Exactly. Moral Hazard. We only want companies to get a bailout if they really truly need it, and it has to be a bit of a bitter pill. Otherwise all the other companies who didn’t need a bailout because they didn’t engage in such risky behavior will be the ones being punished.

do to the banks the way the Govt did to the Postoffice and sell each new employee a Kalashnikov. It will help our relations with Putin and the Russians will not follow through on their plans to invade

a snip from her post:

1. People in these firms (the large banks on life support) were overpaid by a considerable degree in the last few years. The earnings were bogus (they were hugely overlevered relative to the risks they were taking; in addition to holding more equity , they should also have made greater loss provisions). So recent pay is no guide for what their services are worth

2. The companies ought to be in turnaround mode. Normally, the board brings in a new CEO. the CEO sets a new direction and replaces people at the top either lacking in the right skills or unwilling to support the new program.

3. The managers and line staff were hired when these companies were drunk on growth and fat fees. They are by temperament and training the wrong type now. Look how badly the once well-regarded John Thain stumbled at Merrill

If these pay caps help corporations get rid of the people who only work there because they receive millions each year, then the pay caps are the best thing that ever happened to these corporations.

The mere reason that somebody makes a lot of money does not mean that he (and it’s almost always a he) actually deserves it. I realize that this is a bit of an un-American thing to say, but I’m not American, so there 🙂

Seems to me the labor market here is probably more complex on the ground than a simple bird’s-eye view would have it. I fear for the healthy institution that hires-away such “talent” from institutions that failed.

Why aren’t these guys tainted by the failure? Is it all “there but for the grace of god go I” — and then were the “healthy” institutions just dumb-lucky in the end?

Maybe this is the perfect time for a changing of the guard. Maybe getting rid of overpaid people who think they deserve their overpayment is a *good* thing for these struggling institutions. Maybe the bubble in financial executive pay should burst along with the other bubbles that have exploded recently. It’s hard to believe that such compensation was ever really rational in the first place.

The classical market is premised on the assumption of rational action (at least some reasonable approximation to it, as we know the absolute is humanly impossible). Executive pay seems as if it has been immune to that criterion. Maybe that could change. Maybe that would be a good thing.

Increasing the tax rate is simply accommodated by increasing their compensation, so the well-paid would prefer that the rate increase if something HAS to happen. These are capitalists. Give them a pile of money, some good accountants, and a favorable tax system and they don’t care WHAT the tax rate is. Take away a capitalist’s pile of money and he’s dead in the water.
More importantly, a rate increase would impact all execs in that bracket, most of whom are doing just fine in terms of performance and even moral and ethical responsibility; they’re trying to remain as invisible as possible and avoid having a public position on the ugly side this mess. The Netflix exec’s strategy in calling for a rate-increase is to drag everyone in the bracket into the fray and turn this into a class-war. That’s the last thing Obama needs.
The underbelly of this whole thing is that not only is there disgust with the Wall Street perpetrators and our government, there’s the growing sense that our legal system simply does not penalize guys like these. Indeed, the law in fact protects them from loss, at least in any criminal sense. As long as they play close enough to the rules the worst that can happen is they get fined. There’s no incentive to NOT play the system as long as the take-out maintains sufficient margin over the potential liability. Embarrassement? Shame? Not hardly. Well, okay, maybe a sheepish grin while being heckled by their friends at the club for having violated the Eleventh Commandment: “Thou Shall Not Get Caught.”
Make no mistake here. This isn’t “Golly, that’s too bad Beaver!” kind of stuff. This wasn’t “Gee, what are those regulators doing?” This was a cold, premeditated milking of this countiy’s wealth, OUR wealth, with full complicity by the Bush administration, including an exit strategy that, in the end, presented Congress with a scenario that in any other venue would be labeled simply “extortion”.
For execs in the hot seat I’d suggest they take their lumps and go quietly. They’ve screwed around with a great many people’s hard earned money. There was a time in this country when “frontier justice” would have dispatched them swiftly and far more severely.

Bingo!

Note that the salary cap only applies to salaries. It does not apply to bonuses, stock options, deferred payment plans, golden parachutes, or payments in commodities such as gold or silver or diamonds, or fine art, etc etc etc.

This is a PR stunt to make Americans feel better. An obviously easy one for Obama to jump on.

$800 billion vs a few hundred million? Everyone is talking about CEO salary caps, and nobody is actually talking about what will actually make a difference (hint: $800 billion).

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