Sure It’s Legal … But Is It Right? 102 comments
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Folks, I’d like to ask your indulgence.
Typically we reserve these pages for in-depth analysis of the stock market and economy. But I’ve grown FED UP with the complete lack of coverage that one area of the current crisis has received.
Ever since the Financial system started imploding in July 2007, I’ve heard countless folks talk about liquidity, bull markets, bear markets, the dollar, bailouts, etc. But there’s one thing I’ve heard virtually NO ONE talk about. That is:
MORALITY or ETHICS.
Everyone’s analysis of this financial crisis is far too complicated. The simple facts are that it was created by complete and utter greed on the part of various regulators and financiers.
In simple terms, the banks (investment and otherwise) lobbied Congress, the SEC, and other regulators to let them engage in business practices that were neither sensible nor responsible (excess leverage, financial wizardry that turned junk subprime assets into “AAA” rated entities, and more). They did this under the pretence that these practices would be good for the market and US economy as a whole.
The reality is that these practices allowed the banks to make ENORMOUS profits: between 1970 and 2003, financial stocks’ earnings as a percentage of the S&P 500’s total earnings rose from less than 10% to 31%. Put another way, by 2003, financials accounted for nearly 1/3 of ALL profits made by publicly traded companies.
Now, THE largest expense for any financial company is SALARIES. So when banks and financial companies lobbied to have their leverage limits increased (or any number of other changes that were made in the ‘90s and ‘00s), they did it for one reason: to collect HUGE payouts.
These folks were driven by greed and nothing more. They didn’t want more people to own homes. They didn’t care if folks lost money buying the AAA rated garbage they pawned off on pension funds and the like. They didn’t care if their OWN balance sheets were cesspools of crap loans no one would ever pay back. Heck, they weren’t even looking after their shareholders (leverage of 50-to-1 makes it extremely likely you’ll end up wiping out ALL equity sooner rather than later).
No, they wanted one thing and one thing only: to make as much money as they possible could.
And boy, did they.
In 2007, the average Goldman Sachs (GS) pay was $661,000. For Morgan Stanley (MS) it was $340,000. Again, these guys were after one thing: BIG PAYOUTS.
So now we fast forward to the financial crisis.
Ever since this Crisis began, the guys behind the bailouts and other “solutions” have used the law or legal precedent to justify their actions. Bernanke, for example, has cited all kinds of laws that give him the right to throw tax-payer money around, monetize debt, and all the other financial hocus pocus he’s engaged in. Same goes for Hank Paulson (who somehow managed to convince the government that he was an impartial figure despite making $500 million+ at Goldman Sachs).
But no one has EVER used the phrases “this was the right thing to do” or “this was a good, moral action.”
Perhaps I’m a naïve fool who belongs in a Disney movie or a Charles Dickens novel (where good and bad distinctions are always clear), but I don’t see the ethics or “moral right” of any of the stuff going on in our financial system today.
I don’t see how it’s “right” for the US central bank to destroy our currency so that Goldman Sachs can pay itself 2007-level bonuses again.
I don’t see how the same folks who created this mess (Hank Paulson, Bernanke, et al) should be allowed to try and fix it.
I don’t see how it’s “morally correct” to funnel taxpayer money to Wall Street BUT not to small businesses and the like (if we’re going to bail people out or help them, why not focus on the 17 million small businesses instead of the 10 biggest banks?)
I don’t see how it’s “ethical” to allow Goldman Sachs and other High Frequency Trading Program operators to “front-run” me and everyone else who participates in the financial markets (Goldman’s traders only lost money two days last quarter… that is statistically impossible unless you’re cheating).
Bottom line: I don’t see ANY actions that are truly aimed at helping MOST of us (the RIGHT thing to do). All I see are huge sums of money (my, yours, our children’s and our grandchildrens’) being thrown at guys who:
1) Made a ton of money pursuing reckless business practices, screwed up, and should go broke or be fired
2) Have shown ZERO responsibility for the actions they pursued that caused this Crisis
3) Have yet to offer any real solutions (or changes to their business practices) to help SOLVE the Crisis
Basically, we have a very small minority of Americans who believe they deserve a FREE LUNCH. These folks are Wall Street and the banks (the alleged pillars of capitalism).
The irony here is that the basic tenet of capitalism (and MORALITY) is responsibility for one’s actions. If you pursue reckless business practices in the name of greed and those practices turn against you, you SHOULD GO BROKE. You don’t get to keep everything, keep calling the shots, AND get other peoples’ money as a reward for your mistakes.
Never mind the legality of this issue… it’s simply NOT RIGHT. End of story.
Let’s put this whole issue into perspective. Imagine two salesmen working at the same firm: Bob and Frank. Bob lies to his clients, embezzles money, and generally engages in business practices that could damage his firm. Frank, on the other hand, never lies, doesn’t cheat his clients, and always watches out for the firm’s best interests.
Now, what sane business owner would give Frank's salary and commissions to Bob?
NO ONE.
And yet, this is exactly the “solution” Ben Bernanke and others have been pursuing in dealing with this Crisis. They are giving OUR money to people who created a MESS. Again, forget about whether or not this is legal. It’s not right. Never has been. Never will be.
And I don’t think I’m totally misguided here.
The ENTIRE financial system runs on trust (credit and debt are issued based on your trust you will be paid back). If you want to fix the financial system, you need to restore trust.
