Chaning The Rules (Bloomberg)
Tim Geithner’s all set to announce the new executive compensation plan at 11:00 a.m. today; there’s three highlights to this thing though:
* It will limit executive pay to $500,000 a year.
* Additional comp is limited to restricted stock; the government has to be paid back (with interest) before the executive can collect.
* Only companies that take the Fed money going forward will be help accountable under the new policies.
It’s a scary thought that the voice of the people should reign so supreme over any administration’s policy initiatives, if only because history has often proven the voice of the people irrational. There are positives to this though, namely that it’s going to act as a disincentive for companies to accept Fed money in the future, which will in fact probably lead to a consolidation/clearing of the finance industry. There’s also the idea that in the public eye something has been done about this menacing problem: statements have been made, leaders acted, rules formulated – and in the end, that might just be enough to keep the brilliance of middle America off our backs for a little while.
Time Warner reports $16 billion loss (Market Watch)
TWX lost $16 billion, or $4.47 a share, compared with a profit of $1.03 billion, or 28 a share in the year-earlier quarter. Excluding the charges, Time Warner would have earned 23 cents a share in the latest three months. Revenue fell 3% to $12.3 billion.
The company was expected to earn 27 cents a share on revenue of $12.7 billion, according to a poll of analysts taken by Thomson First Call.
Earnings for 2009 are seen “about flat” compared to 2008 results.
“We’re making progress at Time Warner toward our goals of becoming a more content-focused company and delivering increasing returns to our stockholders. Last year, our priorities were to rationalize our structure and improve our operating performance,” said Chairman and CEO Jeff Bewkes.
Wells Fargo Gets Publicly Taco Punched (WSJ)
It could be reasonable argued that the western-borne-bank hasn’t had as much national press exposure as some of the larger houses, so it’s not unreasonable that they don’t have the experience in fielding press related questions. That argument would and could stand as a good explanation as to why, when questioned about the conference set in Vegas, the company just said “we’re not canceling it” (before canceling it). It would also explain why, in turn, the company had to back peddle and re-issue a statement to the effect that these mortgage brokers, almost to the same extent as WWII veterans, are responsible for freedom worldwide, and have worked their asses off to protect home buyers. That’s what this conference is about people, freedom and protection.
Henry Markopolis Feared For His Safety (NYT)
There’s no doubt Markopolis is an intelligent man: anyone that suffered through his letter to the SEC and attest to that. There is, however, the douche factor – the one that pops up when you’re the guy that was right and everyone else was wrong and you rub their faces in it.
Europeans Have An Issue With Protectionism (FT)
“The European Commission says it will examine any legislation to determine whether it violates a WTO treaty signed by the US, EU and Japan. Signatories must open government contracts to foreign companies.
“If the provisions finally passed by the Senate and approved by President Obama infringe [WTO] provisions, to which the US is a signatory, this is something we will have to consider taking them to the [WTO] over,” said Peter Power, EU trade spokesman.”
Citi Set To Drop Cash, Keep The Mets (Reuters)
“Citigroup Inc said it will use $36.5 billion in taxpayer bailout money to boost lending, while a source told Reuters the bank was not backing out of a controversial $400 million baseball stadium sponsorship deal with the New York Mets.”
Greenberg On AIG (CNBC)
“They’ve really lost their way. Clearly there’s a seriously issue and it’s hard for me to understand. AIG was the largest most successful insurance company in history … it’s hard to understand how it could fall off a cliff that quickly and that far,”
Greenberg later went on to add:
“Dear Mr. President, There are too many states nowadays. Please eliminate three.
P.S. I am not a crackpot.
[...]
The last time the meteors came, we thought the sky was on fire. Naturally, we blamed the Irish. We hanged more ‘n a few.”
Does the Salary Cap apply to all employees at the affected banks or just the most Senior executives?
If the $500k limit applies to all employees there will be tremendous downward pressure on pay packages across the street.
The Hamptons will become the playground of doctors and lawyers. Nobody wants that.
@1 – my guess it that it applies to everyone !
Did you really think that the Senior executives will earn less than other employees ?!
