Financial News

[NorthSideSox72]

Especially because in many of these cases, labor can be replaced by someone making pennies an hour, and nothing would change. It is totally labor.

And frankly, you could put any number of other qualified people in these executive jobs for pennies on the dollar, and at worst, nothing would change (hard to make a disaster much worse), but at best, they might actually do better.

 

[southsider2k5]

And frankly, you could put any number of other qualified people in these executive jobs for pennies on the dollar, and at worst, nothing would change (hard to make a disaster much worse), but at best, they might actually do better.

 

And because labor makes by FAR the most money in any company, it isn't even close. Thank you.

[NorthSideSox72]

And because labor makes by FAR the most money in any company, it isn't even close. Thank you.

Huh? I don't even know what you are talking about here. I don't think anyone said that labor wasn't the largest direct cost for a company.

 

[southsider2k5]

http://www.chicagotribune.com/business/chi...,7734591.column

 

Executive compensation: Booth School of Business professor a pay pal of CEOs

 

CEOs aren't overpaid. The pay process isn't broken. And their compensation shouldn't be regulated.

 

That's Booth School of Business professor Steven Kaplan's stump speech, and this year he has taken it to everyone from the powerful Securities and Exchange Commission to Yale law students and Economist magazine readers. And who does the U. of C. educator blame for outrage over executive pay? The "myth-perpetuating" press. So Kaplan and I struck a deal: I'll give him his say, and in return he'll accept e-mails from readers at [email protected].

 

Myth 1: CEO pay is skyrocketing.

 

Not so, says Kaplan. CEO pay has risen since 1980, and more than tripled from 1992 to 2000. But the graphs change after that. When charting what CEOs of the country's largest public companies, the S&P 500, actually earn, the average CEO pay package, including exercised stock options and other compensation, was down to about $11 million a year in 2008 from a peak of about $17 million a year in 2000. The median gradually rose from 1993 to a peak of more than $9 million in 2007, and then fell to about $7 million last year. Kaplan's figures are inflation-adjusted.

 

Myth 2: CEO pay is causing growing income inequality in America.

 

In 2007, the 20 heads of the country's largest hedge funds earned more than $20 billion. That same year, the S&P 500 CEOs combined earned $7.5 billion. There may be a problem with inequality in America, but the salaries of CEOs of public companies are not the primary cause.

 

Myth 3: CEOs are raking in the dough while their companies are falling apart.

 

CEO pay at public companies is highly tied to stock performance. (Equilar, a leading analyzer of executive pay, concluded that the wealth of corporate CEOs dropped 43 percent in the crisis.) And proponents of more regulation perpetuate this myth by talking about what boards of large companies expect to pay their CEOs in a given year, instead of what they actually get.

 

Myth 4: Corporate pay should be regulated because it's partly to blame for the mess.

 

Kaplan blames excessive credit, risky trading of mortgage-backed securities, poor management at banks, loose monetary policy ( Alan Greenspan kept interest rates too low) and regulatory policy (Fannie and Freddie gave mortgages to people they shouldn't have) for the crisis. A better solution than pay regulation would be to require banks, when things are good, to set aside more cash, he said.

[StrangeSox]

You don't need a PhD in economics to see the bulls*** here:

 

Myth 3: CEOs are raking in the dough while their companies are falling apart.

 

CEO pay at public companies is highly tied to stock performance.

 

And they can raise short-term stock performance to the detriment of the long-term profitability of the company. The entire system of focusing so much on quarterly performance incentives this.

[HuskyCaucasian]

Congressmen To Call For Return of Glass-Steagall Law

Five House Democrats will call this week for a return to a Depression-era law that separated Wall Street investment banking from Main Street commercial banking.

 

If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation's biggest -- those now commonly referred to as "too big to fail" -- would be broken up. The Obama administration opposes the measure.

 

The amendment's five co-sponsors -- Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts - want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of, among others, Larry Summers, now President Barack Obama's chief economic adviser.

 

The five congressman all voted against the repeal then -- and now they want it back.