Ben Bernanke is working overtime to make the banks trust each other again… but he’s sacrificing an even more important “trust” relationship to do this. That is the trust Americans have for Wall Street/ the banks/ regulators/ etc.
It may get Ben Bernanke re-elected… but it’s going to destroy Americans’ retirement, incomes, and prosperity.
And that simply is not right.
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This article has 102 comments:
Sure, it's not right to have such unfairness and inequality go on unchecked in the country. But those who can stop it have no interest in stopping it. And those who want to stop have no power to stop it.
This is government corruption US style. And government corruption is very difficult to root out in any country, whether this country is democratic or not.
The fundamental common denominator in each of these problems is immorality. Creating money out of thin air is counterfeiting and theft, no matter who does it. Bonds that can never be paid are promises that cannot be kept, and are dishonest. Lying to the people for self-glorification, and to divert attention away from actions that were negligent and destructive is immoral. A government that robs from the poor and gives to the rich is corrupt. A government that casually throws its workers to the wolves while catering to the wealthy is morally lost. And a Congress that decides, in direct rejection of the United States Constitution, that there will be two classes of citizens in America, the commoners and the elite, the serfs and the nobles, is derelict in its duty and a disgrace to its high office.
There is accumulating evidence that the Washington – Wall Street moral hazard experiment has gone disastrously wrong, and that just like any other accidental discharge of a deadly virus, the moral hazard virus is now loose and swiftly propagating throughout society. By so blatantly colluding with Wall Street, Washington has lost all moral authority, and the people now have only one place to turn: themselves. An ethic of, “If they can do it, so can I,” is spreading, as people realize that fabric of American society has been shredded and replaced by a free-for-all mentality whereby everyone must fend for oneself in order to survive.
Homeowners evicted by foreclosure trash their homes in rage on the way out the door, with an estimated 50% of such dwellings damaged. Looters and squatters destroy many of the rest, stealing copper pipes, wiring, granite counter tops and anything else of value. Dozens of Internet sites such as “youwalkaway.com” provide calculators to help homeowners decide whether or not to “strategically” default on their mortgages. Shoplifting costs retail businesses $35+ million per day, as 27 million shoplifters go on the hunt. Drug addicts who have become shoplifters say that the activity is equally as addicting as drugs, leading to a continuing cycle of theft. [3] Insurance fraud is a systemic financial risk, with 25% of fires caused by arson or suspected arson, making this the greatest cause of property damage in the United States. Even before this financial crisis, which has bankrupted millions, 10% of respondents said it was acceptable to submit a false insurance claims. [4] Medicare fraud exceeds $60 billion per year. Phony automobile and other bodily injury claims cost billions annually, and are difficult to control since it is impossible for a court to tell someone they are not in pain. [5] Each day, 175,000 phony checks are presented as payment. The cost of check fraud is estimated to exceed $50 billion annually. And on and on it goes.
It seems like a terrible way for the public to get even with gov't and Wall Street and it will destroy us all in the end, but how do you stop such moral decay?
It is troubling nowadays that our great leader keeps saying he doesn't care about ideology (can sometimes be translated to principles or morals) as long as it works. Very much like China's Deng XiaoPing's "Black cat or white cat, as long as it catches the mice, it is a good cat". The end justifies the means. Now, isn't this a bit like Bush administration eavesdropping on citizens or torturing prisoners in the name of national security? These are Machiavellian times.
Republican or Democrat, politicians are all the same. Don't expect anything moral from them.
The U.S Government needs to run full tilt to line the pockets of GS and others who will shill the markets up in the face of horrible economic data (remember this is the time of year when things were supposed to really turn around for our economy).
Ethics in business? Do they even cover it in today's MBA programs?
Economic collapse is the gun that bankers place to the head of government entities - and the government gives in every time (especially in the too big to fail categories).
Plus, it wouldn't have to do anything with special interest groups, re-election contributions or anything like that............
What good is life if you can't upgrade to interior teak wood on your second yacht anyway?
One of the great lines I see too often in earnings calls/transcripts is "our profits were lower because currency worked against us" but I have never heard anyone say the opposite-"our prifits were good because the currency exchange rates were favorable"
Although it is good in that disparate areas of the country and more accurately represented the inability for a party to force its constituent members to vote around a party policy is problematic.
This is why the lobby system is both so outrageously huge as well as disproportionately powerful - lobbyists can target members of the houses and encourage them not to follow the presidents policy.
So any and all legislation handed down gets diluted and watered down and weakened so it's not what is was meant to be when it was conceived.
Sure certain folks may have the political will to promote change, but good luck getting meaningful legislation through both houses even when your "party" controls both. Money talks and lobbyists have lots of it.
We need a very radical change in the governing principles of this country. We need to go back to the beginning and reapply the principles that our founding fathers put in place and allow them to be our guide to the future. That will not happen with the current two-party system.
I encourage you to take a look at a web site that offers an alternative: goooh.com
The more I think about what is advocated by that site; the more I read articles and comments with the same string of views that our government and the banks are corrupt; the more I start to believe that goooh.com may offer a viable answer for starting over with a moral justification and accountability.
What you need is an MBA who can withstand the lure of easy money, not better ethics teachers.
> Ethics in business? Do they even cover it in today's MBA programs?
seekingalpha.com/artic...
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I do wish I could change it, but it is a problem so great I have yet to have any great ideas as to how.
