Somewhere I read that Henry Ford used the word "capitalist" in the opposite way. He didn't consider himself one; he considered Wall Street speculators to be parasites and applied the word to them. But his usage was idiosyncratic, I think.

A friend of mine defended speculators who merely manipulate money in financial markets, saying they do promote the flow of money to productive projects. I didn't know enough about economics to either agree or disagree with him. However, I can't help *feeling* that the amount of money they skim off of productive enterprises and arrogate to themselves is way out of proportion to the benefit they provide, if any.

It would have been nice if Congress had thought of putting the pay cap in BEFORE handing out the money. More banks might have taken a pass that way.

Oh, and the fat fuck Frank is seriously considering extending the salary caps to all corporations.

Maximum Wage anyone?

Follow it up with an "excess profits tax" on all corporations, and Hello Marx!

Well, here we go with the American layman's combination of ignorance and schizophrenia.

Show me just one executive who was compensated outside the pay process approved, by law, by the shareholders and board of directors.

Unless you can show that, you're just whining about other people's money. It's illegal in no way whatsoever. It's the result of market competition for executive positions.

Now: what does one properly call government interference with that market?

Where does the schizophrenia come in? The bailouts. For everyone formerly whining about "corporate welfare" - itself a canard - the bailouts, for your information, are nothing but. Such people should be gagging on their own ignorance, having not once indicated that they understand cause and effect in the current market conditions.

Throw money at the problem and it'll go away. That's all these people are saying, and just as sexual escapades were the key distractor in the Clinton White House, money has blinded the nation today.

"Ooo! I can get money!"

Hey, idiot! It's your own money, being grossly mishandled, and you're going to pay down the line.

What business is it of yours what Steve Jobs gets paid? None, until you're an Apple stockholder. The idea that it should be your business when the company is suffering is just your ego talking, and it's drowning out the consequences and precedents you seek.

I think you make too much money. I think I'll get the government to cap your salary. Thanks for making that possible now!

Cue the whining.

One more thing, with an example.

Take Steve Jobs from Apple, where he has clearly made a difference in everyday life directing the production of consumer products, and move him to General Motors, where labor issues and product liability insurance, and therefore government presence dictates what goes on to a huge degree.

Tell me what he should be making there.

Do you get to blame an executive whose every decision is thwarted or distorted by labor unions and/or Federal law?

Do you get to blame a bank executive who can't cover the high-risk loans she was compelled by government to issue?

Radwaste - I have to agree that you're right, even though I hate it. I think what some CEOs make is outrageous, irregardless of how the company is doing, but it isn't my business. I used to have access to payroll reports at the company I work for and saw how much the executives made and didn't see what they did that justified their earnings, and they made diddly squat compared to the ones you hear about (and the company I work for for the umpteenth year in a row increased market share and earnings). I was a lot younger and more naive then, but I still think doubt that what they do is worth what they're paid.

Wayulll...

Just as an aside.....

A lot of administrative stuff has been going on that no one can actually explain, so we'd decided to take it on faith that it was all purposeful. There's not really much difference between Madoff's clients and the broader investors who lost a lot of money last year. In both instances, people were selling things to each other that didn't mean anything.

But if it was just "wild speculation by idiots", it wouldn't really be a problem, would it? You know a wild idiot when you see one, don't you?

I thought I did, which is why I was proud of investing in index funds instead of individual stock picks. After all, a year ago (maybe two), a lot of people who were not stupid thought the financial industry was on sound footing.

Obama said (www.huffingtonpost.com/2009/02/03/obama-to-limit-executive_n_163765.html ):
---
Executives came to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses.

That's the height of irresponsibility. That's shameful. And that's exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis: a culture of narrow self-interest and short-term gain at the expense of everything else.
---

So, what does Obama do? He puts $300 billion into the custody of these same executives. Bush did it and Obama supported it. Obama and Geithner want to give them hundreds of billions more. Does this in any way restore trust? He says to these shameful and reckless executives "keep running the company, and here is more money". But, we are going to pay you less, only $500,000 per year plus stock options. (The options will only be paid after you pay the government back.)

