Anti-statist in the classical, American sense of the term.
UBS nixes bonuses, but increases salaries
Any increase in base salary availalbe to a managing director at UBS still depends on a performance review. But some salaries for senior bankers are being raised to about… $429,000 from $172,000…
While this is still less than many made with bonuses included, I wonder how many UBS investors are getting this type of guaranteed return.
Here is a chart of UBS stock price decline over the past year.
Barbedwiresmile responds.
In a commentary aimed at the recently announced cap on bonuses for firms receiving state bailout funds, Dennis Kneale states:
Soon this same mob could come after your pay, too, arguing you make too much money and that something must be done about it.
This makes sense. The only thing worse than state intervention in the markets in the form of propping up failed businesses is further intervention in the form of arbitrary wage and/or bonus caps. Naturally, when state intervention fails (as it always does), the answer is more state intervention, thus perpetuating the cycle. This is also a very dangerous precedent being set, and one that ultimately serves to further expand the power of the state.
However, in the same piece, Mr. Kneale goes on to suggest the following analogy:
Bonuses on Wall Street aren’t an “extra” doled out in great times, on top of full pay. They compromise the variable portion of base compensation costs… this lets a firm pay out more in flush years and cut back in lean ones.
A waiter works on tiny base pay and hopes to reap the bulk of his compensation on good tips. On Wall Street, many people work all year long on only 30 percent of salary, or 50 percent, or as little as 10 percent for the biggest stars. They collect the rest in a one-shot windfall after year-end. So now their pay is down by 40 percent or more, and their company stock is down 50 percent or more. That isn’t punishment enough?
Who is Mr. Kneale kidding? This makes no sense.
First, to compare or otherwise analogize a Wall Street employee with a waiter is beyond intellectually dishonest – it suggests ulterior motive. Second, last I heard, the term ‘wind fall’ implies that something good happened, or at least that money was made. In this case, we are talking about depository and investment banks that have lose hundreds of millions, if not billions of dollars and have had to accept massive capital inflows from Washington just to stay afloat. These companies are wards of the state.
The reality is Washington doesn’t have any money. Washington is running at a deficit. The only money they have is what they can continue to beg, borrow and steal – literally – by printing money, selling treasuries and confiscating in the form of taxation. In other words, this money is coming out of your pay check (in the form of income tax), your budget (in the form of sales tax) and out of the standard of living of future generations as we run up record deficits to prop up failed business models still hiding write-offs on assets gone bad in off balance sheet SIVs and CDO contracts yet to be unwound.
I feel very strongly about the free market. I do not care one bit what Bank of America wants to pay its executives. That’s up to management and the shareholders. But the minute they accept favors from the state – not just in the overt form of tax payer funds, but in the more subtle form of tax breaks and other corporate preferences – they become wards of the state and are properly held up to public scrutiny.
The solution, of course, is to let the banks do what they want – MINUS tax payer funds. Successful banks will attract private investment as safe havens for capital. Failed companies, on the other hand, should fail, be broken up and sold in bankruptcy court, and disappear. That would be the market at work, and executives of these failed companies would be out on their butts, not ‘salary-capped’ to continue running the companies into the ground, let alone promoting false information about their companies balance sheets to investors and tax payers alike.
We have endured the Internet bubble that burst in 2000, the housing bubble that blew up in late 2007, and the commodities bubble that popped last year. Now looming of us is a new bubble – in what one dictionary defines as feigned piety or righteousness; hypocritical devoutness or high-mindedness. The new bubble is sanctimony.
This all sounds very good, particularly when aimed at our corrupt overlords in Congress who voted for this mess. Yes, this sounds good, until one realizes this piece is written in defense of executives from bailed-out financial firms paying themselves billions of dollars that they don’t have, and wouldn’t have, unless given to them by the state. In fact, I think it’s fairly sanctimonious for Mr. Kneale, and others of his ilk, to suggest somehow that I should not only be taxed against my will to pay for bailing out these companies that are “too big to fail”, that pose “systemic risk”, but also to subsidize the million-dollar earnings of its already-millionaire executives. To then serve me up the analogy of a waiter in a restaurant sounds more “high-minded” to me, Dennis.
And nowhere does Mr. Kneale mention the millions of dollars spent (well documented on this site) on Super Bowl parties, trips to the spa, hunting, new corporate jets, vacations in Vegas, squash tournaments and associated waste.
“These people are idiots,” U.S. Sen. Claire McCaskill declared on the Senate floor on Friday. (Referring to Wall Street executives).
No, as articulated previously on this site, these people are far from idiots:
That’s billions of dollars in financial executive compensation and severance, not to mention compensation earned during the last several years of the boom and other packages paid out prior to 2007.