Thanks for this, I for one think this is THE discussion we need to be having. If we continue to defer recognition of this grave moral deficiency, we will fail to approach the tangible issues of corruption, systemic economic imbalances, and a host of other issues. A great "act of contrition" is probably what is required, but when you look at the politicians we continue to choose there is scant evidence that we are even in the early stages of recognition, let alone action. Your brief post is a notable exception, and IMO one should not be shy about calling something what it really is, even here on SA.
Thanks again.
1. The bank bailout was not evidence of moral hazard so much as the demonstration that moral hazard and financial immorality has won the war. Everything that has happened since then is justifiable proof that is so.
2. The financial sector is at the apex of the pyramid but you must add in all the other massive corporate sectors that helped make this happen not the least of which is the mainstream media and its culture. Then you have all the lobbyists who at this point really run the show in Washington DC.
From my point of view the fat lady has sung and we are on the verge of beginning to see just what the consequences of all this are.
That would put their moral hazard into perspective. Heads you win, tails you die...
It's OK to speculate with your own money, but not with someone else's.
There will always be corrupt souls taking advantage of the naive but it cannot be condoned and encouraged by our leaders. Now that things have calmed in the financial arena our leaders should line up all the villians for a show just like Madoff. Otherwise how many of us peons will decide that we are fools for paying taxes to a morally bankrupt government and spend our careers working out ways to not support America.
So long as times were good and accounts were flush, we were silent. Now it's all gone to the dogs, and some of us would round up the scoundrels and "put a cap in them" gangster style. No, my friends, we all got here together. Revenge is a satisfaction that wears off quickly. No use for that. We have A LOT of work to do from here to make things right again. WE do. You and I and all the rest of us.
We now have Darwinian fascism!
so we get two sets of slime together that shape our future financial system that the only thing they are worried about it if they can get away with it , not if its wrong .
putting the fox , i mean paulson the sec treasurer fed was a good idea , he was gonna fill his pockets and his buddies ....
from wiki biography :
In 2004, at the request of the major Wall Street investment houses—including Goldman Sachs, then headed by Paulson—the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure.
so i create the monster , now i 'm gonna save you from it ?
what a joke , he's a crook
line em all up if their corrupt and send them a surprise , bet the line would get short really fast
what did madoff get , a life of luxury and a free retirement ?
he plead guilty so he didn't have to reveal his co horts ,
what were they gonna do , give him 300years if he didn't plead ?
why didn't they make him pay for his jail , the price is the same as what he ripped off his investors each year cant afford it , ohh well
why should the little guy pay for this pos to be in jail?
crime didn't pay for him did it ?
1) Made a ton of money pursuing reckless business practices, screwed up, and should go broke or be fired
2) Have shown ZERO responsibility for the actions they pursued that caused this Crisis
3) Have yet to offer any real solutions (or changes to their business practices) to help SOLVE the Crisis
______________________...
My understanding of our “system” is that of a triangle with each point represented by 1.Government 2.The Marketplace / Business and 3. Church / School / Educational Institutions. Each institution should rely on the others to provide the essential ingredients for the overall health, safety and growth we desire. To the degree one of these entities overtakes another, the system breaks down as we are witnessing today. Government has co-opted education and business. Business has assumed the role of government in “wielding the sword” by threatening financial Armageddon as witnessed last October 18th. And the Church has rolled over like Indians on a reservation, fearful to speak out and venture off the reservation by allowing the education of our children to be assumed by government and reinforced by a business controlled media.
Your bottom line items may be correct but the culprits are the combined government / business forces that have run roughshod over the educational, spiritual and moral development of our children.
www.rollingstone.com/p...
Happy Capitalism???????
Unfortunately you can't legislate morality or ethics and for every regulation passed there will be a team of experts figuring out how to get around the latest road block on their road to riches.
Where is the "Whig" party (Centrists) when you need them I ask you Mr. Summers? Where indeed?
As it is now, index funds and other mutual funds control the majority of shareholder votes. Index funds don't care and mutual funds are dependant upon Corporate 401k's deposits that are directed by the very crooks that have exploited the existing system. These funds aren't about to take activist positions and anger Corporate management.
On Sep 03 08:37 AM Mike from NYC wrote:
>
> Unfortunately you can't legislate morality or ethics
There's your answer
The BabyKissers are bribed by re-election contributions right in front of our eyes. We need term limits or to defeat every incumbent at every election.
But take heart, you lovers of justice, this thing cant go away until it plays out fully and it wont play out fully for a decade yet as we all know. The articles and book about the 80 year moral cycle was enlightening and spot on. Yet here I am, watching the market by the day, wondering GREEDILY when to pull the last chunk of my own profits out of the market.
I have thought of Ron Paul lately. He never did stand a chance did he. Yet I never heard him utter a word that I didnt love to hear. perhaps next time.
The American voter certainly does have a choice! They could insist that Congress establish publicly financed elections with jail for any politician accepting gifts or benefits of any type. The federally licensed networks would be required to donate a specified amount of time for all registered candidates and political parties with the registration requirements being sufficiently liberal to permit the emergence of several new parties that currently cannot hope to raise the $60B required for a national election. This would eliminate lobbyists, and, with additional parties, would do away with majority party line voting, and probably create legislative coalitions varying from item to item.
I have a more detailed outline for this approach to taxpayers regaining some control over the legislative process that was posted on another blog that I will publish here if there is any interest.
On Sep 02 12:40 PM Nick36 wrote:
> The thing about American voters is that they don't really have any
> choice in this matter. The Fed isn't officially responsible to anyone.
