The recent Washington Post article and related commentary notwithstanding, Senator Robert Menendez just sidestepped and dodged a rather pointed question about the stronger restrictions on executive compensation that appear in the February 10th draft text of the Senate Bill we highlighted yesterday. CNBC being spineless, there was no real follow-up to Menendez’ “bonuses sap the confidence of the American people” dodge.
Hmmm.
Update: The House markup has, indeed, zapped the literal salary cap in favor of this language:
STANDARDS REQUIRED.–The Secretary
shall require each TARP recipient to meet appropriate standards for executive compensation.
[Read: You are Geithner's bitch.]
SPECIFIC REQUIREMENTS.–The standards established under paragraph (2) shall include the following:
Limits on compensation that exclude incentives for senior executive officers of the TARP recipient to take unnecessary and excessive risks that threaten the value of such recipient during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding.
[...]
A prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding, except that any prohibition developed under this paragraph shall not apply to the payment of long-term restricted stock by such TARP recipient, provided that such long-term restricted stock–
(I) does not fully vest during the period in which any obligation arising from financial assistance provided to that TARP recipient remains outstanding;
(II) has a value in an amount that is not greater than 1/3 of the total amount of annual compensation of the employee receiving the stock; and
(III) is subject to such other terms and conditions as the Secretary may determine is in the public interest.
What follows is a sliding scale that applies the restriction to the “Senior executive officers and at least the top [x] most-highly compensated employees, or such higher number as the Secretary may determine is in the public interest….” where “x” is a number from 1 to 20.
Alarming here is the power the Secretary has to impose whatever restrictions he feels is “in the public interest.” Ouch.
Putting populist things in the bill and voting for them make for really great campaign sound bites. Of course it’s never your fault if they don’t survive the Conference.
Back office slave here.
You front office turds think you can find better/better-paid work sans bonus? Go fucking find it and quit whining. Your self-entitled bleating is unbecoming.
@2 – just remember, without the front office, there is no back office. last time I checked, a cost centers couldn’t pay the electric bill…don’t bite the hand that feeds.
Give the guy a break, it’s 1,000+ pages. He just hasn’t gotten to that part yet.
@3 good points. there is a reason why things are.
Front and Back office,
Client here.
Can you quit your bitching and let us borrow some of the TARP cash you are sitting on?
We are aware front office can’t travel to visit us or pay long distance to call. So we will work it out through DB.
Since the Treasury Secretary and his underlings will all need post-government work in 4 or 8 years, they will not want to bite the hand that will soon be feeding them.
Ask yourself, what kind of pay caps would Robert Rubin have imposed?
Just do this: All TARP recipients mus forward compensation advisement to the office of Treasury and they will evaluate, make recommendations and alter,deny or accept said compensation. Liablity put squarely on the Treasury. ok done…moving on
Also, clawbacks-lite in section (g) of the markup I saw:
(f) REVIEW OF PRIOR PAYMENTS TO EXECUTIVES.-
(1) IN GENERAL.-The Secretary shall review bonuses, retention awards, and other compensation paid to the senior executive officers and the next 20 most highly-compensated employees of each entity receiving TARP assistance before the date of enactment of the American Recovery and Reinvestment Act of 2009, to determine whether any such payments were inconsistent with the purposes of this section or the TARP or were otherwise contrary to the public interest.
(2) NEGOTIATIONS FOR REIMBURSEMENT.-If the Secretary makes a determination described in paragraph (1), the Secretary shall seek to negotiate with the TARP recipient and the subject employee for appropriate reimbursements to the Federal Government with respect to compensation or bonuses.
The solution here, which will absolutely never ever happen, is for everyone to just admit we all f*cked up, to over-generalize, and work together to fix this clusterf*ck.
We can go the whole witch hunt, scapegoat search route if we wan’t to just dig the hole deeper, but that doesn’t quite seem like a very good idea to me.
Too bad all of our elected officials are spineless turds, and the executives don’t have the cajones to call them out on it (or admit it themselves).
And hence the government clamps down on free market.
The apologists will say – dont take TARP money and pay whatever you want! Yet they neglect the fact that when your competitor is funding his business at rock bottom rates and without and care about risk or any such stupid thing, how on earth are you supposed to run an independent business?
So the only way to do business is to suck it up and become the government’s b*tch or not do business at all. Great going!
Oh, and let me translate, EP:
Alarming here is the power the Secretary has to impose whatever restrictions he feels is “in the public interest.” Ouch.
