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Thread: Administration: Rein in pay in US private sector

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    Re: Administration: Rein in pay in US private sector

    Obama is appointing Czars for everything

    why?

    He gets to appoint them and they get to do whatever and nobody has any say in what they do.



    Byrd: Czars are power grab by exec

    By JOHN BRESNAHAN | 2/26/09 4:47 AM EST

    West Virginia Sen. Robert C. Byrd, the longest-serving Democratic senator, on Wednesday criticized President Barack Obama’s appointment of White House “czars” to oversee federal policy, saying these executive positions amount to a power grab by the executive branch.

    Byrd complained in a letter to the president that his decision to create White House offices on health care reform, urban affairs policy, and energy and climate change “can threaten the constitutional system of checks and balances. At the worst, White House staff have taken direction and control of programmatic areas that are the statutory responsibility of Senate-confirmed officials.”

    While it’s rare for him to criticize a president in his own party, Byrd is a stern constitutional scholar who has always stood up for the legislative branch’s role in checking the power of the White House. He repeatedly clashed with the Bush administration over executive power, and it appears he won’t spare the Obama administration either.
    Byrd: Czars are power grab by exec - John Bresnahan - POLITICO.com

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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by phattonez View Post
    Was that an original condition in the loan, or did the government make it up as it went along?
    I'm curious about something. What do you make of the current financial crisis, and what do you think caused it in the first place?

    It seems that many folks are ignoring the fact that the industry failed to self-regulate (ie, AIG). When greed starts driving the market and subsequently causes widespread economic chaos, what's the government supposed to do? Stand back and watch as every person who has a 401(k) account loses 35%-50% of it? These are not made up percentages by the way..I am a pension analyst and this is a reasonable range based on the large numbers of gain/loss calculations I've performed since the crisis hit.

    Yes, I understand the housing bubble bursting was a major contributing factor.

    Yes, irresponsible consumers are to blame, too.

    Yes, Frannie and Freddie..I get it, really.

    However, I feel like every time this sort of issue is brought up, proponents of a pure free market seem to gloss over this major issue: the government didn't go to the companies offering to buy them out. They came to the government - and, many of them did it to request that the government save them from a mess that they themselves created! It's with jaw-dropping disbelief I read comments about how terrible government is at managing companies - right, like these companies did such a bang-up job on their own?

    They shouldn't have received one red cent in my opinion, but since the government did pay up it now has every right to set restrictions and have a say in how those companies are run. Yes, even after the fact. I'd have kicked ALL of the CEO's and the entire executive group of these failed companies out on their keisters - frankly, I thought they were treated with far more concern than they deserved. They are fortunate to still exist at all.

    I didn't support the bailouts and I don't support the stimulus package as it's written, but I strongly question some of the exaggerations and omissions of fact in many comments of this thread. The market failed to self-regulate, contributing to the catastrophic crash. Companies came to the government with hat in hand, and were rescued.
    Last edited by Analyst; 06-11-09 at 06:50 PM.
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Triad View Post
    Obama is appointing Czars for everything

    why?

    He gets to appoint them and they get to do whatever and nobody has any say in what they do.

    Byrd: Czars are power grab by exec - John Bresnahan - POLITICO.com
    Or, it could be just that he wants to maintain organization in handling the crisis. If he doesn't dissolve these posts after the crisis has passed, I'll be in complete agreement with this.
    Last edited by Analyst; 06-11-09 at 06:49 PM.
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Analyst View Post
    It seems that many folks are ignoring the fact that the industry failed to self-regulate (ie, AIG). When greed starts driving the market and subsequently causes widespread economic chaos, what's the government supposed to do? Stand back and watch as every person who has a 401(k) account loses 35%-50% of it? These are not made up percentages by the way..I am a pension analyst and this is a reasonable range based on the large numbers of gain/loss calculations I've performed since the crisis hit.
    What most people fail to realize is that the markets and industries did not "fail" to self regulate. Given the nature of government regulations in place and the willingness of government to cover huge losses, AIG's behavior in particular was extremely rational, predictable, and predicted.

    http://papers.ssrn.com/sol3/papers.c...ract_id=227162

    It costs $5 to download Akerlof's paper from the 1980's S&L crisis, but his analysis of thrift behavior then dovetails almost perfectly with the derivatives market behavior today.

    The players knew they were betting with house money, so the entire risk/reward scenario was distorted. Instead of contemplating risk of capital (since the players had no real capital at risk because the government would backstop their losses), their risk contemplations were about the likelihood of going to jail after extracting however many millions they could.

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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by celticlord View Post
    What most people fail to realize is that the markets and industries did not "fail" to self regulate. Given the nature of government regulations in place and the willingness of government to cover huge losses, AIG's behavior in particular was extremely rational, predictable, and predicted.

    SSRN-Looting: The Economic Underworld of Bankruptcy for Profit by George Akerlof, Paul Romer

    It costs $5 to download Akerlof's paper from the 1980's S&L crisis, but his analysis of thrift behavior then dovetails almost perfectly with the derivatives market behavior today.

    The players knew they were betting with house money, so the entire risk/reward scenario was distorted. Instead of contemplating risk of capital (since the players had no real capital at risk because the government would backstop their losses), their risk contemplations were about the likelihood of going to jail after extracting however many millions they could.
    Ah, now I'm beginning to understand your position.

    What you are saying is that these free marketers you support knew a government handout was assured and so their self-sabotaging behavior was rational - yet, at the same time you want government to stay out of private industry?

    Can you see the inherent flaw in that reasoning?

