I know you thought Jack Welch had faded away. We did. Sure, he’d appear at this or that conference. Make a speech here or there. But we were kind of convinced that he had a body double doing all this work while he played bridge at the secret Welch Hideaway Compound. Well, that was until his appearance last night with Larry Kudlow when the guy who gave us Jeffrey R. Immelt poured out his heart. He had some not-so-kind words for the new “owners” of AIG:
KUDLOW: Geithner and his group should have called Liddy down to Washington. I don’t understand this. And just sat him down and say, okay, here is the way life works. Here’s the way it’s going to work. Is that what you’re saying?
WELCH: It should have been resolved between Liddy and the Treasury, or the Fed, or whoever it is that represents the US government who is the owner of AIG! The idea that these guys who own it, can now all throw rocks at it, makes no sense. It would be like a board of directors throwing rocks from the outside and not being responsible.
Jack makes a good point. The government has always seemed to believe that owning a majority stake of common somehow grants them some sort of mystical micromanaging power over individual salaries and operational details that would make a Chancery Court puke. Are all these lawmakers just this clueless about corporate governance? Or is the current outrage really just populist pandering? Given that the details of AIG bonuses have been public and in front of Congress for quite some time and this bit of outrage is so sudden and violent, we think the latter.
An Interview With Jack Welch [CNBC]
The real scandal here is the AIG payment of counterparties at par using TARP money. That’s going to finally explode after this bonus noise subsides.
Welch: Semi-senile, on CNBC he wanted to shoot Immelt a few months ago.
From Systemically Important:
Doorknob:
A simple mechanism everyone gets a turn at::
Maria Bartiromo:
Award-winning journalist
Becky Quick:
A business reporter who is easy on the eyes::
Joe Kernan:
A business reporter
Jim Cramer one week:
“This market is going straight up!”
Jim Cramer year after:
“Psyche!”
http://systemicallyimportant.blogspot.com/2009/03/analogies-cnbc-journalists.html
“The government has always seemed to believe that owning a majority stake of common somehow grants them some sort of mystical micromanaging power over individual salaries and operational details that would make a Chancery Court puke.”
Yes, because it is the government, not another business. Its revenues are derived from its coercive power over its citizens. Its purpose is to have a monopoly on the use of force. This is what happens when you need the government to bail you out. WTF were you expecting? If you think that government should act like a business and is capable of acting like one, then why not just hand over all productive capital to the government? Why not just give it a monopoly on the means of production and the use of force? Personally, I expect the government to be terrible at running companies and I also expect it to act in an unreasonable manner towards any “private” enterprise that it owns.
@3 – I don’t understand you. Didn’t AIG agree, voluntarily, to give the Feds 80% of its common? If I owned 80% of a company, I’d be agitating for a special meeting to install a board that reflected my views. And doesn’t the board usually have a compensation committee to review executive compensation? (I don’t see Obama, Dodd, et al, outraged at the pay for secretaries or junior analysts.)
Frankly, one of the things that has pissed me off in recent years is the absolute acquiescence of shareholders in the form of pension, mutual, and hedge funds to do whatever the f*** the boards want, even while they blow up the company. In the old days, when they were partnerships, they could keep it all in house. But I think outside directors have done SFA to keep a rein on the internal ones.
EP’s whole “I’m shocked, shocked at what the gov’t is trying to pull here!” schtik is getting pretty tiresome.
Yes, congressmen are grandstanding fucktards.
Yes, they generally have no friggin clue as to corporate governance, the intricacise of finance, etc.
But the bottom line is – don’t take the King’s shilling and expect a free hand and a walk in the woods.
Jack Welch is great. I loved him on “Everybody Loves Raymond”.
@4
“Didn’t AIG agree, voluntarily, to give the Feds 80% of its common? If I owned 80% of a company, I’d be agitating for a special meeting to install a board that reflected my views. And doesn’t the board usually have a compensation committee to review executive compensation?”
No, I agree with you, that is what the government should have done and it is the proper way for an owner to proceed. However, since the owner is the government, it can retroactively change the rules, tax, or do whatever else needs to be done to rectify the problem. That includes breaking contracts. This is why you don’t want the government in your business. Now, everyone is acting surprised and lamenting the actions it is taking, but these are exactly the actions it must take given the situation. If the government rewards failure at a “private” enterprise that it owns, even through, or, especially through, its own incompetence, then it must rectify the problem ASAP or face questions regarding the moral legitimacy of its taxation powers.
@2
I don’t get it…
Moral legitimacy? You mean like giving out NINA loans and taking people’s word for it so you can sell it to unwitting parties all over the world and cause an economic meltdown?
Go back to MSN finance.
sorry to rain on the ‘Peasants with Pitchforks Parade’ (PPP), but wouldn’t some ex post facto law prevent specially taxing AIG bonuses given that they’ve already been paid?
(ya down with PPP…)
Jack is done. He should go off and enjoy his retirement.