is in nearby Wilton. Citi, UBS, RBS, all have trading floors in Stamford.
NYC TV channels did not even note POTUS 22 miles from NYC. One New Haven TV channel showed up. Dodd is a dead Senator walking.
Wisdom
Good point, Lou! If I hear you right, you're saying that these are Zombie banks anyway; that they're going to fail no matter what we do. Why pour any more money into them? Same must be true for GM, AIG and the rest.
On the 'mop joke'; I don't quite get it. When Obama first started telling it, it was a 'socialist' mop. After that it just became a plain old mop. Even Batchelor refers to it as a plain, old mop. So which is it - a 'socialist mop or a plain, old mop? I think the American people deserve to know what kind of mops they're using in the WH.
I have had a standing offer, first made to major airlines, that I will am prepared to be CEO and lose their shirts for half the current CEO compensation. so far no takers. the same goes for Citi, etc. they are really overpaying.
the pay thing is a joke. it (so far) only applies to Nov, Dec 2009. and even if it made business sense to retain at high cost these wonderful brainiacs, it is unprincipled. screw them.
And let it be a lesson to all others--take a sip of the Federal brew and you are toast. in its own perverse way that is a real sanction.
and to my thinking it is a large logical leap to say exec comp actually played a role in the bank collapse. it isn't the money, it is the goals that are rewarded. and that falls to the BOD. and most boards are still in tact. that is an outrage.
by the way, has anyone noticed how Patricia Romer has started to sound more like the econmist she one was and is distancing herself from the administration. some people just can't sustain the flak role. she's on her way back to academia I think. Her own pre-Obama research contradicts much of the stimulus strategy.
Yep, as far as I know it's the only thing the government's not wasting money on.
The (probably lost) opportunity here was law reform at the state level to give shareholders the power to challenge do nothing, conflicted or entrenched boards.
Boards of public companies are fiduciaries for entities like pension funds and charitable endowments that hold stock. They can't be owned by the management. It makes sense to pay Jack Welch a king's ransom. It makes less sense to pay a king's ransom to Al Dunlop. Boards should be accountable for knowing the difference.
This issue is not as obvious as it seems. About 10 yrs ago I recall John Bogle (Vanguard ex-Chairman) leading a charge to get mutual funds to vote their shares. The apparently at that time (don't know about now) would simply turn their votes over to management. and in many co's they are very large shareholders. Of course they want access so they don't want to ruffle feathers. It si very incestuous. same with many stock analysts.
The idea that you and I are buying shares of a company, esp through a MF, and then receiving fiduciary representation is blocked at every level of ownership. You are hitching a ride on someone else's train.
Actually, once the government starts buying shares in private companies, you've stepped through the looking glass. Once on the other side, there's no right or wrong anymore, just things that feel somewhat analogous to right and wrong.
The only way to get back on the right path again is to get all these companies and banks to pay the money back and then make sure it never, ever happens again (the bailout, not the crash. Crashes happen, they are part of capitalism and can be actually somewhat enjoyable if you stay away from open windows and right-wing talk show hosts.)
I am posting this because it suddenly occurs to me that arguing over whether the government does or does not limit compensation to these companies is entirely irrelevant. It's sucking us in to somehow tacitly admitting that the bailout was OK in the first place, which it wasn't. Of course, we still have to find out who shot JFK before we can really pursue ANY of this with true abandon.
Who shot JFK? See the Federal Reserve Bank.