Incompetent? Hardly. These men are geniuses.
It’s the citizenry that are incompetent, and incapable of holding a minarchist Republic.
-BWS
It now seems that Wells Fargo will be cancelling their trip to Vegas.
Wells Fargo and Co. abruptly canceled Tuesday a pricey Las Vegas casino junket for employees after a torrent of criticism that it was misusing $25 billion in taxpayer bailout money.
See here for my earlier comments on this outrageous waste.
Understand, however, that Wells will simply pay out the award winning employees in bonus money in lieu of the trip. For example, $2,500 extra on their next check (grossed up for taxes to ensure an actual $2,500 payout) so they can go to Vegas, or wherever, no their own.
Doubt it? This is exactly what Countrywide did when they went through similar public scrutiny last year and had to cancel a series of awards trips for their various business units.
And that’s the story you’re unlikely to read about in the corporate media.
Wow- two updates in one day.
Thanks to an alert reader who sent this gem:
Wells Fargo & Co., which received $25 billion in taxpayer bailout money, is planning a series of corporate junkets to Las Vegas this month.
Wells Fargo, once among the nation’s top writers of subprime mortgages, has booked 12 nights at the Wynn Las Vegas… The hotels will host the annual conference for the company’s top mortgage officers.
No, this stuff is too good to make up.
The conference is a Wells Fargo tradition. Previous years have included all-expense paid helicopter rides, wine tasting, horseback riding in Puerto Rico and a private Jimmy Buffett concert in the Bahamas for more than 1,000 employees and guests.
Sounds like fun!
“Recognition events are still a part of our culture”
And what culture would that be? Would it be the same culture of fraud and waste that originated no-money-down, stated-income mortgages and sold them to Wall Street to be bundled into fraudulent securities sold to pension funds and town councils?
Stay tuned as I continue to bring you Let-Them-Eat-Cake updates. See here for the original theme. Previous updates include:
Super Bowl Parties and Beach Resorts
You may as well enjoy reading about them, because you’re paying for them.
An ever-vigilant reader of this blog brought this to my attention today. Send your news links and stories of corporate arrogance to barbedwiresmile@gmail.com
This just in:
“JP Morgan, Amex sponsor New York squash tournament amid $28 billion bailout”
The weeklong event — the Tournament of Champions — was held Jan. 23-29 at Grand Central Terminal and sold roughly 4,500 tickets. The tournament’s see-through court attracted thousands more passers-by and commuters who caught a glimpse of one of the “world’s premier squash championships,” according to tournament director John Nimick.
Some critics said the sponsorship for the elite event was a waste of money — especially for corporations that are getting federal bailout money.
Who are these outrageous critics, and how dare they so brazenly suggest that $125,000+ squash tournaments are a poor use of funds by insolvent banking institutions?
“It’s frustrating for the average American taxpayer to see corporations who received federal bailout funding to be spending money on events like this,” David Williams, vice president of policy for Citizens Against Governmental Waste
David, my friend, “frustrated” doesn’t begin to describe it…
JPMorgan Chase and American Express defended their participation in the event.
Naturally. “Let them eat cake!”
“We constantly evaluate events as they come up for renewal.”
I think that may be the problem. How about simply eliminating all ‘sponsorships’, resort getaways, hunting expeditions and associated waste until such a time as you no longer need taxpayer funds to support failed, insolvent business models?
How about, dare I say? A MORETOREUM
Joanna Lambert, vice president of American Express’ public affairs, said the tournament was a “very minor” sponsorship for the company
Implicit in this statement is that there are other, larger events looming on the horizon. And I’m waiting on the edge of my seat.
Today’s update features Bank of America and Morgan Stanley:
Despite a near collapse that required $45 billion in federal taxpayer bailout funds, Bank of America sponsored a five day carnival-like affair just outside the Super Bowl stadium this past week…
The bank refused to tell ABC News how much it is spending as an NFL corporate sponsor, but insiders have put the figure at close to $10 million.
Earlier last week, Morgan Stanley, the bank that laid off 5,000 employees last year and took $10 billion in taxpayer bailout money, held a three-day conference for clients at the Breakers, a five-star oceanfront resort in Palm Beach, FL.
Click here for pictures of the Breakers. Apparently, the resort is “set amidst 140 acres of breathtaking oceanfront property, the resort offers an extensive range of services and amenities for the vacationing or business traveler”.
Click here for a graph of unemployment rate increases over the past few months and projected increases into the near future. Notice no smiling families, sunshine or beaches.
