<p>Here is a link to the actual FED disclosure of what all they did, as far as we know. If you look at the right side of the page, you will see all the different ways they bailed the banks out of the CDS mess. It’s extensive and expensive.</p>
<p>[FRB:</a> Regulatory Reform - Transaction Data](<a href=“http://www.federalreserve.gov/newsevents/reform_transaction.htm]FRB:”>FRB: Regulatory Reform - Transaction Data Released on 12/1/2010)</p>
<p>Government makes banks give loans to low income earners that normally wouldn’t qualify for a loan, because that sounds like a humanitarian thing to do. They do this on a massive scale, after all the more loans, the more interest, and more money. People get loan, buy house, and then default on mortgage. People get kicked out of home that is probably upside down now, lose money and waste time. Housing market gets flooded with houses and prices drop. Economy crashes and now you have millions more people out of work from the economy crashing. Government set out to help the little guy, and ended up hurting the entire economy. The banks aren’t going to eat the losses, and honestly they shouldn’t have to if we’re fair because it was the politicians that forced them to make the loans.</p>
<p>Raiders, the problem undoubtedly began with forcing the loans. But, the problem that we ended up with had to do with the way JP Morgan invented to make these loans profitable, by traunching them with good loans, cutting them up into pieces and selling off parts of the laons, and then a trading market that developed, which is like a trade on a trade on these loans, also known as insurance…</p>
<p>It’s way more complicated than what you just said. But, since the banks took NO losses on any of this, I’m not at all sure why people always point to this as the issue. The banks lost nothing. Well, the big banks lost nothing. The small banks were allowed to fail.</p>
<p>Of course it’s more complicated than that, I just don’t understand the advocating of helping the homeowners after the fact, when it was this exact thing that caused the problem in the first place. The government giving houses to people who couldn’t afford them created a bubble, and they should follow that up by letting the same people live in a house they still can’t afford? All you are doing is distorting parts of the economy, which throws the balance off.</p>
<p>Also, you’re forgetting that if they are never forced to make these bad loans, they wouldn’t be forced to come up with elaborate ways to trade them. You can’t get mad at a businessman for making good business deals, that’s what they do.</p>
<p>I think we as a nation should take advantage of the benefits of global capitalism and outsource our CEO positions or grant H-1B visa to foreign CEOs. Surely that would “enhance shareholder value”!</p>
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<p>There were reasoned voices there should be strings attached. I guess they were overridden. I also read that at the same time, banks profits were made tax-exempt. Does anyone know if this is true? Back then it didn’t matter much since no one except Wells Fargo was making any profit. Time to tax them, and tax them heavy?</p>
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<p>The purpose of the FED is to lend money to its member banks. It didn’t bailout any banks during the financial crisis to protect the evil capitalists you fear, it did its job to preserve banks for depositors and for borrowers which is its job. </p>
<p>If you want to talk about the beneficiary of FED policy it is the federal government who can now fund its debt at zero interest rates. The federal government can run up trillion dollar deficits to make sure all the “takers” get their free stuff that they voted for.</p>
<p>AIG was taken over by the federal government not by the FED. You can’t seem to tell the difference between the FED and the federal government. </p>
<p>AIG and GM should never have been bailed out by the federal government.</p>
<p>“Wonder when we’re going to learn the lesson on THAT?”</p>
<p>Never.</p>
<p>Razosharp, I already posted this link, and I am well aware of Treasury’s involvement. Also, the FED’s job might be to loan money, but it’s not to pick winners and losers, which it did in this case. At any rate, the FED was massively involved in the AIG money funnel.</p>
<p>[The</a> AIG Bailout Scandal | The Nation](<a href=“http://www.thenation.com/article/153929/aig-bailout-scandal#]The”>http://www.thenation.com/article/153929/aig-bailout-scandal#)</p>
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<p>You should read the whole article. You should look at what is floating around in your kool aid, Razorsharp. I also posted the actual disclosure from the FED, so far, as to what was done, including the buybacks.</p>
<p>They did far more than lend 9T dollars at give away rates. </p>
<p>Everybody knows this. I don’t even know why you are trying to say it isn’t so.</p>
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Having spoken with bankers whose institutions took the money, I am here to tell you that there were strings attached - just not the ones that you may have wanted or known about.</p>
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<p>How much does it cost if you lend out money and it gets repaid right away? Not much. </p>
<p>Now compare that to a 30 year mortgage pool with 20% lates and 5% defaults- thats crazy expensive.</p>