Rewarding Bank Management for Failure

Here's something for you all to consider. The top executive at Savannah River Site several years ago made a million dollars, plus three million in bonuses. I think it's fair to say that the man didn't invent any of our processes for handling nuclear waste; in fact, during his tenure, the In-Tank Precipitation process failed, costing about $400 million. Structures were built during that project that interfere with our efforts today; compensatory measures such as more-complex procedures are necessary.

The post's qualifications and performance is monitored by the Department of Energy.

Just who do you think is guarding the henhouse today and tomorrow?

Executive pay IS our business when it is our tax dollars paying them.

If they don't get our tax dollars, then I don't really care.

I agree. If Obama can cap their salaries, he can cap yours. The businesses should have been allowed to go under, though, not bailed out. Personally, I think if a hospital thinks an RN is worth $70 an hour, the RN should get it. The government has no business in it, and now they have their foot in the door.

> The government has no business
> in it, and now they have their
> foot in the door.

Well, if government is an investor, it literally "has business." Obama's caps may be primitive and small-minded, but in the real world of human hearts, they're entirely righteous. The fact that this seems simplistic and designed for voting janitors who 'don't think about economics very much' is irrelevant.

If all the seven-figure executives who balked about this as an inexcusable infraction of free-market principle decided to quit and take their talent elsewhere, where would they go?

Nowhere.

Every time some wiz kid executive takes over a failing company and really, truly makes it stronger, he or she will do for a dollar a year or something... There's always better compensation later on or by indirect means, but they never do iftfor the money. (See Apple, Chrylser, etc.)

Listen, if we're bailing out Bank of America, don't we want someone in their who's taking the challenge as a matter of sport?

Let's not pretend that animal Darwinian greed is going to put this contraption back together. We need clockmakers who enjoy the feel of machinery.

Show me just one executive who was compensated outside the pay process approved, by law, by the shareholders and board of directors.

Unless you can show that, you're just whining about other people's money. It's illegal in no way whatsoever. It's the result of market competition for executive positions.

You're right and you're wrong. No one is saying this is illegal. Many people are saying this is shameful.

And you're right about the lack of corporate governance being to blame. When "compensation committees" are made of board members who are CEOs of their own company, it's not terribly shocking that they vote themselves outrageous compensation.

And good as mutual funds have been to John Q. Public, when the mindset of people buying Wall Street is to sell at the sign of distress, and buy on rumors it doesn't get investors to actually "invest" in a company. What arises is not investment, and not oversight and accountability of management, but speculation and voting by walking away.

So there is no accountability in the process.

This being a government and community of the people, by the people and FOR the people, I have to say that all else being equal, none of these clowns in a public corporation sold under the auspices of the SEC have any sort of right or claim that their compensation is theres alone to determine.

If we have a crappy corporate governance then, as it is clear we do, I have absolutely no problem with SEC regulated companies having to abide by SEC regulations concerning compensation.

Yes, it IS a free market and these douchebags are free to get another job in a private company, same as we tell the wage slaves at the other end of the spectrum.

The nonsense about Wall Street running away is that even at a measley 500,000 plus stock, they will find plenty of completely qualified individuals to run these companies as well if not better. There is no shortage of people with MBAs, finance degrees, accounting degrees and experience.

If there is some argument that these companies are so huge that there are only a small group of people who can run them, then I remind you of why we had to bail them out, they are supposedly too big to fail.

That being the case, the solution, IN ADDITION to salary caps, is to BREAK THESE BEHEMOTHS up. Too big to fail is blackmail on the US citizen. Too big to fail is resolved by splitting Citigroup into pieces and allowing qualified MBAs/finance/accounting types to run it as smaller companies.

NONE of this impinges on our free market, because we are not in a free market. These are public companies regulated by the public for the public.

If they want a better deal in a free market, I suggest they go find one.

Otherwise, they should stop whining.

You too.

I did qualify my statement by saying they had no business being bailed out. That was big fucking mistake #1. Giving government more control over private citizens salaries is big fucking mistake #2. Big fucking mistake #, oh maybe 8, will be government telling you what your job will be henceforth.

Socialism.

Thank you for posting this letter to the editor, Amy. I've also long wondered how people going to the gov't for handouts can possibly be labeled as "capitalists".

As per the tangential discussion on Capping Exec Pay, I respect what RadWaste has said but my own feelings lean more towards the words of NicoleK.

