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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Thu Jun 17, 2010 8:36 pm Post subject: White House Opposing Financial Reform |
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http://www.nakedcapitalism.com/2010/06/white-house-out-to-block-shareholder-say-on-executive-pay-in-banks.html
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One of the common arguments against the need to create mechanisms to moderate corporate and in particular financial services compensation levels is that that burden falls on shareholders, and they don�t seem to be doing much about it. That�s a major misconstruction.
Public companies represent a major agency problem. How, exactly, are fragmented investors supposed to discipline managements that overpay themselves? It isn�t as if this is a new problem; then star Wall Street analyst, Sallie Krawchek, remarked in the early 1990s, when bonus levels were much tamer than now, that it was better to be an employee than a shareholder of an investment bank. Pay for performance is also a myth. Numerous studies have found that correlation is negative, and particularly highly paid executives are typically at companies that underperform.
Why does this situation persist? Investors have the deck stacked against them. Merely making noise has no impact; for instance, unhappy institutional investors met with Goldman last year to protest its expected record 2009 bonuses, to no avail. Mounting a battle to install new directors is costly and almost always fails (virtually all companies have staggered director elections, so even a successful campaign one year, a rare event, is not sufficient to change how the board votes. It�s cheaper to sell shares than fight, and with most equity investors having to be diversified by sector (and often having specific sector weights), institutional investors can�t escape practices they deplore once they become well entrenched.
And don�t fool yourself: management has stacked the deck in its favor. Board rely on compensation consultants, which are recommended by the human resources department, which reports to the CEO. For reasons I cannot fathom, most boards have been persuaded to set the target pay for their CEO in the top half, sometimes the top third or quarter, of their peer group. This assures constantly escalating pay. When companies drops into the bottom half, they must raise pay levels, which moves the average for that group up, which will put some other firm(s) in the bottom half, who must raise pay, again raising the averages�..
Huffington Post today describes how Team Obama threw its weight behind the financial oligarchs:
The White House is intervening at the last minute to come to the defense of multinational corporations in the unfolding conference committee negotiations over Wall Street reform.
A measure that had been generally agreed to by both the House and Senate, which would have affirmed the SEC�s authority to allow investors to have proxy access to the corporate decision-making process, was stripped by the Senate in conference committee votes on Wednesday and Thursday. Five sources with knowledge of the situation said the White House pushed for the measure to be stripped at the behest of the Business Roundtable. The sources � congressional aides as well as outside advocates � requested anonymity for fear of White House reprisal�..
The White House move pits the administration against House Speaker Nancy Pelosi (D-Calif.), who told Barney Frank (D-Mass.) to stand strong against the effort.
�I met with the Speaker today and she said, �Don�t back down. I�ll back you up,�� Frank, the lead House conferee, told HuffPost. �Maxine Waters is very upset, as are CalPERS and others.�
Advocates said that the corporations fought the issue primarily over executive compensation concerns. Given proxy access, investors could rein in executive salaries. The Business Roundtable is a lobby of corporate CEOs�..The investor-protection language was stripped and replaced by an amendment from Sen. Chris Dodd (D-Conn.), who leads the upper chamber�s negotiations in the conference committee�
The SEC is planning to issue rules related to proxy access. Those rules would be made meaningless by the language currently being pushed.
Yves here. I suggest you read the entire piece. This conduct is a disgrace, and should settle any doubts as to whose interests Obama really serves. Hint: it isn�t yours and mine. |
What to say. Shareholder rights are the primary concern of public companies. Or something. Does Obama know what a public company is? Hard to say.
Anways, next time you hear about some guy making 100mil for running a company in the ground remember that this is the situation that Obama pushed for. |
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Fox
Joined: 04 Mar 2009
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| Posted: Thu Jun 17, 2010 9:13 pm Post subject: |
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When I see this, I think two things:
1) Yes, the Obama Administration is pretty clearly not working in terms of the interests of the common citizen, or even the common investor.
2) I don't think the difference in opinion between Pelosi/Frank and the Obama Administration is controlled dissent, but rather a genuine difference of opinion.
Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
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AsiaESLbound
Joined: 07 Jan 2010
Location: Truck Stop Missouri
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| Posted: Thu Jun 17, 2010 9:28 pm Post subject: |
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Setting the out dated democrats and republicans both aside. Instead of all this monkeying around, why don't Uncle Sam encourage and work with companies to innovate product lines and hire people into jobs that offer a real opportunity to excel? These Asian countries are doing well, because governments are working closely with corporations to engineer all this manufacturing of state of the art goods. Americans could do it if put into the right mindset by competent leadership. Uncle Sam has long since taken a passive role where it doesn't encourage enterprising great things on US soil. Great things like innovation, manufacturing, and developing people into competent leaders that offer positive value to us all rather than selfish rich people investing in emerging markets and getting fat sitting on their gains.
You might see lots of incompetency on lower levels over here, but at the high level, they are very competent to pull off the many success stories they cranked out in business. I suppose that's how it would be anywhere. If you want work to make sense, then work with the high professionals in your field.
Placing controls and policing companies is only going to further handicap our country from achieving the success stories that were once common place on Main Street, USA where every working man could own 2 big cars, a house, and raise a family while investing some away for retirement. Empowering people and company chiefs to work with optimism based on the principal of a, 'can do," attitude would be golden. For this to happen, we have to be looking out for domestic interests and working for the common good rather than being so selfish while shooting our own talent down by simply not hiring as to cut costs in effort to afford big executive bonuses instead of working to generate long term value and profitability. The business culture must change back to the way it once was if we expect another boom. A boom doesn't magically materialize, it is engineered through optimism and resetting mechanisms to work for the people and companies alike. I can't say it enough times, the stagnated rotting business culture and lame political climate is severely stalling out America. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Fri Jun 18, 2010 6:22 am Post subject: |
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| Fox wrote: |
| Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
It is not so hard to comprehend: all the "Republican-like acts," regardless of who is in power could never happen without the support of their Democratic enablers: the oppressive laws, the war-funding, all of it. Maybe there are some disagreements at the fringes, but they are 95% in cahoots. |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Fri Jun 18, 2010 7:04 am Post subject: |
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| Fox wrote: |
Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
Its true that some Democrats resemble Republicans.
But there are other Democrats who are just 'centrists.' This doesn't mean they represent the middle-of-the-road. It means they hog the pork. They are the most cynical Congressmen of them all, cutting deals and placing themselves in the middle of every fight to gain every opportunity and advantage. I could give some examples, but I think you know what I mean. |
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Fox
Joined: 04 Mar 2009
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| Posted: Fri Jun 18, 2010 5:44 pm Post subject: |
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| The Happy Warrior wrote: |
| Fox wrote: |
Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
Its true that some Democrats resemble Republicans.
But there are other Democrats who are just 'centrists.' This doesn't mean they represent the middle-of-the-road. It means they hog the pork. They are the most cynical Congressmen of them all, cutting deals and placing themselves in the middle of every fight to gain every opportunity and advantage. I could give some examples, but I think you know what I mean. |
This is also true, and a good distinction. |
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Fox
Joined: 04 Mar 2009
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| Posted: Fri Jun 18, 2010 5:52 pm Post subject: |
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| bacasper wrote: |
| Fox wrote: |
| Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
It is not so hard to comprehend: all the "Republican-like acts," regardless of who is in power could never happen without the support of their Democratic enablers: the oppressive laws, the war-funding, all of it. Maybe there are some disagreements at the fringes, but they are 95% in cahoots. |
I agree that things like oppressive laws, war-funding, abusive tax policy, and so forth have all passed with and require the participation of some Democrats. There's lots of party-line votes too, though, where even the Democrats willing to work with the Republicans say no. And there's many cases where only a small minority of Democrats defect.
You make it sound like ultimately the Democrat vs. Republican schisms are all controlled opposition. I don't think that's true. I think there's lots of very genuine disagreement. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Jun 21, 2010 9:07 am Post subject: |
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http://baselinescenario.com/2010/06/21/dead-on-arrival-financial-reform-fails/
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Dead On Arrival: Financial Reform Fails
The House-Senate reconciliation process is still underway and some details will still change. But the broad contours of �financial reform� are already completely clear; there are no last minute miracles at this level of politics. The new consumer protection agency for financial products is a good idea and worth supporting � assuming someone sensible is appointed by the president to run it. Yet, at the end of the day, essentially nothing in the entire legislation will reduce the potential for massive system risk as we head into the next credit cycle.
Go, for example, through the summary of �comprehensive financial regulatory reform bills� in President Obama�s letter to the G20 last week.