Tri-State real estate is going to drop 40% in the next 18 months. (if you have to sell)……hopefully you do not.
2- fucking evil doctors, healing the sick! wtf is that?!?
25 most interesting financial articles this morning…links with thumbnails of every story inside one link.
http://bit.ly/XHOB
What firm has not taken govt funds? I thought ALL the Wall St firms either tooks funds or were forced to ?
Looks like Wall St and the Swiss banks are all in the same boat now
Tr*ly F*cked
Amused at the anger in the post and comments. You guys blew it, many of your banks are blown, you’re on taxpayer life support. Deal with it.
“It’s a scary thought that the voice of the people should reign so supreme over any administration’s policy initiatives, if only because history has often proven the voice of the people irrational.”
Elitist, eh? Free markets are good — when I say so? If free markets reflect the wisdom of the crowd why not let politics do the same?
Makes me glad I went private.
http://notcorporatemedia.com/california-pension-funds-close-to-bankruptcy
Too Calpers didnt coffers
What are the implications of Calpers going BK ? (CFA LIII Q)
Who the hell writes this opening bell? Sounds like a major douchebag who doesn’t know anything about politics. The cap is to grease the skids to get a lot more bailout money than is available under the original TARP law. You see, there’s $350 billion left, and the banks are asking for a lot more than that. The people are going to revolt, so give’m a salary “cap” to appease the unwashed masses. But the masses are grabbing those pitchforks, axes and 2 by 4s as we speak.
This is class warfare baby, and Wall Street asked for it!
how about all government officials have a salary cap equivalent to the average national wage
thus begins the great brain drain out of wallstreet back into the PE space.
yesh
yesh
@9 – Because in politics, it is (mostly) “one man, one vote.” In the market, it is one dollar, one vote.
This is the source of free market ideologues’ fear of politics and the great unwashed. With the (substantial) exception of lobbying, where dollars do count, politics simply pays too little attention to how much money you have. Hence, those terrible peons have far too much power. It makes the rich nervous.
@3, Top execs at IB’s are often, if not always paid less than a handful of their star performers/producers. That is not unusual.
Here is what most/many don’t seem to understand. The losses at banks would be even larger than they are today if existing and profitable business/products such as FX, Rates Derivatives, M&A Advisory, Debt Capital Markets were not throwing off revenues and profits. If those business lines loose talent, shareholders (which includes tax payers and the Government) are in a worse position. This is a classic case of cut of the nose to spite the face.
Professionals who were not involved in CDOs, Sub-Prime etc and who have consistently made profits for banks through ingenuity, hard work and individual effort will move on to other (offshore) banks or new entities which will not be constrained. They will take a large share of their profitability with them. And the banks will suffer.
Here is the bit that few understand. Banks pay very little heed to how much PnL you generated in the previous year when they pay bonuses. You could have two employees who both made $10MM in 2008 but with very different bonus expectations. What banks consider is how much 2009, 2010 expected revenue can Employee A or Employee B take with them if they leave. Traders, Advisors or salespeople with bankable talents, relationships or other individual revenue assets get paid because their departure means revenue loss. It’s simple.
If you didn’t take TARP you have nothing to worry about, it’s that simple. You can carry on paying yourself as much as you want.
If you work for an institution that has been tarp’d and feathered then leave and go to one that hasn’t.
.simple.
Do they have to pay their taxes or is that a contra benefit to the pay cap?
You’re asssuming that PE guys have brains. Bad assumption. Read the Vanity Fair article.
@14 – Four problems with your remark:
1) The flow has always been one-way. IB flows to PE, not vice versa. No-one is going “back” to PE from IB.
2) In aggregate, PE is tiny compared to IB. Even if they wanted them, there is nowhere near enough demand in PE to employ lots of bankers.
3) In case you hadn’t noticed, PE is sucking on its own tailpipe right now. They are firing, not hiring.
4) Finally, some might argue that there are no “brains” left in IB to migrate anywhere.
People leaving IB are just leaving, period.
“and in the end, that might just be enough to keep the brilliance of middle America off our backs for a little while.”
What a patronizing, elitist *sshole. Conrad Black wannabe.