=
“Geithner must craft such compensation schemes so as create the public perception that he’s laying down the law on the “crooks”, while not shooting himself in the foot for when he seeks a high-paying gig on Wall Street when his tenure as Secretary ends”
@6 – front office here. hq, as previously noted on these pages, decided that db incites anarchy and has blocked the site. now, the gov’t has concluded that the internet is luxury we are no longer allowed enjoy. thus, we are no longer able to service you. consequently, we will utilize said tarp cash to pay the back office slightly less than the front until shelia bair forces us into the hands of some other financial institution that has yet to accept the fact that it too is insolvent. however, we thank you for your support.
how long before we see the emergence of a bunch of names no one recognizes on the quarterly M&A rankings?
Well wall street should have seen this coming. The guy with cash (or ability to get cash) now is the king, which currently seems to be taxpayers/Congress. As long as Wall Street keeps borrowing from taxpayers Congress will be running their show. Of course the alternative for Wall Street seems to be even worse so the show will go on according to Congress.
@ Cluzo
Wait, you mean all of the “woman and minority-owned” M&A/advisory firms that Maxine Waters wants to run the show?
And the following is quite relevant but ignored by EP:
“CreditSights ran the numbers, and found that according to its “severe” case scenario, all the major banks and brokerages — Citigroup, Bank of America, Wells Fargo, JPMorgan Chase, Goldman Sachs and Morgan Stanley — may require further capital injections from the government.
CreditSights’ projections were driven by its own forecast for future credit losses based on how badly the market could perform over the next two years. Under these assumptions, the losses from mortgage-related products would be significantly higher than the amount the banks have set aside already. It also envisions an unemployment rate of 10 percent.
The future losses for some banks are staggering by CreditSights’ estimates: Wells Fargo, $119 billion; BofA, $99 billion; JPMorgan, $124 billion; Citi, $101 billion; Goldman Sachs: $47 billion; Morgan Stanley, $34 billion.”
http://dealbook.blogs.nytimes.com/2009/02/13/under-one-stress-test-big-banks-look-anemic/
What a combo of losers and whiners in that list. They say the don’t need taxpayer money or they ever did, right!
@anal_yst – yep. better for me. I can open up a broker dealer and hop on deals as a co-mgr, collect my hush money, buy my east hampton estate in the “good” neighborhood and then thank all of those pikers who thought buying a second home in miami or vegas was a good idea – despite the fact that they couldn’t afford their first one.
Front office from a different industry here:
Banks would be imploding left and right if it weren’t for TARP money. Front office and back office should both be unemployed. In my industry if executives take huge risks in addition to creating shitty products, customers eventually figure it out and stop buying and the company implodes. After the implosion, the employees go elsewhere, other companies start up and if the products and executives are solid, they stick around. That’s the way things work in a free market.
Shut the fuck up and stop this self-righteous “we deserve to get paid what we do because it’s hard and i’m super smart” bullshit. If you take federal money to keep your business from going under, then deal with the consequences. Welfare wasn’t intended to make you rich, and even if you get paid 250k to 500k you are still wealthier than the bulk of top executives in other industries.
Citi is a minority run banking institution, no? Or is it that minority is only when u r a very specific shade?
@19 – minority in ownership, not in leadership.
@18 – slow your roll mr. “I work in a different industry”. look at the comp for all s&p 500 ceo’s – tell me how many make $500k or less? exactly, you can’t get good leadership for peanuts. as a taxpayer, you should not want a cap. you should want these banks to be able to recruit someone who could actually right the ship.
as for the self-righteousness – don’t paint all the bankers with the same brush. just as aig was brought down by a relatively small group in london, so too were the banks. m&a and underwriting are generally profitable endeavors…
@20 – slow yourself – I was talking about folks in middle management.
How many middle managers in the Microsoft sales or engineering staff make $500k or more? How about an exploration manager for Shell? Maybe a business development director for AT&T?
It strikes me as the tiniest bit hypocritical for a bunch of fat, morally bankrupt (if not financially insolvent) cows to be suckling greedily at the tax payer teat while simultaneously complaining that the milk tastes sour. Guess I’m just not brilliant enough to possibly comprehend the genius of Wall Street, eh?
@Headless:@22
You won’t find a horse in these parts. You might as well just slip that head of yours between two white sheets then wake the lady of the house up.
@23 – that is a tremendously curious image. I like it, even if you must do a lot of drugs.
