Interesting Questions

Rich,  I really don't think these are hot button issues unless you are the incompetent buffoon responsible for sending your company down the commmode. I think most people believe that these CEOs of today are vermin who have, for whatever reason, been able to con a number of Boards of Directors into giving them ludicrous sums of money without any good reason. Many "capitalists" say executive salaries are no one's business and the market sets the bar for salaries. I disagree. I think it's all about corruption and looting corporations solely for their own personal gain. Now, I have nothing against capitalism just as I have nothing against water. But too much water will kill you and too much greed will ruin thousands of peoples lives in a single blow. I reference Enron. You can reference Lehman Brothers. We can all reference Congress.

Case in point. The company I worked for was taken over by another company in Delaware. From the very beginning, ten years ago, the value of the stock for the merged companies went into freefall. It had been valued at around 65 - 75 dollars a share. The dominant corporation paid top dollar for our company. Roughly 35% more than it was worth. Over the years the company failed to improve or build upon its merged abilities. At one point after several other failed CEOs had come and gone, the stock price was under 6 dollars per share. The latest CEO, in charge for about 3 years now, did nothing else. The stock price, though inflation, rose to about 17 dollars a share. Staff was continually cut in this country while spending millions to open other sites in Asia and Finland.

Two months ago, the CEO announced the company had been purchased lock, stock and barrel by yet another corporation in Kentucky. This does not bode well for the hundreds of people in Delaware, some of whom are friends.  Eerily, the CEO and his hatchet man will be retained at their 5 million plus salaries while regular people are cast off to the wolves. I sincerely believe people like that belong in prison.

I suppose if I am trying to say anything it is that this country has transformed from a caring population to a self centered and greedy one from the richest to the poorest. Yes, even poor people can be shameless, out for only themsleves. I may sound cynical. I prefer "jaded". Mostly, I'm despondent to see how my fellow citizens are acting.  

Lily's Lore "I don't ever want to be rescued And I don't ever want to be saved I got a feelin' that I'm gonna be alive forever Dancin' on the edge of a grave..." Jim Steinman

I received the following email which suggests a unque perspective on just the bail out of AIG.  Just think if the concept were expanded to the full 700 + billion how it would affect the ordinary taxpayer.  I did not verify his numbers but I am sure someone will.

The Birk Economic Recovery Plan

 
 
I’m against the $85,000,000,000.00 bailout of AIG. 
  
Instead, I’m in favor of giving $85,000,000,000 to America in 
a We Deserve It Dividend. 
  
To make the math simple, let’s assume there are 200,000,000 
bonafide U.S. Citizens 18+. 
 
Our population is about 301,000,000 +/- counting every man, woman 
and child. So 200,000,000 might be a fair stab at adults 18 and up.. 
  
So divide 200 million adults 18+  into $85 billon that equals $425,000.00. 
  
My plan is to give $425,000 to every person 18+ as a 
We Deserve It Dividend. 
  
Of course, it would NOT be tax free. 
So let’s assume a tax rate of 30%. 
  
Every individual 18+ has to pay $127,500.00 in taxes. 
That sends $25,500,000,000 right back to Uncle Sam. 
  
But it means that every adult 18+ has $297,500.00 in their pocket. 
A husband and wife has $595,000.00. 
  
What would you do with $297,500.00 to $595,000.00 in your family? 
Pay off your mortgage – housing crisis solved. 
Repay college loans – what a great boost to new grads 
Put away money for college – it’ll be there 
Save in a bank – create money to loan to entrepreneurs. 
Buy a new car – create jobs 
Invest in the market – capital drives growth 
Pay for your parent’s medical insurance – health care improves 
Enable Deadbeat Dads to come clean – or else 
  
Remember this is for every adult U S Citizen 18+  including the folks 
who lost their jobs at Lehman Brothers and every other company 
that is cutting back. And of course, for those serving in our Armed Forces. 
  
If we’re going to re-distribute wealth let’s really do it...instead of trickling out 
a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President. 
  
If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+! 
  
As for AIG – liquidate it. 
Sell off its parts. 
Let American General go back to being American General. 
Sell off the real estate. 
Let the private sector bargain hunters cut it up and clean it up. 
 
