Cramer's Stop Trading! Galleon Is Just the Beginning (10/21/09)

Stocks discussed on Jim Cramer's Stop Trading! TV Segment, Wednesday October 21.

Citigroup (C), Bank of America (BAC), AIG (AIG)

Executives of firms that received the most government money could see their compensation reduced by as much as 50%. Cramer applauded the move, since the taxpayers are, in effect, paying these executives' salaries. This reform will affect Citigroup (C), Bank of America (BAC), AIG (AIG), General Motors and Chrysler. Cramer hopes this reform goads the companies into raising more capital so they can become more independent of the government.

Cramer thinks the investigation of Galleon Management is just the beginning, and there will be many more names and companies associated with Galleon's wrongdoings.

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Comments

[Ranjan:]

Shouldn't the inspired management of these Financial Institution consider a Special Bonus Dividend to the US Tax Payer? After all they wouldn;t be around had it not been for the bailout.

Oct 22 08:19 AM

[Ranjan:]

If Investment Banks are reporting huge profits, shouldn't someone be asking who are their clients and what are their lines of business that can support such hefty fees?

Oct 22 08:21 AM

[ECONOMICS 101:]

Brian Semkiw believes that shareholders should be the winners at the end, not the managements.
"Management should be compensated and well, but not at expense of shareholders" says Brian Semkiw.

Oct 22 09:55 AM

[Ginzel:]

TARP is saying that compensation will be cut among the upper people at certain banks, while others are speculating that these top people will just move to another institution to avoid those compensation cuts. The government should mandate the compensation of the individual, not just for the individual at a specific institution. If these same upper people were driving a car when it was involved in collision with a group of pedestrians, (which, in essence, is what happened) with the government repairing the car and burying the dead, it would be unusual for the enforcement body to say "you can't drive this car fast any more; but, should you get a different car, you can drive just as fast as you want. We think you should be well rewarded for destroying as many lives as possible, you just can't do it in the same car twice."

Oct 22 10:45 AM

[bobl4910:]

Is there any doubt that these employees will just leave and go to where their "talent" can get a better compensation package? Is there any doubt that these companies will now have difficulty attracting enough talented people to get their businesses back on the right track. Is there any doubt that this policy disincents anyone that remains at the company from taking any type of measured risk in innovating for better company results. Is there any doubt that this single policy immediately reduces the opportunity for the American people to maximize the return on its "investment" in these companies? Is there any doubt that this policy sounds good as a 30-second sound bite on television that appeals to people's base emotions as opposed to good economic or management theory?

Oct 22 11:04 AM

[jackooo:]

bobl4910:
Bobl, What talent are you talking about? They are why we are in this mess, no?
As far as going somewhere else the gov. has shut down 100 smaller banks. That means there are many executives looking for a job which means reduced salaries.=, no?

Oct 22 11:51 AM

[bobl4910:]

Jackoo - it is easy to bash the people here, but someone has to manage these companies going forward. Let's assume for example that all of the people that caused the Citi mess were fired tomorrow. Citi would have to find someone to come run the company - and their ability to find decent folks to run the company will clearly be impeded by the government intervention on salaries. Concur with your assessment that less banks mean less jobs means less demand for banker types means lower salaries. The market will absolutely take care of that - but there is no need for the government to establish the wage scale (like a union does). The "A" players always have somewhere else to go regardless of the state of the market. This only gurantees that the C and D players are the ones that will stay behnd (or sign up) to run Citi, BofA, etc. - Good Luck with that.....except for the fact that as tax payers we all now have a stake in the outcome.

Oct 22 12:03 PM

[whiplash:]

I'm tired of been on the end of the whip. Let's take their salaries and then let's impose a windfall tax on the ones that think they've escaped any penalty - best examples are Goldman Sachs and JP Morgan. They owe the American tax payer more than just the refund of TARP. All the top financial institutions created this bubble by completely sweeping aside any common sense or restraint. While all the people who were playing be the rules are left with the sting. Enough.

Oct 22 12:48 PM

[waiting:]

This is one reason why regulation is so important. If proper regulations had been in place, these "talented" people would not have been allowed to do these things. Not that they couldn't have done some of it, just not the huge amounts that caused the institutions to fail (without the bailout).

Anytime a co. is allowed to have liabilities or potential liabilities that are greatly in access of assets, this is going to happen sooner or later in spite of what Greenspan or his other cronies say (said).

If we have proper regulation, these 'talented' people won't be so talented because they will be limited in the risk they can take. And proper regulation, which Obama is holding back on, is probably the only thing that can stop this. Heck, I could have done what they did!!!! (If only someone would have let me.)

Oct 22 01:07 PM

[dpk:]

If there is a Bonus as incentive,then probably,there should be penalty too if company's goals are overlooked by the executives.Carrot or stick approach.

Oct 22 03:02 PM

[notsosmart:]

what do you mean "talented".you have to be talented to create this mess? you have to be overpaid for underperformance.? most of these scoundrels should be with made-off.

Oct 22 03:25 PM