@21 – you need to be more clear. I believe the compensation provision if for “senior executives”:
“Senior executive officers and at least the top [x] most-highly compensated employees, or such higher number as the Secretary may determine is in the public interest….” where “x” is a number from 1 to 20.”
yes, I know, lots of wiggle room. but “middle management” continues to be free to “suckle greedily” (as headless puts it)…for the record, most corp dev guys I know get paid salaries in the $250 – $400 range, with a bonus on top. fairly certain there are plenty of bankers who would love that deal right now. not to mention you get most of your weekends free and a late night is staying at the office past 7:30.
#22, Taxpayer money has already gone waste by the very act of the bailout.
The point now is – do you want to recoup any of that money or not?
If not then fine. Go ahead and pay all the remaining people 50k. After all, they should not technically have had jobs in the first place so you can chose to pay them whatever. It will be a net write-off for the taxpayers.
On the other hand, if you actually want to get at least something back and not waste everything completely, then run it like a real business and pay market for the people who matter. Fire the rest. Let the parts of the business that were making money throughout continue to do so. Let the business take appropriate risks instead of trying to push lending.
Before going off on a populist rant, pause for a second and think about what the objective is. It will help clear your mind.
Someone explain to me the difference between limiting the pay of the highest paid employee and the [x] highest paid employees?
@26
The organization you work for only exists because of government intervention. What you fail to realize is that THERE IS NO MARKET for your talent, so how can we pay you “market”? If you know of a gem inside one of these banks then why not organize a MBO and take over that subsidiary? I am sure that EP can help you and the taxpayers will be glad to get some cash back (even at a slight loss). My guess is that you do not want to do the heavy lifting and would prefer a welfare check from the taxpayers at the old “market” rate.
@28
Please provide a single shred of evidence (besides another tin-foil ignorant rant) to support any of your claims.
Otherwise STFU, you’re in way over your head.
@26
The point is the fucktards are going to beg minimum $550 billion more, round it to twice of that for what they are going to end up with in this next round. So show them a carrot and see if they perform. Don’t let them steal the money.
I’ll take the paycut just give me two slaves, 15 acres of land, and a FEMA trailer
“We use detailed information about wages, education and occupations to shed light on the evolution of the U.S. financial sector over the past century. We uncover a set of new, interrelated stylized facts: financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We investigate the determinants of this evolution and find that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis also shows that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period we estimate that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.”
http://www.nber.org/papers/w14644
So, hey, even with government support, there is:
1.) Little IPO activity.
2.) Decreased leverage.
This means that there are more people with financial skills than there are financial jobs. So, the market rate should go down provided that taxpayer money is not used to artificially support salaries and bonuses at the old market rate. Hence the need for caps until these businesses are once again truly private entities and making a profit.
@32 – what you fail to realize is that by capping salaries, you will effectively nationalize the banking sector. as we have seen time and again, the government is filled with a bunch a dim wits. is that what you want, a bunch of jv players trying to guide us out of this financial $hit storm? think about it, if you were a “star”, why would you stay? what is your incentive when you can go across the street and make more (or at least have the opportunity for higher pay)?
33 Irrelevant. On WS, a star is someone who’s good at getting others to part with their money. Totally different skills than the ability to guide the nation out of a sht storm.
@33
There is no “across the street” anymore. If there was, we would not have this problem since we could simply let the bad banks fail and the good banks hire. Basically, the banking sector has undergone a de facto nationalization and caps are needed to prevent over subsidization of the individuals left working there. Hopefully, some of the so-called “star” players will go to the Treasury and help us. In fact, as a taxpayer, I rather have them working there.
@34 and @35 – there is “across the street” and it has many names like: greenhill, lazard, evercore, perella, and quadrangle. yes, there are fewer seats, but the pay is much better as a result. you eat what you kill, so the guys/girls who play politics need not apply.
keep calling for the end of wall street people but don’t hold your breath. the industry has been around for over a hundred years and will be around for a hundred more. the names of the firms may/will change, but “excessive” pay will remain (albeit into few pockets).
You are overestimating the amount of money most corporate dev guys you know make.
Menendez? Didn’t he and his brother kill their father?
@37 – those were figures I was given by a headhunter who was calling me about a position. granted, it would have been a senior position in corp dev. think large financial institution (but not a bank).
@33 – maybe the smart cookies should start their own bank that doesn’t need TARP money and compete with all the shitty banks with the underpaid employees and dominate the shit out of them?
You fuckwads couldn’t think of a free market solution if your lives depended on it.
@40 – thanks for the tip, but I beat you to it. haven’t worked at a large bank for a while…and who do think started greenhill et al? c’mon man, I know it’s friday, but think before you post.
have a good weekend kids, I’m out.