> And the US government is controlled by two political parties both
> of which are in the pockets of Wall Street companies and executives,
> who finance the election campaigns of politicians.
>
> Sure, it's not right to have such unfairness and inequality go on
> unchecked in the country. But those who can stop it have no interest
> in stopping it. And those who want to stop have no power to stop
> it.
>
> This is government corruption US style. And government corruption
> is very difficult to root out in any country, whether this country
> is democratic or not.
The backlash is coming out as protests to any type of new healthcare planning, but what the people are really doing is venting their frustrations from the economic blow out on the health care discussion.
Deregulation is not the answer whenever greed can come into play. We have seen the results on Wall Street. It's not going to get better for a long time. Right now, we are riding a small bubble, but the new foreclosure starts indicate another huge wave on its way, and these are not the result of the sub-prime, but the prime. Most likely, the 27-3 baloons that are coming due in the prime markets.
We have a long wait before it gets better. All we can do is hope to get a true "moral" majority.
The politicians have benefited too. Name one other industry where a $167,000 a year salary equates to MILLIONS in increased wealth. And all the "old guard" politicians (both sides of the aisle) are multimillionaires.
Things that make you go, "hmmmmmm."
To think those that directly benefit from campaign contributions, lobbying and corrupt business dealings (Congress) will grow enough balls to fix this is insanity at its finest.
On Sep 02 12:40 PM Schweizer wrote:
> Wall Street still has the goverment by the balls. Pay me what I
> want or I push the systemic collapse button.
grumpy capi - - yes, RON PAUL, the only decent guy in D.C., but
how did the voters react? They had a shot but were far too ignorant
to vote in their own self interest.
So we have greedy bastards on Wall St aided and abetted by ignorant voters. That's the recipe for this stew.
Sure it will.
The government collected LESS taxes with higher rates.
And what will keep these companies from leaving to Ireland or Dubai? They will leave and the US government will get nothing.
100% of nothing is NOTHING. Every single time.
Taxes do not create positive outcomes for the working man. Our salaries continue to shrink and higher taxes will make everything cost more. Great plan.
On Sep 03 09:44 AM OnW wrote:
> The solution is so simple. Recapture the egregious compensation
> with a truly progressive income tax going all the way up to a top
> bracket taxed at 90%. There will still be plenty of incentives for
> the powers and prestige that accompanies high executive positions.
> Let's remember the good ol' pre-Reagan days when top brackets were
> 70-90%. Today we have a new aristocracy with billions accumulated
> from the post-Reagan greed years. Never have we seen such a spread
> between the haves and havenots.
1) let's mandate public financing of elections,
2) and then give members of Congress and the prez a 10x pay raise,
to end permanently the influence of big banks, big pharma, big oil, big defense, etc. on "our" elected officials.
I have said for over a year, when the executives at these banks start "retiring" we better yank all our money, convert it into necessities and hold on.
We ain't seen nothing yet and the insiders KNOW what is coming.
Hope their security systems will still operate, because that will be their only hope of surviving a starving, ill, mob.
On Sep 03 01:16 AM Mike Kane wrote:
> According to Bloomberg this week, banks are now just as levered as
> 2007. Have they not learned their lesson? Or do they just not care
> anymore? I think its the latter
The majority of Americans do not understand "hard work" which is why our politicians are creating class warfare while lining their vaults with the money from the "rich" and "evil."
Sheep buy it because they are incapable of seeing reality through the propaganda.
On Sep 02 08:37 PM The Simple Accountant wrote:
> Well said, Mr. Summers. A good dose of moral outrage is a welcome
> antidote to much of what passes for analysis of the crisis. In London,
> Lord Turner has raised the question, to the applause of many and
> the ridicule of others. But what about the targets of our outrage?
> "They" are us. Quite simply, they are. Our politicians, our bankers,
> our corporate managers, our doctors, the whole thieving lot of them.
> They are us. An old, now retired vice president in my employer firm
> often would say in meetings, "silence is consent" (albeit in a very
> different context).
>
> So long as times were good and accounts were flush, we were silent.
> Now it's all gone to the dogs, and some of us would round up the
> scoundrels and "put a cap in them" gangster style. No, my friends,
> we all got here together. Revenge is a satisfaction that wears off
> quickly. No use for that. We have A LOT of work to do from here to
> make things right again. WE do. You and I and all the rest of us.
No amount of accounting tricks or stimulus or economic pulley and winch efforts will restore the loss of trust.
I have NO TRUST in banks, insurance companies, or my government.
NO TRUST.
As a kid, it was (literally) beat into me that I'm responsible for my own actions. Yet, in today's society, we have a multitude of examples where individuals "aren't responsible" for their own behaviour. Drop hot coffee in your lap when driving? It was McDonalds' fault because the coffee was hot. Fall off the top rung of the ladder? It was the manufacturers fault for not preventing you from climbing that high. Inadvertantly kill your neighbor? It's not your fault, it was the Twinkies. Drive your firm into bankruptcy? It's not your fault, the currency moved against us. Unfortunately, it is very difficult as a parent to counteract this societal movement to void any sense of personal responsibility. (Although, as a parent, I continually fight the good fight.)
The true moral hazard sits in the fact that there is NO sense of personal responsibility throughout our society. This concept of capitalism on the way up and socialism on the way down is simply the corporate version of a lack of personal responsibility. The legal and societal ability to shift the responsibility for a given action to a third party has become the standard. I'm not sure how we fix the situation, but I do know that it can start at home and with ourselves.
