Wait wait, we got HALF???
by Kaiser Edamame
Executive pay and Wall Street bonuses are the root of all evil.  You might even put them in the axis of evil.  And our fearless good-guy government leaders in the US and Europe have addressed the evil head-on, chastising anyone who makes “a lot of puddin“. Recently, even going so far as to enforce pay freezes and caps. This might sound suspiciously socialist, even Russian.
Unfortunately someone forgot to tell the government that they were getting half those bonuses in taxes . Yes, The Government, you get a 50% cut of all that bonus money. To which I say “THE GOVERNMENT, HOW DARE YOU ACCEPT SUCH EXORBITANT PAY! YOU ARE RECKLESS! AND YOU DIDNT EVEN SAVE ANY OF IT??? DISGUSTING”. And WHOOPS The Government, you just capped your own tax income. And in places like the UK, where financial services tax income is 25% of the budget, it’s going to mean that you, The Government, will have to lever up (read: print money) to make up the short fall.
Banks won’t lever up. They have decided that lending isn’t a good return on investment right now. But most banks have decided that adding some leverage to pay their top performers bonuses in an awful market is a good return on investment. The Government has decided the opposite. Of course, the Government is the same body that thought that THEY, career politicians of varied backgrounds, could do a whole lot better allocating mortgage resources than the free market via the mandates they put in place for Fannie Mae and Freddie Mac.
For one side when they do a bad job, their firms and their entire industry end up on the brink of non-existence. For the other side when they do a bad job or are completely wrong, whether it be 9/11, Iraq, aiding the Great Regression, printing money or messing up the recovery, they get much MORE money and much MORE power. If Dick Fuld had worked for congress, he would have been promoted to Chairman of the House Financial Services Committee.
If the Government does follow through all the way and take away or freeze bonuses for Wall Street executives, we think it’s only fair that they should also give something back to those very same Wall Street executives. I have some suggestions.
- A cut of every lobbying dollar that politicians get after leaving public office
- A cut of every speaking fee politicians receive after leaving public office
- The ability to travel on a whim at the expense of taxpayers, specifically in support of potential new employment
- A new requirement that poor performance is rewarded with promotions and tenure, whereas in finance in the past those things were rewarded with being fired or a dramatic reduction in bonuses
- The ability, once in an executive position, to “redistrict” your supervisors in a way that ensures that you have supervisors who are most likely to favor you with continued employment
- And last, but not least, coupons for Washington DC’s high end brothels which are rumored to be the nicest on the East Coast
Wrekless?
I fail.
hear hear.
Hey, I wonder when the purges are going to get underway. It’s only a matter of time before dragging private industry before congress to answer for congressional mistakes is going to lose its bite.
Oh yea, and unlike in Finance, where if you fail to advance periodically you’re summarily “allowed to seek other career opportunities,” such lack of ambition/execution is rewarded, nay, encouraged in Government.
Thus, we shall re-write the rules. 2nd/3rd year Analysts/Associates will no longer have to worry about such things. As a matter of fact, 20th-year Associates will even be given preferential treatment even, after all, their lack of experience anywhere else should mean that they’ve reached a level of unrivaled expertise, right?
So you’re saying the government should spend $1 to make 50 cents? Great idea.
Before you jump in and say “but it’s a LOAN!” refer to a previous post on your own blog about the obvious trick: (a) receive gov’t $, (b) pay out in bonuses, (c) close up shop, (d) start new shop with same people.
>>>Banks won’t lever up. They have decided that lending isn’t a good return on investment right now.
Well, as the President made transparently clear last night, the Nation stands united against those who make risky investments. We will not tolerate this bad business practice, of investors taking risks, any longer.
To prove our resolve against investors who take risks, we will force banks to make 4% mortgage loans to those individuals who are in default on their mortgages.
This will definitely fix everything. And if it doesn’t, we can always nationalize the banks and place the economy in receivership to the EPA. And that will definitely definitely fix everything…
And in places like the UK, where financial services tax income is 25% of the budget,
25%? In your dreams. With maths skills like that it’s no wonder the financial services industry has screwed up so badly… total forecast tax receipts in 07/8 £549.9 billion (HMT Budget Report), total tax contribution of the financial sector in both personal income and corporate tax in 07/8 £27 billion (BBA).
I’ll help you out with the complicated bit and tell you that that comes to 5%.
The Government has decided the opposite. Of course, the Government is the same body that thought that THEY, career politicians of varied backgrounds, could do a whole lot better allocating mortgage resources than the free market via the mandates they put in place for Fannie Mae and Freddie Mac.
Well, that explains why all the free market institutions have done so much better than Fannie Mae and Freddie Mac. Models of financial rectitude and sound lending practice like Washington Mutual, Countrywide, Lehman Brothers, Bear Stearns, Citi, Moody’s, S&P, Merrill Lynch…
ajay – come on – just let us get away with broad generalizations, then pile on and make fun of the government, it’s so easy. can you link us to the UK site. our source was the infallible fin times – which upon review quotes it as 25% of corp tax:
http://www.ft.com/cms/s/0/b55eb980-fe24-11dd-932e-000077b07658.html
My pleasure…
UK links: for the BBA – http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1569&a=12022
“Financial companies directly pay £12 billion in tax, their employees pay £15 billion in income tax.”
Budget report: http://www.hm-treasury.gov.uk/d/bud08_completereport.pdf
You want page 193, table C4.
(Interestingly, the BBA says that finance is 9.4% of the economy, which does rather raise the question “how come you’re only contributing 5% of the tax base then?”)
Kaiser, you know, on reconsideration, I’m with you. The U.S. Government can probably do a better job of running banks and the markets than the people now running them. Chris Dodd and Barney Frank definitely know more about how to make the economy work than, say, Warren Buffet, or some idiots who trade commodities on the CBOT for a living. What do they know about capitalism? Nothing. No, you need to be a Harvard Law grad who has never held a private sector job, if you want to really see capitalism for what it is. You have to be outside the system to see it for what it is. Right?
I suspect you’re a member of the right clubs, so I’m sure you’ll welcome the way the new leadership allocates risk and rewards.
The U.S. Government can probably do a better job of running banks and the markets than the people now running them. Chris Dodd and Barney Frank definitely know more about how to make the economy work than, say, Warren Buffet, or some idiots who trade commodities on the CBOT for a living.
Which makes exactly as much sense as saying that a truck driver knows more about how to design a suspension bridge than a civil engineer who’s never driven a truck in his life.
@ ajay
Methinks you missed the sarcasm there chief.
Nope, don’t think so. Commodity traders:Barney Frank::truck drivers:civil engineers, if that makes it easier.