@40
Some are going to take advantage of the opportunity for creative destruction and succeed. That’s what always happens.
But not the whiners here. They rather join the choir conducted by EP.
Don’t mind 40 cluzo, he only knows of three or four banks that he recently saw on CBS news last night.
Top guys are leaving to Evercore and Greenhill by the batches.
Good times for DB and other non TARPs to poach senior talent.
@36 – Why don’t you just go there (across the street) and shut the FUCKING fuck up already, you whiny little bitch? And take all of your prissy little BSD wannabes with ya. We’ll see how long “across the street” lasts when you all fuck those up too.
How many people make up a “drove”? Last time I checked Evercore and Greenhil had less than 1000 employees combined. There’s been well over 100,000 employees laid off. What to do for the rest of them? Even if they double in size that is less than the 1% of “top talent”
Man, I wish these finance types would start working hard again, I miss fucking all their girlfriends.
@44 – u can suck it b1tch because I’m already there, can you read or do you just post without thinking?
#27 said
>Feb 13, 2009 3:00PM
> Someone explain to me the difference
> between limiting the pay of the highest
> paid employee and the [x] highest paid
> employees?
as far as I can tell, none, if you cap the highest 20 paid employees, anyone that earns more than the 20th highest becomes the NEW 20th highest, and is therefore capped
Stimulus Bill Limits TARP Exec Pay
http://www.propublica.org/article/stimulus-bill-limits-tarp-exec-pay#8236
TGFD might be missing something here, but I really don’t think so.
WhyTF should the country care if BAC, C, WFC, GS, MS, and JPM all get broken apart, sold apart, or otherwise dismantled with the rotting debris left behind to eventually dry out and blow away? Add in CS and UBS, and we’ll have a nearly-complete reorganization of the banking industry.
The 9,000 or so smaller banks in this country could easily absorb all the depositor accounts and any other worthwhile assets the big banks now have. Bring back Glass-Stegal while we’re at it.
I don’t think unrestrained CDSs and 35x leverage are required for us to have a fully-functioning banking system.
The Guy from Delaware
@47
So if you cap the top 20 highest paid, as you said, that essentially caps everybody below the 20th highest paid because #21 can’t be higher than #20, who’s capped. So everybody gets capped?
Or is highest-compensated referring to base, i.e. the top 20 recipients in terms of highest base salaries (who are usually the most senior people) are capped?
Thanks in advance.
Two top lawmakers on congressional committees that oversee financial regulations appeared to dismiss the possibility that the administration would not follow the compensation requirements.
“Mr. Gibbs may not like it, but it is going to be enforced,” Rep. Barney Frank, chairman of the House Financial Services Committee, said on CBS. “This is not an option. This is not, frankly, the Bush administration, where they’re going to issue a signing statement and refuse to enforce it. They will enforce it.”
Sen. Richard Shelby, the ranking Republican on the Senate Banking, Housing and Urban Affairs Committee, said the compensation provisions were necessary to protect taxpayer money. Of Gibbs’ comments about the provisions and their enforcement, he told CBS, “It seemed to me that he was waffling a little bit.”
“This provision in the stimulus bill is going in the right direction,” he said.
http://news.yahoo.com/s/ap/stimulus_executive_pay
And the whining continues…
At some point, are we going to see one/some of the CEO’s hand the keys to the Government? Is it worth the effort? GS / MS can probably pay back the TARP funds and escape government interference. But if you are Vik or Ken, would $500k p.a. be sufficient compensation for being publically spit-roasted by Messrs. Frank and Cuomo?
more comedy from the whingers…
I agree caps on pay is a terrible idea. Completely un-American. The market should be totally free. Instead of bailing out these losers, they should have been allowed to fail and brought into BK. I thought watching all those losers carry their deal toyz out of Lehman was the funniest thing ever. That should have been repeated at C, MS, GS, AIG, MER, BAC.
The government could have easily worked out deals to pump money into the economy through the solvent banks. Instead we’re letting these crooks steal our money.
Since that’s not going to happen what we really should do is raise the marginal tax rate to 50% at 1M and 80% at 5M while providing free education and health care. There’s no reason why Arod should make more money than an MD who’s desperately trying to help the government recoup it’s trillion dollar investment.
All you crybabies should be happy. If caps mean people won’t work as hard that means there will be more room for deadweight like yourselves since we all know the industry is going to contract 50% regardless of what happens.
Lest you forget, finance doesn’t actually do anything, it’s only supposed to make the markets more efficient. The macro economy doesn’t need you per se.