14&21 shut your piehole. most people with brains are already in pe, pe has hired anyone they feel like from banks for years, so no ‘exodus’ will happen cause there’s no demand.
and 21, you dork, why don’t you try sending your cv around to some pe’s? we love a good joke. bitch.
PEB
How does the government expect to get paid back when they choke an organization so much? Defies logic.
@22, wake up. You think that the most talented and creative minds in bulge bracket banks are going to stay with a ceiling placed over their potential? The model is dead, the exodous has already begun. Economic downturns breed creativity, VC and PE will be back in full force very soon. That’s where the best of the best will be. (you will still be getting your underpaid boss coffee)
@24 I did PE. Made a bunch of money and left. Decided that life is too short to deal with assholes like you.
How about the President taken a cut to his $250,000 number that devides the rich from everyone else. Thn a performance bonus if he does a good job. And how about the millions of dollars of perks he gets?
How about we cut the number of congressmen by 50% and cap their salaries based on how well they perform.
I am all for incentives based on performance but why limit it to banks!
@22&24, read Meredith Whitney’s article on Bloomberg TOP, oh wait, you don’t have access in your parent’s basement do you.
I read the Markopolos NY Times story. Are they kidding? They asked him why he didn’t go to the FBI, state AGs, FINRA, etc.? What? It’s HIS fault now for not pursuing it farther than spelling it all out and giving it to the proper authority? When he had no axe to grind and it was costing him time and money?
this is why I hate ass-covering. Now they are blaming the guy who saw it for not expending more effort on trying to wake someone up and smell the coffee once the PROPER REGULATOR was shown to be asleep at the switch. Unbelievable.
Gee, with salary caps in place it seems the only way to make millions for hardly doing any work these days is to be a lobbyist in Washington or a friend of someone politically connected.
What amazes me is how a bunch of douchebags who have collectively allowed the country to get $11trillion in debt (even using bullshit accounting principles that would NEVER be allowed in the private sector) are playing ‘holier than thou’ to private businesses. All you have to do is take note of the ‘Buy American’ provision of the ‘stimulus’ bill to understand these idiots are causing far more damage than they are undoing or preventing.
#29 – that fact that you jerk of to mw doesnt make her an authority on anything. she works for oppenheimer, that should tell you enough..
#27 you ‘did’ pe, really? what, some lower midmarket leverage shop? and you sound like they didn’t treat you nicely, boohoo…
22- fully agree
PEB
@32, i typically throw beats to your mom.
WTH is Willie R suggesting Markopolis is being douchey? Or rubbing faces in it? There’s made-for-TV movie, no Oprah, no Larry King. The Mark’s kept a low profile. Other than his sworn written testimony.
At 60 pages, that’s like 833 mill a page.
Yes, too Marko, didn’t scheme.
Only an enormous yowling douche could cry douche on Markopolos.
His prepared testimony is extraordinarily good in a bunch of different ways, and the guy himself has displayed extraordinary class.
But that’s probably invisible to you.
Markopolis has every right to rub people’s faces in the shit they created by their incompetence. The only way to get FINRA or the S.E.C. to do their jobs is to humiliate the organizations for their failures.
Maybe pointing out the failures of FINRA enforcement will get Obama to rethink putting that lapdog Schapiro in charge of the S.E.C. Schapiro is part of the problem, not part of the answer.
the executive cap is equivalent to the rule with have here in Germany. The salary of top managers of banks that got gov money is capped at 500k; that doesnt mean that everyone’s salary is capped.
It is more of a symbolic thing, showing the public/taxpayers that the top execs dont pay themselves huge bonuses.
@33 – yeah, while you’re chanting to yourself ‘milf! milf! milf!’ why don’t you go find your kumar?
@33
Very original. You’ve confirmed that you are posting from the lair in your parents basement.
- not PEB
Is GE a bank now? GE Capital certainly got a lot of help.
Do these compensation caps apply to CNBC?