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<p>Absolutely. Our stock is up somewhere between 30 and 40 times when I joined. That can make for some pretty happy employees. The CEO has done a fantastic job over the long haul. I’ve had my disagreements over strategy but I’ve been proven wrong (which is why I’m not the CEO).</p>
<p>Well, this thread went kind of far afield, but to return to CEO pay, I have a couple of observations:</p>
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<li><p>I have no objection to anyone making a lot of money. Athletes and actors make money based on pure capitalist calculation by the wealthy people who pay them, based on informed analysis - “If we pay Joe Quarterback $20M, will we earn an extra $20M+ as a result?” “If we hire Sandra Bullock at $5M for this movie, will we make a bigger profit net of that salary than if we hire Suzie Nobody?” They’re not always right, but it’s always an informed, calculated decision involving the money of the people who are making the decision. That’s how capitalism works, and I’m a fan of capitalism.</p></li>
<li><p>But CEO pay is not capitalistic. It pretends to be - razorsharp touts the party line on that - but it really isn’t. Busdriver11 hit it on the head - the decision of what to pay a public company CEO is strictly cronyism. Sure, they hire consultants to come up with a glossy brochure justifying whatever pay the CEO wants, but the outcome is predetermined. Who would hire the consultants if they gave the “wrong” answer? (I worked on a lawsuit involving a commonly known public corporation and got to dig into the process because a member of the compensation committee “coincidentally” got a contract with the company which required that the previous contract holder be axed. It was neither subtle nor honest.) </p></li>
<li><p>Comparing people who started a company like Gates or Jobs with your average CEO is nonsense. Their wealth accrues because they own the company (or a big piece of it, after selling off parts to capitalize their dream.) </p></li>
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<p>The real Masters of the Universe are guys who are members of the club, who work the system until they will be paid millions whether they help they company or drive it into bankruptcy. They get paid hundreds of times the pay of regular workers because they think they deserve it, and they rig the system. Thirty years ago the club members felt that 42X average worker was appropriate. Today they honestly feel that 350X that worker is fair. That’s the long and the short of it. Today’s CEO’s are not 10 times as valuable as 1980’s CEO’s. They just believe that they are. There’s nothing “capitalistic” about it.</p>
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Kluge, what is your “average” CEO? As I’ve been hammering away at on this thread, the article said NOTHING about the average CEO - it said the “average CEO of a top-500 company”. </p>
<p>I know several CEOS, many of whom are CEOs of start-up companies, working for peanuts, getting paid last (after everyone else gets paid, after the bills are paid, they get the leftovers, if any, but the salaried employees didn’t put their own money in). </p>
<p>I know a few people who do turnarounds, and take companies on the verge of bankruptcy and make them profitable. Those people tend to be worth every cent. (The same cannot be said of the CEOs who ran the place into the ground.)</p>
<p>I have no personal objection to saying, “Some CEOs are wildly overpaid;” what I object to is the proposed solutions that are, IMHO, worse than the problem. Government intervention, limiting the ratio of CEO pay to regular worker pay? Sickening, and anyone who think that such powers will be confined to Fortune 500 company CEOs is a bloody fool with no discernible neural activity. </p>
<p>(As a final thought, modern CEOs live in a ‘global economy’. They may not be ‘worth’ ten times as much as 1980s CEOs, but they might be selling their products to a market that is ten times as large. A 1980s-era car phone manufacturing company CEO, for example, would logically be paid far less than the CEO of a company who sells to a hundred million Americans and a half billion people worldwide.)</p>
<p>ariesathena, my personal feeling is that the root cause of the inflation of CEO salaries (and yes, we’re talking about big, public corporations) is simply that the mentality of the wealthy in America has changed. There’s a sense of entitlement among the wealthy that I think shares more with 19th Century European noblemen than 20th Century America. The pay level is really more a matter of custom than anything else. Like I said - it’s not capitalism. You’d get the same people performing the same quality of work at 42X that you get at 350X. It’s not like they’ve become supermen. They’ve just decided that they deserve a bigger piece of the pie - and yes, they believe that they deserve it regardless of the actual outcome of their tenure at the company.</p>
<p>“Worth every cent.” That’s easy to say, but do you really mean it? Do you really get those results if you pay 350X but not if you pay 42X? Because unless you can say that’s true, capitalism isn’t responsible for that decision, and the extra cash is coming out of the pockets of everyone else - shareholders, workers and customers - simply because the members of the club control where the money goes.</p>