The president argues for more capital in banking � and this is a fine goal, particularly as the Europeans continue to drag their feet on this issue. But how much capital does his Treasury team think is �enough�? Most indications are that they will seek tier one capital requirements in the range of 10-12 percent � which is what Lehman had right before it failed. How would that help?
�Stronger oversight of derivatives� is also on the president�s international agenda but this cannot be taken seriously, given how little Treasury and the White House have pushed for tighter control of derivatives in the US legislation. If Senator Lincoln has made any progress at all � and we shall see where her initiative ends up � it has been without the full cooperation of the administration. (The WSJ today has a more positive interpretation, but even in this narrative you have to ask � where was the administration on this issue in the nine months of intense debate and hard work prior to April? Have they really woken up so recently to the dangers here?)
�More transparency and disclosure� sounds fine but this is just empty rhetoric. Where is the application � or strengthening if necessary � of anti-trust tools so that concentrated market share in over-the-counter derivatives can be confronted. The White House is making something of a show from Jamie Dimon falling out of favor, but all the points of substance that matter, Dimon�s JP Morgan Chase has won. The Securities and Exchange Commission is beginning to push in the right direction, but the reconciliation conference looks likely to deny them the self-funding � CFTC and FDIC, for example, collect fees from the industry � that could help build as a regulator. At the same time, the conference legislation would send a large number of important questions to the SEC �for further study�. None of this makes any sense � unless the goal is to block real reform.
The president also asks for a �more effective framework for winding down large global firms� but his experts know this is politically impossible. The G20 (and other) countries will not agree to such a cross-border resolution mechanism � and this was an important reason why Senators Sherrod Brown and Ted Kaufman argued so strongly that big banks had to become smaller (and be limited in how much they could borrow). Now administration officials brag to the press, on the record, about how they killed the Brown-Kaufman amendment. These people � in the White House and around the Treasury � simply cannot be taken seriously.
And as for �principles for the financial sector to make a fair and substantial contribution towards paying for any burdens�, this is a sad joke. This is not an oil spill, Mr. President. This is the worst recession since World War II, a 40 percentage points increase in government debt (attempting to prevent a Second Great Depression), loss of at least 8 million jobs in the United States, and a painfully slow recovery (in terms of unemployment) � not to mention all the collateral damage in so many parts of the world, including Europe. Could someone in the White House at least come to terms with this issue and provide the president with a sensible and clear text? Honestly, as staff work, this is embarrassing.
There is great deference to power in the United States, and perhaps that is appropriate. But those now calling the shots should remember that they will not be in power for ever and � at some point in the not too distant future � there will be a more balanced assessment of their legacies.
Simply claiming that the president is �tough� on big banks simply will not wash. There are too many facts, too much accumulated evidence, pointing exactly the other way. The president signed off on the most generous and least conditional bailout in world financial history. This is now widely understood. The administration has scrambled to create some political cover in terms of �reform� � but the lack of substance here is already clear to people who follow it closely and public perceptions will shift quickly.
The financial crisis of fall 2008 revealed serious dangers have developed in the heart of the world�s financial system. The Bush-Obama bailouts of 2008-09 confirmed that our biggest banks are �too big to fail� and the left, center, and right can agree with Gene Fama when he says: �too big to fail� is perverting activities and incentives.
This is not a leftist message, although you hear people on the left make the point. But people on the right also increasingly understand what is going on � there is excessive and abusive power at the heart of our financial system that completely distorts markets (and really amounts to a hidden, unfair and dangerous taxpayer subsidy).
This administration and this Congress had ample opportunity to confront this problem and at least wrestle hard with it. Some senators and representatives worked long and hard on precisely this issue. But the White House punted, repeatedly, and elected instead for a veneer of superficial tweaking. Welcome to the next global credit cycle � with too big to fail banks at center stage. |
This was the greatest theft the world has ever seen. From A-Z the bankers won. Suck it, peasants. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Mon Jun 21, 2010 6:06 pm Post subject: |
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| Fox wrote: |
| bacasper wrote: |
| Fox wrote: |
| Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
It is not so hard to comprehend: all the "Republican-like acts," regardless of who is in power could never happen without the support of their Democratic enablers: the oppressive laws, the war-funding, all of it. Maybe there are some disagreements at the fringes, but they are 95% in cahoots. |
I agree that things like oppressive laws, war-funding, abusive tax policy, and so forth have all passed with and require the participation of some Democrats. There's lots of party-line votes too, though, where even the Democrats willing to work with the Republicans say no. And there's many cases where only a small minority of Democrats defect.