We can change our elected officials and we can change our CEOs, but we won't be able to change the way in which these individuals act unless our society makes a 180 and people actually accept responsiblity for their own actions. As Mom always said "The right thing to do is usually the hard thing to do."
I don't know if these problems can be fixed. The Democrats (the biggest culprits) won't fix it. And when Republicans were in, they bellied up to the troughs as well. Probably the biggest culprit is the Media that vilifies anyone who could really help, because they want Socialism.
"It does not take a majority to prevail but rather an irate tireless minority keen on setting brushfires of freedom in the minds of men" Samuel Adams commenting about the Boston tea party.
On Sep 02 03:36 PM Pat C wrote:
> Mark, I am with you. I keep coming back to the same place. It should
> take only 1 or at most 2 election cycles. 31/2 years of putting
> our differences aside is nothing compared to taking our country back.
"It's morally wrong to allow suckers to keep their money."
Canada Bill Jones's Motto.
I had this motto it made into two signs. One hangs behind and above my head when I sit at my desk, where it can easily be seen by those sitting opposite my desk, and the other hangs on the opposite wall where it can easily be seen, by me, from my desk. I figure that they have saved me $,$$$'s of trouble and grief.
The robber barons of an earlier century did the same thing. The Kennedy family made their wealth running rum during Prohibition. The Bushes and others in Carlyle made their wealth selling war materiel to the Nazis during WW II.
Take off the rose colored glasses, Pollyana. There are no ethics in business, though there are SOME ethical individuals in business.
We end up getting garbage out of Washington since they only have 2 agendas (jackass or dumbo) for input. No real thinking outside of the box is allowed. Follow the party line or you get no money or support for reelection.
Public financing of elections could go a long way to solving some of this problem but term limits would go farther along with a whole list of issues. I see problems with public finance because how many 1000's would run if all you needed was X number of signatures to get that public money. It could be chaos and very costly for the public money purse.
Mark said it, I have too, a solution is developing. goooh.com
"If ever a time should come, when vain and aspiring men shall possess the highest seats in Government, our country will stand in need of its experienced patriots to prevent its ruin." Founding father, Samuel Adams
Time to join the patriots, GET OFF THE COUCH AND DO SOMETHING!!!!
On Sep 03 09:53 AM thkalinke wrote:
> How's this for a solution to our crappy government:
>
> 1) let's mandate public financing of elections,
> 2) and then give members of Congress and the prez a 10x pay raise,
>
>
> to end permanently the influence of big banks, big pharma, big oil,
> big defense, etc. on "our" elected officials.
On Sep 03 09:50 AM TeresaE wrote:
> Yes, because giving more taxes to the corrupt government will fix
> it.
>
> Sure it will.
>
> The government collected LESS taxes with higher rates.
>
> And what will keep these companies from leaving to Ireland or Dubai?
> They will leave and the US government will get nothing.
>
> 100% of nothing is NOTHING. Every single time.
>
> Taxes do not create positive outcomes for the working man. Our salaries
> continue to shrink and higher taxes will make everything cost more.
> Great plan.
Moral hazard is a term that has lately been applied only to the least powerful and the poorest, ginning up outrage against the "welfare queens" who steal pennies while letting the rich and powerful gather billions and send it offshore. Socialism only seems to be evil when it protects the least powerful; it's fine and dandy when it hedges the risk of billionaires. Shoplift a pair of jeans and get thrown in jail; loot the taxpayers of billions and get richly rewarded.
These preverse Reagan-era incentives have caused an upward concentration of wealth, which has reached a level that is tearing this country apart. The working poor are becoming destitute and the middle class are becoming the working poor. And the ones in power blame the victims, with a dollop of racism and social conservative outrage thrown in, sufficient to make the true victims vote for more of the same.
We need to restore progressive taxation; we need to treat hedge fund inclome like salaries, we need to restore the banking regulations that prevented this crap, and we need to apply a small fee to all short-duration stock transactions.
Incentives got us where we are; they can get us back to where we should be.
On Sep 03 09:44 AM OnW wrote:
> The solution is so simple. Recapture the egregious compensation
> with a truly progressive income tax going all the way up to a top
> bracket taxed at 90%. There will still be plenty of incentives for
> the powers and prestige that accompanies high executive positions.
> Let's remember the good ol' pre-Reagan days when top brackets were
> 70-90%. Today we have a new aristocracy with billions accumulated
> from the post-Reagan greed years. Never have we seen such a spread
> between the haves and havenots.
You live in the USA, you don't even know the buggers who sold you out.
No job, can't buy or sell a home, health care unaffordable, rising prices and income declining....get the picture?
It will only get worse until the sheeple are totally fleeced. Then they'll be ready for action.
Amen to this. As a CPA I am forced to take bienniel ethics classes that only a lawyer could love for all the inane rules that say everything but, do the right thing. Ethics cannot be legislated, they must come from within but first they must be put there by parents, teachers, friends you choose, groups you affiliate with and, most importantly in business, the management.
I did IRS corporate audits for many years and encountered both ethical and unethical CEOs. The CEO sets the tone for the company. This is not to say that ethical CEO's bent over backwards to pay proposed tax assessments but their tax departments treated us respectfully and their responses were thoughtful. Being Silicon Valley their compensation was generous (all CEO's have egos) but so was that of their employees down the line and rank and file shareholders truly "shared" in their wealth. Comps were generous but not flagrant.