Here’s my rationale. We deserve it and AIG doesn’t. 
  
Sure it’s a crazy idea that can “never work.” 
  
But can you imagine the Coast-To-Coast Block Party! 
  
How do you spell Economic Boom? 
  
I trust my fellow adult Americans to know how to use the $85 Billion 
We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC. 
  
And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned 
instantly in taxes to Uncle Sam. 
  
Ahhh...I feel so much better getting that off my chest.

Kindest personal regards,

Birk

Someone do the math here:

...So divide 200 million adults 18+  into $85 billon that equals $425,000.00. 

Good catch Read, I didn't buy the premise either. Whoever wrote that has to be fan of talk radio because no rational, educated, human being would clasp that concept. :>)

But I still think all these failed CEO belong in prison.

Lily's Lore "I don't ever want to be rescued And I don't ever want to be saved I got a feelin' that I'm gonna be alive forever Dancin' on the edge of a grave..." Jim Steinman

Sorry folks,  Apparently whoever did the original math must have also done real well on the math portion of their SAT.

$85 Billion divided by 200 Million = $425.00  That's it

$85 TRILLION would equal $425,000

JD

Regardless of the temperature of the buttons or the accuracy of the math, I must admit that when I replied to the e mail question, I had questions, but no answers.

On capping CEO's:  Were any laws broken or was it malfeasance coupled with greed?  Who would make the decision?  Is there a precedent?  What criteria would they use & why?

On making too much:  Once again, where is the point at which "too much," surpasses, "enough?"  Who determines this?  What is the criteria & why?  It's still a free market.  To my way of thinking, the stockholders are the employers, why not ensure they have an input? 

Either way, I think one would need an historian, at least, a boatfull of lawyers (Yeah, we really need more) & possibly a representative for the stockholders.  Then there's the question of who represents the non stockholding public if the money is supposed to come out of our taxes?  Congress?  Yeah.  They've been doing a real cracker jack job for us lately.  Just exactly what have they & the administration done to prevent this while they were telling us that fundamentally, the economy was sound, just before it went down the crapper?  And now, they tell us the only solution is to use our money to bail the jet set out of trouble & oh yes, it has to be done NOW!

It's been about 40 years since I had any advanced economics classes, but I don't recall any of them covering something like this.  JATFUR.

Rich K

With the 700 billion added to the other bailouts already funded the figure approaches a Trillion dollars.  Assuming there are 200 million taxpaying individuals over the age of 18, then what has this debacle cost the individual taxpayer?  Bear in mind that the bottom third of our taxpayers do not pay taxes and the top 20% find a way also not to pay.  Now tell me what the middle class taxpayer is paying.

I would also like to comment to you about your recent blog blaming FDR as starting this economic collapse.  History will show he followed a republican named Hoover, what does Hoover and Bush have in common, thats right both of them reduced oversight on the Wall Street players.

Like it or not JD this collapse started in 2000, I hold those in power from both parties from that time frame until now as responsible.

For the moment it does not matter it is human political nature to blame it on the other party.  Just use your calculator and figure in what it is costing middle america per individual 

Assuming 200,000,000 Taxpayers

Assuming 5% can dodge taxes =190,000,000 Taxpayers

Assuming 1/3 pay no tax = 124,000,000

=$700,000,000,000/124,000,000 = $5624.00 per tax payer

Assuming 200,000,000 Taxpayers

Assuming 5% can dodge taxes =190,000,000 Taxpayers

Assuming 1/3 pay no tax = 124,000,000

=$700,000,000,000/124,000,000 = $5624.00 per tax payer

I dunno. 

What would be helpful is if someone with a BS in economics stepped up to the conversation to wow us with his know-how.  I don't who among the bloggers that would be. 

The congress democrats wanted the low interest rates so the poor people and those with bad credit, could get a loan to buy a house. The Republicans voted against it.

It got passed anyway.

 Years later I have only heard one news station have a story on who is really responsible for this mess. Do you think they will own up to it? fat chance. Remember who was in the White House at the time.

The scariest words in the english language is "I'm from the government and I'm here to help"

Those who give up freedom for security have  neither.