* held
“will be help accountable “
Marko’s words will, easily, have more impact on the SEC than any other reform we’ve had in decades. It will be stinging and, frankly, hurtful to the lawyers there. However, his criticism is not immune to criticism. By his own account, the obstacles he faced were the result of one person – Ms. Cheung, which leaves one to wonder why he did not try other avenues. His reasoning that, if the SEC did not take interest, the FBI would not, leaves a lot to be desired. He portrays himself as a man pursuing his civic duty of trying to protect the public, but I don’t see that. He either was not as confident in his analysis as he says or he was driven by other things. Why not try one call to the US Attorney’s office – why not try.
Do they also apply to collegese and universities? I’m sick of college football coaches out earning me.
@41
I pointed that out earlier and my post got deleted.
Guys, let’s quit fighting and focus on what really matters – an excellent Simpsons reference. Bravo Opening Bell.
I am astounded that people of intelligence and financial experience are willing to go along with this ridiculous idea. Full disclosure: I do NOT work on Wall Street.
What about commission based compensation? Are they going to say a broker a Smith Barney can earn more than a trader who brings in double the revenue? WTF?
@39 – use of the word “lair”, classic.
Also, can I be an LP in the government equity fund? Apparently I get a return on capital before operating expenses are paid out. Awesome deal!
@46 this thing will be so full of loopholes and exceptions and grandfathering that probably the only thing it will guarantee is that the poor schnooks currently making under $500K will stay that way.
The first time they tried for an “exec comp cap” back in Oct the senate made an exception for employees currently under contract so every IB signed contracts with the execs before switching to a bank holding company. This stipulation is for institutions accepting money “going forward”, not historically, which means the big boys have a month or so to figure out all the ways to evade and arb this legislation, at least as far as the senior execs are considered. IMHO.
I can just see it now. What the execs are going to do is take the 500k cap and then they are just going to sign on as board members of other companies that are sympathetic and make an asston of money as board memebers.
@42
Oh the answer is so simple, all the other government enforcement agencies will say the SEC has jurisdiction, we don’t, unless there’s strong criminal evidence. They expect the SEC to refer the case to them if the SEC determines that the case reaches the standard of criminal enforcement. Otherwise, the SEC ignores the case (they did), or files a civil complaint (that’s what they most often do when they feel like it). Most of the SEC actions don’t end up in criminal court, there are mostly regulatory or civil matters.
The writer of this Opening Bell is a douchebag and that’s probably not his real name.
@48
You are correct.
@42: Read @50′s post. BINGO – the other agencies will first ask “did you take this to the SEC” and when he said “Yes, and they had no response” – the other agencies will naturally respond “well, if they see no need to respond, and it’s their jurisdiction, then we can’t do anything”.
Markopolis did exactly what he was supposed to. Why in HE** should he have had to go trucking around when it (a) wasn’t his money, and (b) he’d already gone to the agency responsible for oversight?
If you found $500, and you went to the police and reported it – but they didn’t bother to get up and do anything – would you then go to the Fire Dept.? the Mayor’s Office?
I thought not.
Earth to William Richards: You ARE “middle America.” Blogging the financial crisis (not even on your own site but as David Lat’s hired help) is about as far from “elite” as you can get.
$500k just means you leave bofa and go to piper, houlihan, jefferies, ect. why do you think the guys from mer’s fig team went to db? they were in charge – but they knew the hick in nc wouldn’t pay them. those calling for the demise of nyc are sorely mistaken. if you’re a rainmaker, you’ll figure out ways to keep it raining. look a ken moelis, his shop is doing bigger deals than bofa and citi…south hampton village may go on sale, but don’t look for deals in east hampton.
53,
And commenting anonymously on a blog is…
23 – as per the buy American provisions… plese stop using your blackberry and quoting Conrad Black…
Also, delete Feist from your (girlfriend’s) ipod.
42, 52 et al., I didn’t say he had to, I’m just wondering why he didn’t. Many on Wall Street had strong suspicions and did nothing to alert regulators, which is fine in my book, but he is smart and, obviously, put a lot of work into this. Why let it die in the hands of some bureaucrat? I just doesn’t add up to me, unless he was not as sure as he says he was. How about an anonymous mailing to some Vanity-Fair-like publication?