I read proxy statements faithfully, vote "no" if the compensation package does not include all employees and sell the stock when the CEO and Bd of Directors get overly generous with themselves. I vote with my shares
> Indeed. That’s why guillotines are poised to make a major comeback!
On Sep 03 08:37 AM Mike from NYC wrote:
> Unfortunately, you can't legislate morality or ethics.
_________________________
I’m not sure where this particular saying had its origin but nothing could be further from the truth. Legislation is our attempt at defining morality and / or ethics. To the degree an individual’s conduct deviates from the “law” or government sanctioned prohibition, the sword or as 357705 mentions, guillotines, are employed to provide equilibrium, or “justice”. Problems arise when those that create prohibitions for others exempt themselves from these same mandates. The US most of us remember and long for makes no distinction between classes, whether elected or free.
On Sep 03 11:29 AM Buckoux wrote:
> Anyone who does not comprehend the difference between rate and amount
> and who wants to use the tax code to punish those who have more than
> he thinks they should have, or are doing something they think they
> should not do, should be disenfranchised. If an action is wrong,
> make it illegal by law, not taxation.
And many retirees, mutual funds, and city governments who bought these bonds with assurances of quality from Goldman were badly hurt.
Goldman Sachs also was a large purchaser of credit default swaps (CDSs) or insurance bets on these same mortgage bonds, many from AIG. Representatives from Goldman placed pressure on Hank Paulson for government bailout funds for AIG. And where did billions of those bailout funds go? To pay off Goldman!
And we the taxpayers are picking up the tab.
Goldman Sachs developed computer algorithms for high frequency trading. As such, they insert themselves in rising or falling stocks, buying and selling with lightening speed and making huge profits.
As a result, the individual investor buys these stocks at higher prices and sells them at lower prices.
Goldman Sachs is profiting from the financial crisis recovery by taking the same huge risks with a bonus-driven culture.
And they have covered this risk by changing their designation from an investment bank to a bank holding company, which enables them to get FDIC protection and almost free Fed money.
So, please tell me how Goldman Sachs’ business model benefits our society? What do they do that is valuable to other people? Does Goldman create real products that contribute to the growth of the American economy? Or does Goldman merely create financial gimmicks to make money for Goldman, leaving the crumbs for the rest of us, and subjecting individual investors to a stock market with a casino mentality?
If the government had wanted to increase credit and NOT to reward the thieves, they would have created a temporary government bank and lend the people money directly, without the banks as a middle man. Instead the federal reserve lends the banks money at 0.25% and the banks turn around and lend us money at 6% to 12%. Because banks can get money from the federal reserve at 0.25%, they pay 0.15% to our retire's savings accounts. Therefore money goes to the bankers rich pockets from the average american.
I do not see the democrats scream foul. Why?
This crisis was created by "too big to fail thieves" and we have "punished" them by making them bigger and encouraging them to steal more money.
FDR's chickens have come home to roost.
Ashes to ashes, socialist to socialist.
Burton A. Johnson
valueinvesting.com
On Sep 03 12:46 PM OnW wrote:
> Taxes are needed to support a society ---to support the public good,
> safety, welfare, etc. Taxes exist in every form, on all kinds of
> purchases and incomes. The question is: What is a FAIR tax? It
> should not be regressive. It MUST be progressive. Those with the
> highest incomes and ownerships can afford higher tax rates and should
> be required to pay higher rates to protect their greater positions
> and further their greater ownerships. Let's not turn the clock back
> to preFrench Revolutionary disparities. Now you want to disenfranchise...perhaps
> bring back the guillitine?
On Sep 03 09:44 AM OnW wrote:
> Today we have a new aristocracy with billions accumulated
> from the post-Reagan greed years. Never have we seen such a spread
> between the haves and have-nots.
A majority from minority interests, Hells Angels teaming up with Chess clubs saying "No more counterfeiting my dollars by QE"
On Sep 02 01:14 PM market ace wrote:
>
>
> The fundamental common denominator in each of these problems is immorality.
> Creating money out of thin air is counterfeiting and theft, no matter
> who does it. Bonds that can never be paid are promises that cannot
> be kept, and are dishonest. Lying to the people for self-glorification,
> and to divert attention away from actions that were negligent and
> destructive is immoral. A government that robs from the poor and
> gives to the rich is corrupt. A government that casually throws its
> workers to the wolves while catering to the wealthy is morally lost.
> And a Congress that decides, in direct rejection of the United States
> Constitution, that there will be two classes of citizens in America,
> the commoners and the elite, the serfs and the nobles, is derelict
> in its duty and a disgrace to its high office.
>
> There is accumulating evidence that the Washington – Wall Street
> moral hazard experiment has gone disastrously wrong, and that just
> like any other accidental discharge of a deadly virus, the moral
> hazard virus is now loose and swiftly propagating throughout society.
> By so blatantly colluding with Wall Street, Washington has lost all
> moral authority, and the people now have only one place to turn:
> themselves. An ethic of, “If they can do it, so can I,” is spreading,
> as people realize that fabric of American society has been shredded
> and replaced by a free-for-all mentality whereby everyone must fend
> for oneself in order to survive.
>
> Homeowners evicted by foreclosure trash their homes in rage on the
> way out the door, with an estimated 50% of such dwellings damaged.