Felix, are you talking about me? I hope not. I haven't got a clue what our political leaders are talking about or thinking other than they want to spend $700B they don't have and can't get.

But hey, it sounds like some people I've met. As long as they have checks left they must have money.

When I was earning my BS they didn't teach BS like this. If the did I must have missed those classes. But I never did see anything like this on an exam.

Micro and Macro I get. Fuzzy is beyond my educational level I guess.

You don't need a degree in Economics to know this is not going to be good for future generations.

Wait, I just thought of something. How about if we get the people that are going to invest in this tollway to come explain it to us. It sounds just like the fuzzy economics they've been using to sell this project.

Do you think they would show up to give us a step by step analysis of how this type of financing works? I'll bet they could explain bailouts to us just fine.

They might even be able to predict when it would be required and how much it is going to cost Clay County.

Political advertisement paid for and approved by, Mike Heemer, write-in, for Commission Chair.

Don't you find it a bit insulting that the middle class is on the hook for approximately $5600 per person, now that does not include the rest of our tax burden for defense, Social security, etc.

I told you all that we have just hocked our family jewels to benefit those CEO's who through greed ran their companies and America into bankrupcty.

Deficit spending was established years ago, America Has prospered when we balanced our budgets.  As the fellow said at the top why not give the taxpayers $5600 and you watch somehow those companies will survive, but not at the size and payrolls they have today.  $50,000,000 plus bonuses for a CEO vs the apx $500k the President gets is a bit out of kilter with responsibilties.  I know some of you will think that we are not getting our 500k's worth.

I know Cheney's retirement is to be protected since he must have gone through the $24 mill he got in severence.  Why are two Presidential candidates in the mix, granted they will inherit what is decided, but neither of them have a clue about the ordinary taxpayer and the burdens that are being placed on them.

Ron Paul has checked in and he is not happy either.  He is calling the act more communist than anything that occurred in China.

Rich, I agree that the questions posed are interesting and complex.  But, since you asked ...

1.  Yes. When my taxes are being used to bail out the stupid decisions of the management of major financial organizations, the CEO and other board members and officers of that company have relinquished their right to get rich. As soon as the first dollar of tax money is spent correcting their malfeasance, all their salaries should be capped.  Take the highest-paid worker in the company with absolutely no supervisory or management responsibilities.  That should become the top salary - company-wide.

2.  As long as my tax dollars aren't being used to enhance the lives of the financial world's rich and stupid, I don't care how much a company's stockholders want to pay someone who's job never gets more strenous than having a bad idea.  I am, though, occasionally amazed and amused by the stories of upper-level corporate incompetence and opulence.

Michael S. Mann

michaelsmann@comcast.net

Michael, I agree with both of your responses.

1.  The government should NEVER cap CEO compensations...unless those CEO's companies require taxpayer bailout.  Once that happens, they no longer have the right to a golden parachute...especially a subsidized golden parachute.

2.  Are CEO's paid too much?  Well, I hate to respond to a question with a question, but I will: Who gets to say what is "too much"?  If the shareholders want to pay a CEO tens of millions of dollars to drive their company into the ground, that's fine with me.  To me, it defies reality that these schmucks get the payouts that they do, especially when they bankrupt a company and then get paid $20 million to go away.  Hey, I'll gladly screw up someone's company for just 1% of that cost!    But if that's what a business wants to do, I don't care...so long as WE, the taxpayers, aren't called upon to subsidize those inflated paychecks.

Mike,

I agree with you.  I just re read my reply on the temperature of buttons, & noticed that on this point, I failed to take into account public taxes for bail out.  Mea culpa.  See what happens when the grey cells start to revolt?

Rich K

Thanks, JIC.  Solving the economic crisis ain't easy, just ask McCain and Obama.  But some tiny little parts of the solution, like not rewarding incompetence at the highest levels, just seem to make sense.

You know, CEOs have driven long-time historically profitable companies into near collapse, then get fired with severence packages in excess of $50 million.  If the illogic that alone doesn't cause your brain to need a reboot, consider "How much is enough?" from another perspective.

Ask that question, but not to determine reward for a career in high finance.  Ask it personally.  How much is enough for us?