    Do you have any moral compunctions about industry cheating others (ie, the government and therefore the American people) out of their money, or is pretty much anything fair game?
    I've done the calculation and your chances of winning the lottery are identical whether you play or not.
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Analyst View Post
    What you are saying is that these free marketers you support knew a government handout was assured and so their self-sabotaging behavior was rational - yet, at the same time you want government to stay out of private industry?
    What I am saying is that their behavior was not self-sabotaging. How many AIG execs went broke? They scored, made millions, and are around to play the next game of beggar-thy-neighbor. That's success, not self-sabotage.

    What government needs to do is remove the expectation of bailouts. Remove that expectation and the risk/reward calculation returns to the normal mode of profit maximization.

    Quote Originally Posted by Analyst View Post
    Can you see the inherent flaw in that reasoning?
    You have not shown any. The flawed reasoning is in the bailout/regulatory justification. Look at what AIG did with its bailout: paid huge bonuses to the very folk who caused the crisis. In essence, the government rewarded AIG for needing a bailout, and AIG rewarded the executives. That makes the executives successful, not failures.

    When you reward people for looting, how is it surprising that they loot?

    Quote Originally Posted by Analyst View Post
    Do you have any moral compunctions about industry cheating others (ie, the government and therefore the American people) out of their money, or is pretty much anything fair game?
    "Cheating" in business is a fiction. There's legal and illegal. Everything else is a question of who sweats the details more.

    Unlike the S&L crisis of the 1980s, bankers are not going to jail over derivatives. What they did was legal, or so it seems.

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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Analyst View Post
    Ah, now I'm beginning to understand your position.

    What you are saying is that these free marketers you support knew a government handout
    If they were free marketeers, they wouldn't be taking or using or even relying on taxpayer money to back them up.

    Guess again.

    They're yours, not ours.

    Quote Originally Posted by Analyst View Post
    Can you see the inherent flaw in that reasoning?
    Yep, as you can see, I spotted it right off.

    The flaw is letting the government get involved at any time.

    Fannie MAE and Freddie MAC, to abortions created by that socialist FDR, have done their deed and helped damage the US economy.

    Can we finally dump them?

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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Scarecrow Akhbar View Post
    If they were free marketeers, they wouldn't be taking or using or even relying on taxpayer money to back them up.

    Guess again.

    They're yours, not ours.

    Yep, as you can see, I spotted it right off.

    The flaw is letting the government get involved at any time.

    Fannie MAE and Freddie MAC, to abortions created by that socialist FDR, have done their deed and helped damage the US economy.

    Can we finally dump them?
    Um, what? That really didn't make any sense, nor did it in any way reply to what I posted. Quite the opposite.

    I'll let you reread my post, and rethink yours before I'll be bothered to respond to it.
    I've done the calculation and your chances of winning the lottery are identical whether you play or not.
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by celticlord View Post
    What I am saying is that their behavior was not self-sabotaging. How many AIG execs went broke? They scored, made millions, and are around to play the next game of beggar-thy-neighbor. That's success, not self-sabotage.

    What government needs to do is remove the expectation of bailouts. Remove that expectation and the risk/reward calculation returns to the normal mode of profit maximization.

    You have not shown any. The flawed reasoning is in the bailout/regulatory justification. Look at what AIG did with its bailout: paid huge bonuses to the very folk who caused the crisis. In essence, the government rewarded AIG for needing a bailout, and AIG rewarded the executives. That makes the executives successful, not failures.

    When you reward people for looting, how is it surprising that they loot?

    "Cheating" in business is a fiction. There's legal and illegal. Everything else is a question of who sweats the details more.

    Unlike the S&L crisis of the 1980s, bankers are not going to jail over derivatives. What they did was legal, or so it seems.
    So, just so I'm clear, what you saying is that AIG deliberately positioned themselves so that they would go bankrupt without a government handout? That's a...bit...hard to swallow. Even were I to concede that it was strictly a risk v. reward proposition while completely ignoring the PR aspects of such a position, there was no certainty that they would receive a bailout prior to the events of the past 6-9 months.

    It does sound at though we are at least partially in agreement, however - I can absolutely agree bailouts should be off the table altogether.
    I've done the calculation and your chances of winning the lottery are identical whether you play or not.
    - Fran Lebowitz

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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Analyst View Post
    So, just so I'm clear, what you saying is that AIG deliberately positioned themselves so that they would go bankrupt without a government handout? That's a...bit...hard to swallow. Even were I to concede that it was strictly a risk v. reward proposition while completely ignoring the PR aspects of such a position, there was no certainty that they would receive a bailout prior to the events of the past 6-9 months.
    Read Akerlof's paper. The AIG execs, the Goldman Sachs execs, Citibank execs, CountryWide execs....they all essentially looted their enterprises. They didn't plan bankruptcy as a specific goal for a specific time frame, but they never worried about their bets going wrong because they were playing with the house money in their minds.

    As for PR....AIG doesn't sell to people, so why would they care what the public thinks? Ditto for Goldman Sachs. Citibank and Countrywide were hawking mortgages to people who had no business taking them out--until after the collapse, who was going to say bad things about them? After the collapse, as the execs have already skimmed their money, why would they care?

    Regarding the lack of certainty of a bailout, while there was not mathematical certainty, the pattern of governance in this country since FDR has been to bail out distressed "too big to fail" entities: New York City, Chrysler, the S&Ls of the 1980s, LTCM in the 1990s. It was not nearly the gamble you suggest it was. In all probability, the reason Lehman's collapse had the shock value it did was because no one actually believed they would not get bailed out.

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