> Looters and squatters destroy many of the rest, stealing copper pipes,
> wiring, granite counter tops and anything else of value. Dozens of
> Internet sites such as “youwalkaway.com” provide calculators to help
> homeowners decide whether or not to “strategically” default on their
> mortgages. Shoplifting costs retail businesses $35+ million per day,
> as 27 million shoplifters go on the hunt. Drug addicts who have become
> shoplifters say that the activity is equally as addicting as drugs,
> leading to a continuing cycle of theft. [3] Insurance fraud is a
> systemic financial risk, with 25% of fires caused by arson or suspected
> arson, making this the greatest cause of property damage in the United
> States. Even before this financial crisis, which has bankrupted millions,
> 10% of respondents said it was acceptable to submit a false insurance
> claims. [4] Medicare fraud exceeds $60 billion per year. Phony automobile
> and other bodily injury claims cost billions annually, and are difficult
> to control since it is impossible for a court to tell someone they
> are not in pain. [5] Each day, 175,000 phony checks are presented
> as payment. The cost of check fraud is estimated to exceed $50 billion
> annually. And on and on it goes.
>
> It seems like a terrible way for the public to get even with gov't
> and Wall Street and it will destroy us all in the end, but how do
> you stop such moral decay?
On Sep 02 01:43 PM bottoms-up wrote:
> Ethics? Right and wrong? Remember, we are a "nation of laws" and
> the laws are made by sorry sorts like Nancy Pelosi, Chris Dodd, etc.
> - need I say anything more?
>
> The U.S Government needs to run full tilt to line the pockets of
> GS and others who will shill the markets up in the face of horrible
> economic data (remember this is the time of year when things were
> supposed to really turn around for our economy).
>
> Ethics in business? Do they even cover it in today's MBA programs?
www.opensecrets.org/
I couldn't agree with you more. Self-interest 101... fingers are ALWAYS pointed at the the other party, someone else! It's all their fault.... they are to blame... It's absolutely pathetic. A bunch of children. No one wants to admit that they have directly played a part in this mess. So as long as it remains someone else's fault- nothing will change.
On Sep 02 08:13 PM lbator wrote:
> Great dose of reality. Plenty of blame to go around. I've yet to
> see anyone at this site argue against a position, law, or regulation
> in which they are perosonally profiting from. Self-interest 101.
> If all the energy that has been utilized poitning the finger at others
> was spent making better personal, moral, and ethical choices (within
> the confines of these institutions) we all would be better off for
> for it
Anyone who traded in a clunker, took a mortgage "modification", or generally suports more government should be most concerned for their own future.
On Sep 03 08:06 PM Bad Dog wrote:
> Yeah. You should add in the 30 years of corruption of the basic idea
> of government; that it needs to exist; that it has to insist on fair
> play; that its job is to do socially necessary things that cannot
> be easily done by individuals. For the last 8 years especially, we
> have had a government hell bent on making sure government did not
> work in any reasonable way. Heckuva job, Brownie! Remember that?
> We spent $2 trillion on a war of choice!! We took a balanced budget
> and trashed it. C'mon, fess up! You thought the Bush tax cuts were
> a great idea, didn't you? If you did, the STFU, because you voted
> for the mess we are in now.
Since there are no repercussions for such outlandish and often illegal behavior, it has only gotten worse and will continue to do so.
Long live the banana republic.
On Sep 02 12:40 PM Schweizer wrote:
> Wall Street still has the goverment by the balls. Pay me what I want
> or I push the systemic collapse button.
A healthy social body has 4 major components: head (for leading the entire society); arms (for protection- the government and military/law enforcement); belly (mercantile and farmers) and the balance support the above 3 groups.
At present, unqualified men/women are in the positions of government and leadership; there are no real leaders (most people don't know what the qualifications of a real leader are, or should be) in positions of authority.
The group that makes the rules, government, has been totally corrupted by the mercantile community (bankers, lobbyist, special interest groups, etc.).
We now have a Social Body with no head, wherein the arms have been replaced by legs, where the belly is bloated
beyond belief, and the rest of the legs just don't know what to do, nor whom to serve/elect, nor where to go.
The entire process of election and governing has been suborned by financial interests.
Each is interested in self-preservation.
A sane and rational Society has a head, and the head provides direction. The head is not interested in governing, nor making money; it's sole interest is in ensuring the citizens are properly engaged and protected. They ensure the leaders are leading in a proper direction, and the leaders MUST be subordinate to such direction, or else they are removed.
But the leaders of the Social Body must be beyond suspicion themselves; they must possess certain specific qualities: peacefulness, self-control, austerity, purity, tolerance, honesty, knowledge, wisdom and religiousness.
Peacefulness because if a country/individual is not at peace, there is no question of happiness. It is a pre-requisite.
Self-control, to ensure we don't engage in excessive behavior that becomes self-defeating.
Austerity, because it develops character, appreciation, honesty, tolerance and more good qualities.
Purity, because it keeps one to the essence of life.
Tolerance, because there are always SO many things demanding our attention, pulling/pushing us in so many different directions simultaneously, that it's easy to leave the path the intelligence has directed is the best course.
Honesty, for obvious reasons.
Knowledge, meaning the difference between right action and wrong action.
Wisdom, the experiece gained from right and wrong actions.
And religiousness, because it shows the commonality between all individuals, based upon our spiritual natures.
If we are all properly engaged/employed, THAT is the beginning of real growth. If you have 1 part of the body that is greatly overgrown (the belly, or mercantile/bankers) at the expense of the rest of the body, the Social body just cannot be healthy.