And let’s be clear here. His testimony goes way beyond just recounting his experience. He goes on to propose a new regulatory structure for our financial system. Great, he uncovered the fraud of the century, let’s ask him how to fix GM. Oh, forget that, we already have Sully the Superpilot covering that one.
Is Ms. Cheung still employed by the SEC? Or is she still there for use as a whipping boy?
@ Lowly Assistant: you tell me.
I’m not ragging on him for being middle American. I’m ragging on him for his absurdly misplaced condescension.
Markopolos details that every major SEC investigation has had at it’s root a whistle blower. Then he gives credit to the SEC for having ‘preemptively’ uncovered Ivan Boesky. Yet here he is incorrect. The Boesky, Dennis Levine, Bank Leumi investigation was uncovered as a result of a letter written by a whistle blower at a Merrill Lynch Retail Brokerage office in Caracas to the head of Merrill Latin American Retail. This letter detailed the suspicious trading of Bank Leumi. Merrill investigated and then turned the evidence over to the SEC. This is all in the public record.
Harry M, I commend you for trying to give the SEC credit for at least one big ‘score’ in the last 25 years but unfortunately, in this case, Boesky was also found due to a whistleblower.
~*~*~*~*~*~*~POSITIVE VIBES~*~*~*~*~*~*~
Good morning, everyone. Hope each of you have a great and wonderful day!~
ignore and it will go away
I learned a rule selling heroin on the street in the 70′s -
The loan shark always gets to make the rules. What else you gonna do?
Barack Hussein Obama purchased a $1.65M home in 2005 in Shi-cago with the salary of a State Legislator ($67,833/year).
@64
You fail. There was more than one income in that household.
You lost, get over it.
Word is that GS have just given back their TARP – obviously a salary cap does not work for them
64 I might also add that, not only did you loose, the US and world are fkd up beyond belief. So much for the skills of the prior administration.
@61 its afternoon in the uk so sod off.. i hate hippies. and blackstone.
@68
See @62
53/59,
Dealbreaker = Wall Street Tabloid
Writer caters to audience.
Shocker.
@64 he also wrote a book that sold a few million copies, but whatever.
@70
Writer is a douchebag, the intended audience are douchebags! Gotcha!
72,
Wow. What a waste of time this all must be for you. Godspeed.
@68
People who dislike others because they do not approve of an alternative bohemian lifestyle particulary are not happy themselves. And it is nice to know that anti-Semetism is alive and well on DB; read some of the back posts pertaining to Madoff, and I was really shocked.
So, the UK receives 8 inches of snow, and it shuts the entire nation down. How pathetic…Winston Churchill would be ashamed!~
~*~*~*~*~Goes back into lurk mode~*~*~*~*~
75 makes 150,000/yr tops.
$500,000 a year?! How fucking middle class!
It’s the Golden Rule fellas: He who has the gold, makes the rules. If you want to quit because of this, please feel free. There are thousands who can easily take your place. You aren’t that special.
It’s the “brilliance” of Wall Street that got us into this mess, so it’s pretty ridiculous of you to show such contempt for the middle class that is stuck paying for the bailout and the resulting impact on the economy.
Maybe you should learn the meaning of the word “hubris”.
Keep squealing like stuck pigs, you greed-mongers. “Middle America” has you bent over a barrel and we are enjoying every minute of it.
oh, I see what you did there.
uncool.
It’s the “brilliance” of Wall Street that got us into this mess, so it’s pretty ridiculous of you to show such contempt for the middle class that is stuck paying for the bailout and the resulting impact on the economy.
Maybe you should learn the meaning of the word “hubris”.
@34
Maybe this “William Richards” guy is the brother of Lori Richards, SEC Director of the Office of Compliance, Inspections and Examinations (OCIE), who just got her ass handed to her by some congresscritters at the hearings this afternoon.
Lori Richards recused herself from the Madoff probe because a former employee she supervised (Eric Swanson) had married Madoff’s niece (Shana), and Richards was at the wedding.
You see, “William” is upset about his “sister’s” Madoff connection, which would have been inconsequential if it weren’t for Markopolos.