<p>First of you have to realize its kind of a junk “study” out out by the AFL-CIO. They compare CEO “compensation” (salary, stock grants, pension, allowances) to the average US worker salary (not including pension, 401K match, benefits). </p>
<p>Why are they comparing total compensation to salary? Why are they comparing CEO’s of a company to workers who arent even in the same industry let alone the same company?</p>
<p>Secondly, if you look at the Glassdoor CEO approval survey you have a hell of a lot of people paying their non-founder CEO over $10M who are very satisfied. McKinsey, Ernst and Young, EMC, Goldman Sachs etc…</p>
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<p>Actually kluge you are touting the party line that if someone is making more than me it must because of corrupt reason and the government must put an end to it. It is not your business how much public corporations pay their CEOs unless you are a shareholder. It has nothing to do with attitude of the wealthy. Anyone who can make money can rise to be a CEO. The cream rises to the top. The reason CEOs make large sums of money is because there are so few of them who can consistently make extremely large amounts of money. If a CEO does not make significant income, he or she is out quickly. Look at what happened to Ron Johnson at JC Penny. He is a genius at marketing but he was unable to turn JC Penny around in the short time the board gave him and he was fired quickly. They replaced him with the old CEO because the amount of talent out there is very slim.</p>
<p>If you want to know the value of a CEO compare Microsofts Ballmer to Apple’s Jobs. In ten years, Jobs took his left for dead company from a stock price in the single digits to several hundred dollars creating wealth for millions of people. Ballmer has taken his stock from somewhere below $30 to somewhere below $30. MSFT can’t get rid of Ballmer because he ownes so much stock. It has nothing to do with cronyism it has everything to do with stock ownership and the lack of any better replacement.</p>
<p>Kluge, is anything you wrote responsive to what I said?</p>
<p>Let’s establish some facts:
*The average CEO is NOT paid 350x the average worker.<br>
*The study did not even compare the average CEO to the average college-degree holder (which would be about 10:1 in terms of straight compensation); it compared the average Fortune 500 CEO to the average worker (including your hairdresser at the mall).
*The study does not compare the different commercial markets between 1980 and present, both in terms of a global market and the size of the domestic market.
*You aren’t comparing lifetime earnings or even decade-long earnings. (Most of the “top 1%” are not there a few years later.)
*The study, as per argbargy’s post, is methodologically flawed.</p>
<p>I wrote about turnaround CEOs who are “worth every cent”; you then extrapolated to Fortune 500 CEOs who are running stable, profitable companies, and demanded that I defend the same. You’re a lawyer; how about restricting your cross-examination to the subjects brought up on direct? </p>
<p>This is nothing but pure leftist, entitled, jealous hackery. (As much as I respect you, I would guess that your raging against the “entitled” upper classes involves some projection. At least, that has been my experience over the years looking at the would-be overlords of “appropriate” salaries.)</p>
<p>This study compares exactly five hundred people with over a hundred million working Americans. You want to get wound up over what five hundred people earn. I don’t. I may not agree with it, but I am enraged that hacks and jealous progressives would use this flawed study, further mis-state it, and then try to attack everyone who has the title “CEO” in front of her name.</p>
<p>Argybargy, would they have been more or less satisfied if the CEO was paid $1M? What was the cause of paying over $10M? They couldn’t get anyone to do the job competently for less? Do you really believe that’s true? That’s the kind of decision that drives Bullock vs. Nobody, or Manning vs. Tebow. But when the average is over $10M that suggests that the average value added by CEO A vs. CEO B is that much. I don’t see it.</p>
<p>Do you really think that “benefits” makes a difference? My thinking is that benefits relative to overall compensation for average workers is probably lower now than in 1982, not higher, so that doesn’t change the basic premise - CEO pay has skyrocketed relative to pay earned by other workers, in a non-capitalistic system.</p>
<p>razorsharp, your comments are silly. As usual, you combine straw man arguments and completely unsupportable claims. I’m an investor like most folks here. I don’t have any say in how much CEO’s are paid, and don’t have the option to invest in companies that don’t overpay their CEOs. The universe of CEO’s of top 500 corporations is remarkably static. You point to some spectacular failures - who were paid millions regardless - but most are just OK - and they still make millions as well. </p>
<p>To support your premise you have to demonstrate that CEO’s are 10 times as valuable to companies - on average - than they were 30 years ago. The rest of your arguments are just window dressing.</p>
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<p>An interesting question is what was his total net compensation during that period.</p>