 

Former Federal Reserve Chairman Paul Volcker is one of a number of financial luminaries calling for at least a partial return to Glass-Steagall. The Wall Street Journal's editorial page also endorsed the concept in a recent editorial as a way to "reduce moral hazard" and "limit certain kinds of risk-taking by institutions that hold taxpayer-insured deposits."

 

The law's repeal ushered in an era marked by big banks getting even bigger. The country's four largest -- Bank of America, JPMorgan Chase, Citigroup and Wells Fargo - now control more than half of the nation's mortgages, two-thirds of credit cards and two-fifths of all bank deposits.

 

And because their deposits are taxpayer-insured, there's a growing concern that they will feel overly confident about making risky bets through their investment arms because they know that should they suffer huge losses, taxpayers will ultimately be there to bail them out.

 

The five Democrats face big obstacles, including their own leadership and the Obama administration.

 

Thoughts?

 

I think it's a good idea to bring it back... but it'll never pass.

Edited December 9, 2009 by Athomeboy_2000

[Cknolls]

You don't need a PhD in economics to see the bulls*** here:

 

 

 

And they can raise short-term stock performance to the detriment of the long-term profitability of the company. The entire system of focusing so much on quarterly performance incentives this.

 

 

Like the gov't reflating through higher asset prices to make everything seen rosy. The gov't is doing exactly what you are saying, but on a scale exponentially higher.

[StrangeSox]

Possible/ likely.

 

Let's just not pretend that the market actually incentivizes long-term planning and objectives over better and better and better quarterly numbers.

[southsider2k5]

Then why are we pretending that the federal government does exactly this when it comes in to regulate these sectors?

[Y2HH]

Let's just not pretend that the market actually incentivizes long-term planning and objectives over better and better and better quarterly numbers.

 

Paying a healthy/sustainable dividend offsets the need for constant growth through troubling times when growth is hard to come by. A lot of more "modern" companies (mainly tech companies), live off of selling the "growth" dream, and paying little to no dividend. You often find huge swings in prices for such stocks, see Apple or Google, where a day that the stock goes up 10$ or down 10$ is common. Then see the Pharmaceutical Merck, or McDonalds, paying dividends with CURRENT price yields of 3%+ per quarter. When I bought Merck, the div yield was over 6%...despite the rise in share price, I'm still making that 6% per share per quarter, so if the stock doesn't rise...I don't care...I'm still getting paid. You will rarely see price swings in these stocks, despite periods of contraction or flat growth.

 

That's called long term planning. Dividends keep your investors interested, because in harder growth periods, they're still making something for tying up their money in your company. It's time some of these "growth" companies (who are already fully grown) figured that out. It helps the company sustain value without having to seek growth at no matter what cost.

Edited December 10, 2009 by Y2HH

[HuskyCaucasian]

House passes financial rules overhaul, letting feds break up big, risky companies

 

The House has passed a sweeping overhaul of financial regulations that would govern Wall Street and reconfigure the power of the agencies overseeing the nation's banking system. The vote was 223-202.

....

New powers would give the federal government the right to break up big risky companies. It also would create a consumer agency to police lenders.

 

....

The House approved a section of the bill on Thursday that would impose regulation for the first time on the $450 trillion over-the-counter derivatives market, including credit default swaps like those at the root of American International Group Inc.'s problems.

 

The bill "will increase transparency in the marketplace and reduce the systemic risk that over-the-counter derivatives can pose to the economy if left unchecked," said Democratic House Agriculture Committee Chairman Collin Peterson in a statement.

 

The House also backed an amendment from Democratic Representative Stephen Lynch to limit financial firms to 20 percent ownership stakes in OTC derivatives clearinghouses.

 

If ultimately approved, the Lynch measure could affect the plans of the Wall Street giants that dominate OTC derivatives markets — Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Morgan Stanley — and exchange operators such as Nasdaq OMX.

 

The House bill would create an inter-agency council to police systemic risk in the economy, crack down on hedge funds and credit rating agencies, and expose Federal Reserve monetary policy to unprecedented congressional scrutiny among other reforms.