Lord protect me from having to deposit a $50 million check into my personal bank account.  I'd have to spend way too much time figuring out how to give almost all of it away.  Gee, that'd make me just like a politician, wouldn't it?

Michael S. Mann

michaelsmann@comcast.net

LIQUID ASSETS    If you had purchased $1,000 of shares in Delta Airlines one year ago, you will have $49.00 today. If you had purchased $1,000 of shares in AIG one year ago,you will have $33.00 today. If you had purchased $1,000 of shares in Lehman Brothers one year ago, you will have $0.00 today. But, if you had purchased $1,000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling refund, you will have received a $214.00. Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-Keg. A recent study found that the average American walks about 900 miles a year. Another study found that Americans dri nk, on average, 22 gallons of alcohol a year.That means that, on average, Americans get about 41 miles to the gallon!

Fred,

Once again, you have shown yourself to be a man who has his priorities in life straight & is willing to put forth an inventive, interesting perspective on another one of life's problems.  Kudo's to you.  Bring on the beer.  JATFUR.

Rich K

What is the potential size of the problem if it is all subprime related?

Keep in mind that $2.5 trillion in subprime, alt-A and payment-option ARMs were funded from 2003 to 2007 Ok, JD break out your calculator and tell those who care about this problem what percentage 700 billion is, of course we may want to add in what has already been spent on Fannie Mae and Freddie Mac, Bear Stearns, and others.  I think in the last 5 months we can reach the Trillion dollar mark making the problem higher than a 1/3 of the subprime loans.

Who will be in charge of setting the bid price and what type of analytics will they use? This is a problem all appraisal giants like the Appraisal Institute feel will go unanswered.  Hopefully they will not resort to using automated computer valuation models, these are seldom correct.  They most likely will go the cheap route and order Broker Price Opinions from the real estate agents.  This is a valuation service and not an actual valuation by law.

Here's another good question: How tough will the government be in negotiating with desperate sellers?  I hate to say this but politics may enter into this one, whoever rules may do what the Bush Administration is trying to do, protect their financial supporters with their bonuses.  Likewise the party after November in charge may try to support their benefactors, that is if any money is left, 700 billion can go in the blink of an eye.

Here's a major opportunity for the government to hire a hotshot trader who can make a lot of money for Uncle Sam. The only problem is that most of the hotshot traders worked on Wall Street for firms that were part of the problem. That's what we call a conundrum...  no I did not say condom.  Kind of ironic, bets are that many of the people responsible will be hired by the Government.  Yes they will be able to afford to work for the Government after they get their golden parachute.

What do you do if your facing foreclosure, here is what an attorney has to say.

NOTE FROM CLOSING ATTORNEY JOHN McDERMOTT: People in foreclosure can still live there until they get thrown out by the sheriff. In fact they could get thrown out and move back in and squat the next day and it would take another legal process to throw them out all over again.

Now you know why attorneys are rich they never have to pay their mortgage, they simply wait to get thrown out, then they come back the next day and start all over.  See there is a loop hole in all the laws, because they are drafted by attorneys.

Fred,

Restating the question as I understand it:  What percentage of $2.5T is $700B?

ANSWER 28%

Glad you reminded me about squatting.  The wife and I were wondering how we would handle the future.

JD

im as ignorant as a bug when it comes to this,so how much am i gonna have to come up with at the end of every year for the next 200 yrs???

Another enjoyable thread -thanks guys.  I especially like the 401-Keg.  If I only I can convince my wife.  It's at least worth a try - but I'll have to change from bottles to cans.

Speaking of insane CEO salaries: according to CNN/FOX, the recently fired CEO of WaMu that was bought by JP Morgan last night, the same CEO who had been on the job for 17 days, received a severance package that was worth $20+ million.  $1.2 million per day for 17 days.  Thankfully - at least so far - this is not taxpayer funded, by is just as painful for the WaMu investors who funded this absolutley insane package.  With deals like this for CEO's, is it any wonder we are in this mess?

I'm with lily - some people belong in jail.  I'm as big a capitalist as you will ever find, but this financial mess screams for tighter regulation and oversight.  Hopefully it will turn out, 10+ years from now, as many predict it will.  Hopefully, please, please, please, let us learn some lessons and change our (society) behavior.  We need to return to the days of living within your means, and saving instead of irresponsible debt.  Many people do live that way, but obviously too many don't.  As complicated as this mess sounds, to me it's as simple as that.