Click here for a list of TARP bailout funds recipients. Here are the top ten (note these figures do not include other, extraordinary ‘injections of capital’ by the taxpayer… I mean Treasury or the Fed):
I will continue to bring you ‘Let them eat cake’ updates as the saga unfolds. You may as well read about the good times… you’re paying for them.
Follow the Money: A Rogues Gallery
To follow up on what I touched on in here, let’s take a little tour of bonuses and severance payments since the current credit crises began to explode in early 2007. This list is by no means all-inclusive, and does not include stock sales from options payouts and stock formerly awarded or purchased, but should to serve as an example of the genius of our corporate overlords nonetheless:
Stan O’Neil (Merrill): $250 million
Peter Kraus (Merrill): $25 million
John Thain (Merrill): $83.8 million
Charles Prince (Citi): $40 million
Angelo Mozilo (Countrywide): $110 million ($37.5 million of which was given back)
David Sambol (Countrywide): $38.3 million
Daniel Mudd (Fannie Mae): $8.79 million
Lloyd Blankfein (Goldman Sachs): $54 million
Adding it up
The total take of my partial list of our best and brightest financial wizards totals just over half a billion dollars. Note that there are only 8 selected individuals on my list.
According to one nice summary, $1.6 billion went to the senior executives of bailed out companies in 2008. You really owe it to yourself to read this.
In reality, the total cost of state intervention to prop up the failed business models of these and other financial services companies, including TARP; the quasi-nationalization of Fannie Mae and Freddie Mac; and various Federal Reserve loans, discounts, guarantees, purchases and handouts, now exceeds $8 trillion dollars when you include explicit GSE guarantees. And counting. This does not include legislation currently in process.
And none of this includes the obscene sums of money thus far spent to prop up the insolvent AIG.
Hunting for Pheasant
As recently as October of 2008, a group of AIG executives on a company-sponsored $86,000 outing were approached by a reporter. They had these words for the peasantry:
The recession will go on until 2010 – but the shooting was great today and we are relaxing fine.
This material is too rich to make up. Google it. Or better, click here. This is the modern equivalent of “Let them eat cake”. But I’m happy to know that some of our best and brightest were “relaxing fine”…
Another relaxing vacation
One of my personal favorites was David Sambol, former President of Countrywide Financial who, shortly after the Bank of America takeover, and amidst the laying off of thousands upon thousands of employees, apparently took his family on a three week safari vacation to Africa… on the company jet.
The million dollar look
As Merrill Lynch was burning and its shareholders were losing money, John Thain decided it would be a good idea to remodel his office. To the tune of $1.2 million dollars. Here is a list of purchases:
Recently, Mr. Thain decided to pay back the money. Reduce the total take mentioned above to a mere $82.6 million.
Just Yesterday
AIG announced it was paying $450 million in retention bonuses to – are you ready for this? – employees in its derivatives trading department. Those are the Really Smart Guys who bought all those credit default swaps.
Back at the Ranch
Meanwhile, back on the home front, Americans lost hundreds of thousands of jobs in the fourth quarter and tens of thousands of layoffs were announced this week.
Corporatism: Reverse Leninism
While all citizens are equal, some citizens are clearly more equal than others. And perhaps it should be so. The basic tenets of capitalism tell us that the cream will rise to the top and, based on their superior abilities, earn more money. This is a comforting thought, and clearly one (along with indebtedness) that keeps tens thousands of middle managers toiling away at corporations around the world.
But as I pointed out here, the system we labor under is not capitalism and certainly not a free market. Rather, our economic system is corporatism. This system may be viewed as Leninism in reverse. Rather than the pretense of confiscating and reallocating capital to ‘the people’, corporatism, via the state, confiscates and reallocates capital to the corporation, while expanding the role and importance of the state.
– Elite ‘vanguard’ determines strategic direction and capital allocation? Check
– Rules of game written by small group of insiders with near-instant access to the state? Check.
– Insiders and their families protected financially and shielded from repercussions of decision-making? Check
– Productive capacity of working citizenry taxed to subsidize state allocation of capital? Check
– Militarized uniformed police, secret plain-clothed police and expanded state apparatus to keep the citizenry in line? Check
– Increased electronic and physical surveillance powers of the state? Check
– Military authorized to function domestically in the event of “civil disobedience”? Check.
– Regulation, licensing and subsequent confiscation of privately owned firearms? Half way there.
Those who feel my checklist is merely hyperbole have not been paying attention. The facts behind each bullet-point above are well-documented. Simply use your search engine to pull up numerous mainstream news links regarding each fact, from opposition to TARP running over 100:1 to the Army units specifically trained to counter civil ‘disobedience’ .
Do your own homework.
The big question
The big question is: to what end is this mess leading?
barbedwiresmile 