Market crash: are we there yet ?

[Rickm505]

Originally Posted by camaraderie

If you simply TAX the "excessive earnings" you give the $$ to the government rather than the SHAREHOLDERS who own the company or employees who work for it. NO THANKS.
As I have said before...executive compensation is outrageous and corrupt and causes focus on the short term etc. ...there are better solutions than giving the $$ to the government. They have enough.
Windy had it right when he said companies will simply go private or incorporate in more favorable countries.

Cam, then what's your solution? It stinks if we hand these guys a trillion bucks and watch as they pay themselves millions for doing such a 'great job'.

[wind_magic]

Originally Posted by sailhog

I'm not advocating the idea of Congress setting salary caps. I'm advocating that the tax backets be redrawn so that we don't have this massive distortion in executive pay. By doing this, you would remove the incentives that are currently in place that prompt the best and brightest to wring massive amounts of money out of a company in a short period of time... and then simply go away with their ginormous bag of gold when the company fails.

I don't have a well formed opinion for or against that. My initial reaction to it, however, is that it sounds more like punishment than any kind of pragmatic solution to a problem. Sort of "we'll get you for screwing us". That might make us feel better, but I don't think it's the basis of a sound policy.

[sailhog]

Originally Posted by wind_magic

I don't have a well formed opinion for or against that. My initial reaction to it, however, is that it sounds more like punishment than any kind of pragmatic solution to a problem. Sort of "we'll get you for screwing us". That might make us feel better, but I don't think it's the basis of a sound policy.

Cam, Wind:
There isn't a "We'll get you for screwing us" motive behind this. The idea -- and I think that you both actually agree with this -- is that there has to be a realignment of motives on the part of the people who are currently running American enterprise. They have to be invested in the companies they work for to a far greater degree. The way the playing field is currently structured simply lends itself to abuse on a massive scale.

I'll admit that I don't know as much about economics as either you do, so I'll defer to you to come up with a creative solution to this problem that we all recognize.

[wind_magic]

I don't have a problem with the government putting conditions on the money we are loaning in these bailouts, don't get me wrong. Sure, let's say that if the company takes the money then from that point forward until they repay the money they can't give their execs any bonuses above x$us, or that they can't give this benefit, or that. That's okay with me.

But that isn't what a lot of people are talking about, at least on television. They are talking about this like these companies are part of the government, or that they are in some way charitable organizations, or not for profits, etc. They ARE NOT. These are private companies, or publicly traded companies owned by share holders, and have NOTHING to do with the government. We don't elect their CEO's, we don't sit on their board of directors, we have no business in their affairs what so ever unless we purchase shares. The American people have a funny idea of what is theirs and what isn't these days - and unless you hold shares, you don't have any right to say anything about how these companies are run. They can shut the doors tomorrow and fire everyone if they want to, it's their company, they can do whatever they want. Just because they provide a very public service doesn't mean that they are run by the public, or that they even have to care what the public thinks. They can tell the public to go xxxx.

People are also under the illusion, many times, that Nike or AIG or whatever company is somehow "American", that they are completely subject to American laws, or that Americans are the prime motivator in their decisions. Most of these companies are now multi-nationals. The only thing that makes them "American" is that they just happen to have a factory in America, or that they have offices in New York, or that they list on an American stock exchange, etc. But their shareholders, many times, aren't even Americans. Financial services for example, many of these banks are in large part owned by people in the middle east, or in Asia. How would you feel if you were a major share holder in a company that was listed on the exchange in Japan and all of a sudden the people of Japan just decided that the executives in your company couldn't make more than x¥jp a year ? I mean it's absurd. You'd tell the people of Japan to go to hell, de-list your company, and start trading it in India or somewhere, maybe close down the one factory you had in Japan and sing happy trails.

[PBzeer]

Of course, if Congress can fan the flames of outrage over CEO's, than maybe people won't notice that Congress was asleep at the wheel when all this could have been prevented.


Windy - I have to say, you are the only one on here who makes consistently sensible remarks, free of hyperbole and rhetoric. I find your posts informative and well worth my time to read. I, for one, appreciate your efforts.

[PBzeer]

So let me see if I have this right. The problem is that there is a bunch of worthless paper assets being held, because the last one to buy them can no longer find a sucker to buy them? And the holders of this worthless paper are now insolvent and will fail, unless the taxpayers buy up this wothless paper?

[wind_magic]

Thank you for the kudos PBZ, you are too kind.

[Rickm505]

Originally Posted by PBzeer

So let me see if I have this right. The problem is that there is a bunch of worthless paper assets being held, because the last one to buy them can no longer find a sucker to buy them? And the holders of this worthless paper are now insolvent and will fail, unless the taxpayers buy up this wothless paper?

This is Paulson's argument

[PBzeer]

So then, what is the problem?

[lynn1120]

there is just "no Bid" which is not the same thing. In the case of the widget example:



"Let's recap. John buys a widget fo $10. The banks call it an asset and lend him $8 on it. Everyone is happy. Suddenly the widget market collapses and John's widgets are worth $1. The Banks call john and call in his loans. This is a liquidity issue for sure just as a sinking boat could be said to be taking on more ballast. In fact this is a solvency crisis. John has to go out of business or find a way to borrow money to pay his lenders until the widget market recovers. The market looks at Johns business model and says no way Jose."

first of all the bank itself is getting called on its borrowings, becaus ethere is "No Bid"-- that is the crux of the problem today -- john is a sign of the crisis spreading---throw a lot of crap at a big fan and you will be amazed at who gets hit...

If the Gov't - or someone with cash, can buy up the "no bid widget loans for say 20% or less, then that hair ball, which is currently preventing other doo- hickey markets from operating normally, will settle down.

Fact is there is still a demand for widgets, people are still servicing a larger % of the widget payments ( that % is currently unknown-- part of the problem) and will want more widgets in the future, the BUYER of today may well realize, over time, that even if as many as 60% of widget value is gone, (that = 60% of all widgets buyers have walked away), 40% have continued to paid off-- that is still a net (100%) gain for the widget loan buyer of today, would that not be good biz?

With the credit squeeze right now only Uncle Sam has the CASH, cause they can print it, to do this. Having "credit" is meaningless right now-- we have come to believe over the past 50 years that having credit is the same as having cash-- it is not, credit is not a right it is a privilage and that privilege is not being extended to any biz right now-- hence the need for the guy with the biggest pile of cash to pony up and remove this hair ball--
don't worry, the witch hunt for the execs and the loan officers etc will contine but that is bread and circuses shell game for the masses compared to the credit crunch issue.

JMHO