You make it sound like ultimately the Democrat vs. Republican schisms are all controlled opposition. I don't think that's true. I think there's lots of very genuine disagreement. |
But it is never allowed to reach the level of political significance. A sub-threshold level of disagreement must be allowed in order to keep up a facade of dissent. If it ever approaches the threshold, forces come into play to eliminate it. |
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Leon
Joined: 31 May 2010
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| Posted: Mon Jun 21, 2010 6:50 pm Post subject: |
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| bacasper wrote: |
| Fox wrote: |
| bacasper wrote: |
| Fox wrote: |
| Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
It is not so hard to comprehend: all the "Republican-like acts," regardless of who is in power could never happen without the support of their Democratic enablers: the oppressive laws, the war-funding, all of it. Maybe there are some disagreements at the fringes, but they are 95% in cahoots. |
I agree that things like oppressive laws, war-funding, abusive tax policy, and so forth have all passed with and require the participation of some Democrats. There's lots of party-line votes too, though, where even the Democrats willing to work with the Republicans say no. And there's many cases where only a small minority of Democrats defect.
You make it sound like ultimately the Democrat vs. Republican schisms are all controlled opposition. I don't think that's true. I think there's lots of very genuine disagreement. |
But it is never allowed to reach the level of political significance. A sub-threshold level of disagreement must be allowed in order to keep up a facade of dissent. If it ever approaches the threshold, forces come into play to eliminate it. |
What are you going on about? Maybe it's because it's a democracy and most people aren't interested in extreme views on either side. If either side was dramatically different then it wouldn't be elected, you make it sound like it's a conspiracy but I think the fact that neither party is radically different shows that America is a moderate nation and any thing to far from the center isn't what the citizens want. |
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chellovek
Joined: 29 Feb 2008
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| Posted: Mon Jun 21, 2010 6:54 pm Post subject: |
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| Leon wrote: |
| bacasper wrote: |
| Fox wrote: |
| bacasper wrote: |
| Fox wrote: |
| Often times people like to say there's no real difference between Republicans and Democrats. I don't feel that's true. Rather, the Democrats are simply such a diverse party from an ideological perspective that some Democrats invariably end up acting similarly to Republicans. Situations like this are a prime example. Yes, Obama has been acting like a Republican, but that doesn't mean his party is doing the same; plenty of them really do want to try to make things better, but simply can't gain any traction with the entire Republican minority, the Administration, and some other Democrats against them. |
It is not so hard to comprehend: all the "Republican-like acts," regardless of who is in power could never happen without the support of their Democratic enablers: the oppressive laws, the war-funding, all of it. Maybe there are some disagreements at the fringes, but they are 95% in cahoots. |
I agree that things like oppressive laws, war-funding, abusive tax policy, and so forth have all passed with and require the participation of some Democrats. There's lots of party-line votes too, though, where even the Democrats willing to work with the Republicans say no. And there's many cases where only a small minority of Democrats defect.
You make it sound like ultimately the Democrat vs. Republican schisms are all controlled opposition. I don't think that's true. I think there's lots of very genuine disagreement. |
But it is never allowed to reach the level of political significance. A sub-threshold level of disagreement must be allowed in order to keep up a facade of dissent. If it ever approaches the threshold, forces come into play to eliminate it. |
What are you going on about? Maybe it's because it's a democracy and most people aren't interested in extreme views on either side. If either side was dramatically different then it wouldn't be elected, you make it sound like it's a conspiracy but I think the fact that neither party is radically different shows that America is a moderate nation and any thing to far from the center isn't what the citizens want. |
Yip! Low quality leaders in a low quality world, methinks. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Jun 21, 2010 7:03 pm Post subject: |
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any thing to far from the center
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The center is an immoral, degenerate, violent, crazy, obscene assault on humanity. |
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chellovek
Joined: 29 Feb 2008
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| Posted: Mon Jun 21, 2010 7:04 pm Post subject: |
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| mises wrote: |
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any thing to far from the center
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The center is an immoral, degenerate, violent, crazy, obscene assault on humanity. |
+1 |
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bacasper
Joined: 26 Mar 2007
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| Posted: Mon Jun 21, 2010 7:49 pm Post subject: |
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| chellovek wrote: |
| mises wrote: |
| Leon wrote: |
any thing to far from the center
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The center is an immoral, degenerate, violent, crazy, obscene assault on humanity. |
+1 |
x2 |
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