 

Bank and Wall Street lobbyists have spent months fighting the bill. Republicans have attacked it, saying the measure would codify bailouts in law and destroy jobs, while setting up new government bureaucracies and piling costs on businesses.

 

Financial reforms are strongly backed by Obama and most congressional Democrats, who see them as crucial to preventing a repeat of last year's global crisis and bailouts of companies such as AIG and Citigroup.

[NorthSideSox72]

House passes financial rules overhaul, letting feds break up big, risky companies

I want to see more about this before passing judgement, but lets start with the fact that the writer needs to do some fact- checking:

 

The House also backed an amendment from Democratic Representative Stephen Lynch to limit financial firms to 20 percent ownership stakes in OTC derivatives clearinghouses.

 

If ultimately approved, the Lynch measure could affect the plans of the Wall Street giants that dominate OTC derivatives markets — Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Morgan Stanley — and exchange operators such as Nasdaq OMX.

 

Newsflash - OTC = Over The Counter, as in, not traded or listed on an exchange or controlled by a clearing house. It is therefore not possible to own a stake in an OTC market or clearinghouse, because no such thing exists. If you trade a swap in a cleared, templated environment, its no longer OTC.

 

Depending on the actual verbiage of the law, the House may have written a law that does exactly nothing (this particular part of it).

 

[BigSqwert]

Matt Taibbi does a great job of summarizing why I am very disappointed in Obama (focuses on the financial side of things).

[Balta1701]

Depending on the actual verbiage of the law, the House may have written a law that does exactly nothing (this particular part of it).

I'll lay you solid odds that you're exactly right, and that a bank lobbyist made sure of it.

[Balta1701]

Matt Taibbi does a great job of summarizing why I am very disappointed in Obama (focuses on the financial side of things).

The Errors of Matt Taibbi

[southsider2k5]

House passes financial rules overhaul, letting feds break up big, risky companies

 

I remember way back when this was called Trust-busting...

[BigSqwert]

Yeah I just read about that in Greenwald's post today...

 

Obviously quite related to all of this, if I had to recommend one article for everyone to read this month, it would be Matt Taibbi's new, masterful account in Rolling Stone of how the Obama administration has aggressively ensured the ongoing domination of our government by Wall Street. I don't want to excerpt any of it because I want to encourage everyone to read it in its entirety; suffice to say, it makes many of the same arguments as those made here in the context of Obama's decisions in the financial and economic realms (though several people, such as Tim Fernholz, have voiced what appear to be serious objections to some of Taibbi's claims; hopefully, he'll respond).

 

And I agree. I hope we get a response.

[Balta1701]

I remember way back when this was called Trust-busting...

I remember way-back when a Republican actually did some of that.

[southsider2k5]

I remember way-back when a Republican actually did some of that.

 

I don't remember anyone doing it with any real spirit in my lifetime.

[Balta1701]

I don't remember anyone doing it with any real spirit in my lifetime.

Roosevelt and Taft were your lifetime right?

[jasonxctf]

Dow closes at 10,501.. closing at the first time above 10,500 since 10/1/08.

[HuskyCaucasian]

Congressmen To Call For Return of Glass-Steagall Law

 

Thoughts?

 

I think it's a good idea to bring it back... but it'll never pass.

McCain and Cantwell propose resurrecting Glass-Steagall to break up Wall Street

More than a year after the election, the John McCain is looking to repair his reputation by joining up with Democratic firebrand Maria Cantwell to propose something that will be anathema to both Wall Street and the Obama administration. According to two congressional sources, the two maverick senators want to reinstate Glass-Steagall Act, the Depression-era law that forced the separation of regular commercial banking from Wall Street investment banking. The senators' proposal echoes a failed amendment introduced in the House last week by Rep. Maurice Hinchey of New York.

[Balta1701]

McCain and Cantwell propose resurrecting Glass-Steagall to break up Wall Street

I'd have no problem with it.

[southsider2k5]

Further weaken banks, what a great idea!

[StrangeSox]

Let banks be "too big to fail" and so interwoven that we're forced to choose between global economic meltdown or bailing them out for their ineptitude, what a great idea!