Here in Canada we have a seemingly endless number of hybrid public-private organizations called "Crown Corporations". They're supposed to be fairly independent but at the end of the day they are simply a branch of the government dipping their toes into the private sector. The heads of these are almost always political appointees. You never usually hear of them unless the shit hits the fan with some incident. Then you see them in the spotlight and realize what incompetent twits they often are.

So knowing that they only got their job through political patronage, I adamantly believe that their salaries should be kept as low as possible.

Thus, coming full circle back to the situation in the U.S., for those companies that have been significantly bailed out by the gov't, I have no problem capping the salaries of what now are effectively gov't bureaucrats. And if these execs are not happy with this then they should earn enough money to pay the taxpayer back in full, with interest, to once again become a truly private corporation.

"So there is no accountability in the process."

And there isn't going to be now. The bailout eliminates it.

Just what is to be broken up? Board memberships? Just how many people do you think are qualified?

There has to be a lot. Al Gore is on the board of Apple. Now I accept the premise that he can't serve on the board of any other company.

This is just an argument about other people's money. It's just more class envy. The guy with the Rolls is still going to hire people to build it, maintain it and fix it. The Luxury Tax should have taught you a lesson about this; a 10% tax on yachts cost thousands of Americans their jobs in Florida alone as multinational companies went to Singapore, the Netherlands, Italy and Germany for them.

I sure wish somebody who understood money would address this where I can see it. Warren Buffet, maybe? Read this.

"Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts." - Warren Buffet.

That's what is really going to hurt you - us - not anything the CEO of General Motors makes. He's a multinational anyway, and making a profit on overseas operations.

A pious little niblet for the Sunday morning churchgoers.

These banks lent money and held assets that do not exist. What we are observing here is THEFT, malfeasance of the highest order. And they are handsomely reimbursed for it? Fuck that.

Now, I wouldn't personally care, because my money is in guaranteed accounts and index funds. However, with the bailout, I will be basically paying for the devaluation on my savings. Way to reward the feckless and punish the prudent.

If GM is making so much profit on overseas markets, why do they need a bailout in the first place? Let them fail.

These banks lent money and held assets that do not exist.

They existed then. They stopped existing once real estate values fell.

Partly, Kish.

In many cases, the selling price of these houses was far in excess (some by as much as 50%) of the ACTUAL value of the house.

Banks loaning someone $500,000 to buy a $400,000 house with no down payment, and a 1/7 Option ARM were stupid. They did so because they believed, just like everyone else involved, that the house would eventually be worth that much and more, and could be refinanced or flipped for a profit and everyone would be happy.

Of course, the builders went apeshit turning out new developments. Classic oversupply problem.

All of this was oh so predictable. My only error was in trying to time the crash. I was two years too early when I bought this place. However, I only bought it because it was a fixer, and I got it for well below market. After the deflation, I'm still afloat.

These banks lent money and held assets that do not exist.

They existed then. They stopped existing once real estate values fell.

The money did not exist either. The actual assets and money on deposit was way overleveraged, which by definition means it did not exist. Not then, not ever.

In many cases, the selling price of these houses was far in excess (some by as much as 50%) of the ACTUAL value of the house.

But that's how "actual" value of real estate is measured - by its selling price. I know of no other objective measure.

The actual assets and money on deposit was way overleveraged, which by definition means it did not exist.

Agreed, if a bank lent more than the property was worth at the time. But I don't think that was generally the case (assuming the valuations were honest). Rather, most problems came from valuations dropping with the bust.

kishke -

That's how actual value is measured in a rational marketplace.

A strong case could be made that the housing market from 1998-2005 was not rational. Any time you have a rising cost of a product when there are also growing inventories of that product, you're dealing with irrational markets.

I mean, really. All of a sudden, out of nowhere, real estate is outperforming the Dow? And nobody thinks there's anything wrong with that?

5% or more annual appreciation on a fixed asset? When does this happen in a rational market?

The valuations were dishonest, the Realtors knew it, the banks were over a barrel because they couldn't say no, and the builders were just meeting demand.

Until the inevitable return to rationality.

Agreed, it wasn't really rational. Still, at the time, there was no other way to measure value. What I'm saying is, it can't be termed "theft," as Liz argued above. It could be called "stupid," though.