As individuals, we must all strive for self-improvement; only then will there be a massive energy to insist that our 'leaders' really lead us, NOT in any groups specific interest (as is SO common now) but for the benefit of all.
This is entirely possible, and the only practical course of action out of this mess.
And believe it or not, there are literally thousands who have a sincere desire to serve and lead, with no interest in their own gain, either financial, social, or political.
On Sep 02 01:14 PM market ace wrote:
>
>
> The fundamental common denominator in each of these problems is immorality.
> Creating money out of thin air is counterfeiting and theft, no matter
> who does it. Bonds that can never be paid are promises that cannot
> be kept, and are dishonest. Lying to the people for self-glorification,
> and to divert attention away from actions that were negligent and
> destructive is immoral. A government that robs from the poor and
> gives to the rich is corrupt. A government that casually throws its
> workers to the wolves while catering to the wealthy is morally lost.
> And a Congress that decides, in direct rejection of the United States
> Constitution, that there will be two classes of citizens in America,
> the commoners and the elite, the serfs and the nobles, is derelict
> in its duty and a disgrace to its high office.
>
> There is accumulating evidence that the Washington – Wall Street
> moral hazard experiment has gone disastrously wrong, and that just
> like any other accidental discharge of a deadly virus, the moral
> hazard virus is now loose and swiftly propagating throughout society.
> By so blatantly colluding with Wall Street, Washington has lost all
> moral authority, and the people now have only one place to turn:
> themselves. An ethic of, “If they can do it, so can I,” is spreading,
> as people realize that fabric of American society has been shredded
> and replaced by a free-for-all mentality whereby everyone must fend
> for oneself in order to survive.
>
> Homeowners evicted by foreclosure trash their homes in rage on the
> way out the door, with an estimated 50% of such dwellings damaged.
> Looters and squatters destroy many of the rest, stealing copper pipes,
> wiring, granite counter tops and anything else of value. Dozens of
> Internet sites such as “youwalkaway.com” provide calculators to help
> homeowners decide whether or not to “strategically” default on their
> mortgages. Shoplifting costs retail businesses $35+ million per day,
> as 27 million shoplifters go on the hunt. Drug addicts who have become
> shoplifters say that the activity is equally as addicting as drugs,
> leading to a continuing cycle of theft. [3] Insurance fraud is a
> systemic financial risk, with 25% of fires caused by arson or suspected
> arson, making this the greatest cause of property damage in the United
> States. Even before this financial crisis, which has bankrupted millions,
> 10% of respondents said it was acceptable to submit a false insurance
> claims. [4] Medicare fraud exceeds $60 billion per year. Phony automobile
> and other bodily injury claims cost billions annually, and are difficult
> to control since it is impossible for a court to tell someone they
> are not in pain. [5] Each day, 175,000 phony checks are presented
> as payment. The cost of check fraud is estimated to exceed $50 billion
> annually. And on and on it goes.
>
> It seems like a terrible way for the public to get even with gov't
> and Wall Street and it will destroy us all in the end, but how do
> you stop such moral decay?
As organized religion is rapidly giving way to the hedonistic religions of "me first" and then ultimately "only me", something has to replace the practical business, personal and social effects of religious faith in people in order for humans to again treat each other with a greater-than-oneself, every-minute-of-the-day, conscious belief in the greater overall good of personal respect for and beneficial treatment of others, just as we would want ourselves to be treated.
Can it ever happen at this late date? Without it, it's just a matter of time until it's all over.
Because from Tokyo with no more credit coming to the Los Angeles welfare state, welfare to work will not be so mandatory. There isn't any more free dole coming.
If they are "too big to fail", the Feds should use anti-trust law to prevent banks, investment banks, and insurance firms from getting so big that their failure can take down the entire economy.
Break up the existing firms like they did AT&T. For example, B of A could be split into 4 regional banks, etc., etc.
Any economic advantages to "bigness" is over ridden by the dangers inherent in too big to fail.
By the way, (liberal) 60 minutes recently stated that it was the Clinton administration with support from Greenspan which passed laws to stop state regulation (of "bucket shops" since the depression) which had been previously used to stop instruments like "credit default swaps." Much of the financial meltdown came from that act of de-regulation.
However, I always thought that the investment banks should have been prosecuted for selling insurance contracts (credit default swaps) without legally required insurance reserves, not to mention insurance licenses, and all the insurance disclosures that are required.
On Sep 02 01:43 PM bottoms-up wrote:
> Ethics? Right and wrong? Remember, we are a "nation of laws" and
> the laws are made by sorry sorts like Nancy Pelosi, Chris Dodd, etc.
> - need I say anything more?
>
> The U.S Government needs to run full tilt to line the pockets of
> GS and others who will shill the markets up in the face of horrible
> economic data (remember this is the time of year when things were
> supposed to really turn around for our economy).
>
> Ethics in business? Do they even cover it in today's MBA programs?
"Sure it's capitalistic to get huge salaries - - - But is it right?"
"Sure it's a nice to live freely - - - But is it right to do whatever one wants?"
"Sure it's American to be proud of America - - - But is it right to demonize others?"
"Sure it's good to consume for the econoomy - - - But is it right to consumer more and more?
The capitalistic system has run into problems, most apparently due to some faults in the reward system. Based on many facts, let's put "right" regulations on compensations, such as including community, national, and global interests into the salary compensation determinations, including a cap or very high tax rates on very high salaries, versus lower rates for private business incomes, personal savings and personal investment incomes.