Wildhawk

The Volcker Inspired Financial Reform Bill

Can somebody explain why Paul Volcker has been so marginalized by this administration? He seems to be one of the few luminaries left with even an ounce of common sense and decency. Why can't we have Volcker back in charge?

Goldman Sachs: This Is an Investment Bank?

So "principal trading" is a full 81% of revenue and investment banking is only 7%? How could they NOT do well in this environment? They have full access to the discount window, had TARP funds until very recently, and effectively have a 0% cost of funds with which to work. The US taxpayer is effectively backstopping the largest hedge fund in the world (81% of revenue) masquarading as an investment bank (7% of revenue). And GS is set to now pay out the largest bonus pool in its history. Is this not the biggest thievery of the American taxpayer by a single private entity in the history of the country? And why, exactly, does the largest hedge fund in the world deserve all the advantages of a bank and none of the regulation when only 7% of its revenue comes from banking activities? This is institutionalized theft by GS employees of the American taxpayer, and it is a crime.

10 Highest Paid CEOs for 2008: Unbelievable

MMarrkk- your comment about the BOD being voted out in the next election doesn't hold water. Over 50% (and I believe the number is something like 70%) of shares are held either by institutions directly or indirectly on behalf of shareholders, rather than by individual shareholders themselves. Those institutions vote proxies in favor of management in virtually all cases, unless explicitly instructed otherwise by attentive individual shareholders.

So why are shareholders letting the institutions vote their proxies for them? Because most individual investors don't have the foggiest notion of how to read a 10-K or a 144A (proxy statement), and so couldn't even begin to tell you what the senior management teams of the companies they own make each year, much less what metrics those execs are paid on. Call it laziness, call it ignorance, call it what you will, but BODs don't get voted out because shareholders don't take the time to read disclosures or have the skill set to interpret those disclosures without it being spoonfed to them by the mainstream media. Even then, most have no idea that they even have an ability to vote on it, and when they do, virtually none of those votes are binding to the company (see all the drama and discussion around "say on pay" proposals, which also wouldn't be binding to companies).

Our current regulatory framework isn't in place to make this stuff easily accessible and understandable to the individual shareholder; it's set up to cater to ramming through whatever BODs want to do with a minimum of supervision and consequences from the true owners of the companies. Heads they win, tails we lose.

Not every company acts this way, but the ones that don't are the exception, not the rule.

I still think the solution to all of this is to institute fiduciary responsibility for everyone who handles the money or financial assets of others as an intermediary (it basically requires financial intermediaries of any kind to follow the "prudent person" rule, and to always act in the best interests of the end client). That would include C-level execs and BODs. I venture to say you wouldn't see this sort of negligence and recklessness from BODs and management teams if the consequences of their decisions could result in jail time. Incentives just would not be this out of whack if the decision makers might go to jail as a result.