We need to return to the days of living within your means, and saving instead of irresponsible debt.  Many people do live that way, but obviously too many don't.

Yes, Bax, I couldn't agree with you more. I am going to publicly congratulate myself for paying off my mortgage nine years early. It took a lot of work and dedication so I can really feel bad for those unfortunate souls who may lose their homes. I would hope this generation learns well enough so as not to repeat the mistake but to instill in their children these life lessons just as my grand parents did to my parents after the Great Depression.

Lilyslore "I don't ever want to be rescued And I don't ever want to be saved I got a feelin' that I'm gonna be alive forever Dancin' on the edge of a grave..." Jim Steinman

I have a question.  If we can get so many common sense comments on these blogs, why can't we get more common sense people leading business & the country?  I now return control of this blog back to you.  No need to adjust your computers.

Rich K

1.  I think the Government should cap CEO compensation for companies that were bailed out by the government.  The twist, is that they should be close market value for the position.  I am afraid nobody will want to come to the helm of these companies if they don't have competitive compensation plans.  If we don't get qualified individuals to run these companies, we will be in the same position 5 years from now when the government has to bail them out again.

 2.  CEO's are paid an insane amount of money for their job.  However, they take an insane amount of risk.  As the CEO or CFO you have to sign the financial statements.  This means that if there is any fraud or mis-stated items, you can go to jail.  Yes the statements are audited, but that doesn't clear the CEO of liability for what goes into the statements.  To actually know what goes on with the statements, you need to have a very high level of understanding and education.  I believe CEO's are paid correctly.  90% of their pay is compensation bonuses for hitting their goals.  Base salary for a CEO isn't insane, the bonuses are.  If a company give reward based compensation, I have no problem with that.

You've got to remember that investor CHOOSE to invest in the company.  They are trying to make a buck like everyone else.  Investors and profits fund these high salaries.  If investors don't want their money and returns going to the CEO, they need to sell their stock and leave the market.  We don't need to worry about the investors in these discussions, because they choose to contribute to the market.  If your 401k is invested in the market, you elected to put money in it, and elected the funds to invest that money in.  If you think the market is bad and don't agree, you should buy some CD's or Bonds, and fund your own retirement with your own expert knowledge and see how far it gets you.  I am not trying to attack anyone, just stating my opinion.  Without these knowledgeable people at the helm, these companies would fold even faster.  CEO's are like any other job, there are good ones and bad ones, that is why you need to do your research before you invest in anything.

2,892,965,919

NASDAQ1983.73-199.61  9.14% DJIA10394.92-748.21  6.71% S&P 5001106.42-106.85  8.81% NASDAQ-1001496.15-175.89  10.5% NASDAQ-100 PMI1634.67-37.37  2.23% NASDAQ-100 AHI1504.728.57  0.57% Russell 1000602.34-57.35  8.69% Russell 2000657.72-47.07  6.68% FTSE All-World ex-US*190.73-13.15  6.45% FTSE RAFI 1000*4394.88-431.69  8.94%2,892,965,919 NASDAQ1983.73-199.61  9.14% DJIA10394.92-748.21  6.71% S&P 5001106.42-106.85  8.81% NASDAQ-1001496.15-175.89  10.5% NASDAQ-100 PMI1634.67-37.37  2.23% NASDAQ-100 AHI1504.728.57  0.57% Russell 1000602.34-57.35  8.69% Russell 2000657.72-47.07  6.68% FTSE All-World ex-US*190.73-13.15  6.45% FTSE RAFI 1000*4394.88-431.69  8.94%

Those of you who are bargain hunters may want to wait a few more days.  Supposedly the loss is due to lack of confidence that those high paying golden parachutes will continue to be protected. Kind of funny now that all those who accepted money from the people they are trying to bail out, are worried about being elected and trying to not get caught in the cross hairs of the voters.  We should be so lucky in Clay county to have our beloved leaders have fear of the voters.  Instead we have SLAPP lawsuits instituted to intimidate voters.