ctenidae
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The speed and intelligence of a group varies inversely with its size.
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A House of Cards
- Thread starter highpeaksdrifter
- Start date
The speed and intelligence of a group varies inversely with its size.
hammer
Active member
Had to correct your statement...
mondeo
New member
I'm suggesting that, without a bailout, policies that are shown to create more problems then benefits will naturally be killed off, eliminating the need for governement oversight while maintaining market freedom.
There is a point to golden parachutes. For one, they're essentially signing bonuses, which guarantee a certain level of compensation independant of the amount of time the executive keeps his job. From this perspective, they're a way to get a high powered executive on board, not a way to take care of them when they screw up. The other purpose is to make them secure in taking risks. If, following these events, the various Boards of Directors determine that golden parachutes lead CEOs to feel too comfortable taking risks, they'll turn into silver drogue chutes from full fledged golden parachutes.
Look at Carly Fiorina. She took major risks and was hevily criticised for the Compaq merger and actions afterwards. Got kicked out, with a severance package over $20 million. Very shortly thereafter, HP took over the #1 spot in the PC market from Dell, and has been there ever since; many credit Fiorina for a good deal of HP's current success, yet she was kicked out before the success started showing. Without the golden parachute, would she have done the same things, going against the Board? Hard to tell, but it's less likely.
I'm not against all regulation. Transparency is almost always a good thing, and probably would've averted a good deal of the current problems, as buyers of securitized mortgages would have actually been able to accurately evaluate them, and led to a smaller market for bad debt. Conflicts of interest are another area, where you have CEOs serving on the boards of each others' companies, so you get a bunch of CEOs writing CEO pay packages. But if a company wants to take on risk? Let 'em. And let them fail. Bad business policies will scare off investors, good ones will bring investors in. There may be larger swings in fortune in an unregulated market, but on average it's economically favorable.
Interesting perspective.......like you I will use a school kid analogy. A kid will drive much safer and take less chances when mom and dad are in the back seat of the Mercedes. I can appreciate risk like your HP example, however I lack trust in many people in such positions.
Power corrupts; and absolute power corrupts absolutely
I think many people who get those ridiculous sign on bonuses become far more interested in themselves than that of the team. You see it all the time in football. A player busts his ass to get that big signing bonus then disappears. I have a feeling many of the Wall Street kingpins are the same way.
I admire your knowledge on the subject though. Pretty good for a guy who fixes planes
mondeo
New member
Adding this stuff makes me question the bailout even more...why can't it pass on its own merit? Is it because the bailout has no merit?
It's because the majority of the voters have very little grounding in economic theory. Only quick thing I could find was from 2002, at which point only 13 states required economics in high school, and only half of all high school students took an economics course; this was only 6 years ago, and prevalence of economics being taught in high school is on the rise. What percentage of people that graduated in 1990 were taught economics? 1980? 1970? And how many actually remember what they were taught? If you start talking about things like diminishing returns, return on investment, overhead, capital investment, etc., to the average Joe on the street, what reaction would you expect? I'm guessing a blank stare. Most people do not understand how the bailout would actually impact them.
The bailout will do what the proponents are saying it's supposed to do. But they're only talking about the next 2 years, which is as far in the future as they know how to look for most.
ski_resort_observer
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Use them and have one minor scewup like a late payment and they gourge themselves with their new high interest rates. Don't get sucked in.
ETF's and MFs work great if the markets are growing. At present they will just drag you down with the ship. Invest in great small cap companies like Green Mountain Coffee Roasters(GMCR).
What I really don't understand is why someone gets to play Solomon and decide what banks institutions fail and who gets bailed out etc.
To me the whole mess seems like a function of accounting rules that need to be changed. AIG gets bailed out on capital liquidity concerns when reporting their liabilities in today's dollars when they are de-valued. The fact is from a business operation stand point the company was producing 9 billion a year in profit. Eventually bad debts that are no longer desirable because of the housing market crash will be worth something again when they make a turn around. It seems to be me that banks should be allowed to continue profitable operations and afforded time to allow the bad debts to become valuable again. In a market that moves as fast as the modern economy, a couple years would do it. Perhaps the goal of the bail out, but of the Gov't just steps in and buys the debt and fire sales them......who outside of the banks win?
To me the whole mess seems like a function of accounting rules that need to be changed. AIG gets bailed out on capital liquidity concerns when reporting their liabilities in today's dollars when they are de-valued. The fact is from a business operation stand point the company was producing 9 billion a year in profit. Eventually bad debts that are no longer desirable because of the housing market crash will be worth something again when they make a turn around. It seems to be me that banks should be allowed to continue profitable operations and afforded time to allow the bad debts to become valuable again. In a market that moves as fast as the modern economy, a couple years would do it. Perhaps the goal of the bail out, but of the Gov't just steps in and buys the debt and fire sales them......who outside of the banks win?
ski_resort_observer
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Most any financial institution can borrow from the 700B fund based on what perameters are decided upon in Congress. It's up to the banks to decide if they want to participate, get assimilated or cease operations.
andyzee
New member
Bill just passed by Senate.
ctenidae
Active member
Timothy Murphy (R-Penn) said this morning that the bill didn't pass last time because they did a poor job of selling it to the public. They focused on liquidity, "which the average American thinks is what you mop up off the floor."
Sadly, true.
Concerning his comments about liquidity, indeed it is sadly true.
The Bill didn't pass the House because there are far more members up for election than in the Senate. I'd be interested to look in depth at the Senate. I'd bet the majority of yes votes came from folks who are not up for election and the no votes are from ones who are.
Senate approval puts a ton of pressure on the House to follow suit.
ComeBackMudPuddles
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Probably obvious to the well-informed posters in this thread, but novices/non-experts (like myself) might get some information from this Time article titled "18 Tough Questions (and Answers) About the Bailout".
hammer
Active member
Good article...I definitely count myself as one of the non-experts, and yes, I did take a basic economics course in college, although I don't remember much of it anymore...
ctenidae
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Nice find.
Makes me feel better that most of my answers to my wife's questions (and she is in it as much as I am) ahve been "idunno".
GrilledSteezeSandwich
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This guy at the bar was telling me that in a year it will be impossible for even someone with good credit to get a mortgage....any truth to that??? Banks make money lending money so why would they stop????
ctenidae
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Because they make money by lending it and getting paid back.
August last year they were saying mortgages would be impossible. People are still buying.
GrilledSteezeSandwich
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My sister and her husband just bought a condo in DC and I know they had to put down 20%
ComeBackMudPuddles
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20% down.....Isn't that how things used to be way back when (i.e., more than 10 years ago)?
GrilledSteezeSandwich
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I always thought 5% was the norm..but I hardly had pubes 10 years ago..lol
Moe Ghoul
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Upside down car loans, 0 down mortgages, 110% HELOC's, what the fuck did anyone expect? Adding back gold today. 
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