U.S. cuts pay at bailed out firms

[Surfdaddy]

An article on Yahoo today says that the Obama Administration is telling the companies like AIG, GM, Bank of America who were bailed out and have not yet repaid the loans that they must drastically cut the pay of the top 25 execs at the firm. Bank of America said the ruling would put it at a disadvantage in competing with companies not under the pay czar's thumb. "People want to work here, but they want to be paid fairly," said BofA spokesman.

What does everybody think about this?

 

[eridanus]

The partially taxpayer-owned companies can do what Goldman did - repay the loans.

 

[bssc]

Fair is such a loaded term, especially when it comes to pay. Since they are essentially government employees, is it fair that they get paid more than other government employees, say in the services?

 

[JustNtime]

I needed another option! It doesn't go nearly far enough... NO ONE in a bailed out company (entity) should make more than old 'exec pay cap' (a Congressman's pay)...

Further anyone making more than exec pay cap in the two years preceding a bail out (OR bankruptcy) should forfeit the excess. Including any and all 'bonuses', etc. That would put a big hole in those 'golden parachutes'.

IF self-regulation worked, bail outs would NOT have been necessary! This would definitely provide some strong incentives to appropriate management and NOT creating these 'crisis' situations in the first place...

While I'm dreamin'... It would also be nice, if those who committed fraud and those who encouraged that fraud were fined and prosecuted to the fullest extent of the law.

 

[RonBoyd]

Fair is such a loaded term, especially when it comes to pay.

Like in "fair market value." The banks are correct in this case. I don't see how the worth, to a particular enterprise, of an executive can be determined by an outside committee. I see many Dragons down that path -- too many unintended consequences are possible/probable. (If the Government were to determine the rates of pay at ALL banks, I might feel differently, however.)

BTW, I don't understand the "middle" choice. Like a "gut" feeling? Or just "warm & fuzzy"?

 

[farmerEd]

Sounds fair to me, any company I've ever owned or run I decided what to pay my employees, in this case the taxpayers essentially own the companies, or control a voting majority, so why shouldn't the "owners" dictate the pay?

This stuff makes me so mad, companies that are essentially bankrupt, paying millions of dollars to the very people that led the companies into bankruptcy (and by the way came close to a causing a complete economic collapse), crying poor because the "bad government" is cutting their pay...boo hoo.

Don't like it? Go find another job...same thing I use to tell my employees.

 

[FUEGO]

I think those employees should just be glad they have a job in these difficult economic times. They should be willing to accept minimum wage. After all, the government has extended a helping hand to these banks and auto companies, so they should return the altruistic gesture by volunteering to work for minimum wage. They should be forced to work for the benefit of their employers and their shareholders at whatever rate the government sets because that is fair.

 

[Bimmerbill]

I don't agree. Gov't should butt out. This sets a bad and dangerous precident, IMO.

 

[Walt34]

I agree. Those "private companies" stopped being private when they accepted government/taxpayer money. The government is now a major stockholder in them and therefore should have a say in how they're run.

That said, I think the bailouts were stupid to begin with.

 

[RonBoyd]

The government is now a major stockholder in them and therefore should have a say in how they're run.

Is that true? "We" purchased stock? Then shouldn't there be a Stockholder's meeting in which this issue is brought up for vote (a "say")?

 

[ziggy29]

In general I have no problem with the concept that if you want the government's help, it comes with strings attached that you should agree to accept if you want the bailout.

Having said that, the fact that (a) some of these businesses were *forced* to take the bailout and (b) terms are being changed and created after the fact is problematic. How would you like to take a loan where the lender was free to legally change the terms of the contract after the fact?

 

[RonBoyd]

How would you like to take a loan where the lender was free to legally change the terms of the contract after the fact?

... and retroactively.

 

[JustNtime]

Actually, I have a bigger problem with MY money being 'lent' without sufficient collateral or repayment schedule... Credit Cards do the changing terms thing constantly and your option is to either accept it or go elsewhere. When you take or get money from the gov't - you're subject to changing laws and legislation. Option - don't take money from the gov't... Paying millions in bonuses to failed execs is obscene. Capping compensation at the level of a congressman's is exceedingly generous for someone unable to profitably run a company...

 

[WB52]

The best government is the least government. However, the free market forces have been disrupted by the bailout. Therefore, I think the government is justified in forcing changes, since they (we taxpayers) are invested in the bailout companies.
OK... it also feels good to cut the pay of those rascals.

 

[RonBoyd]

OK... it also feels good to cut the pay of those rascals.

And it would feel even gooder if the pay was cut of those Weasels who thought up and voted in the bailout and are now making matters worse. They don't seem to be any more competent than the banking executives.

Everyone here keeps skirting the issue but if these people are so bad in their jobs, how can paying them less make them more capable? (Yeah, I know firing a Weasel is only possible every four or six years but those others... )

 

[HFWR]

Article on CNN today...

Who cares if Wall Street 'talent' leaves? - Oct. 23, 2009

Still, we say Godspeed to this "talent." After all, the traders and suits in the corner offices don't exactly have an unblemished track record. In 2008, Citigroup, BofA and Merrill Lynch (since acquired by BofA) posted a grand total of $51 billion in losses.

Bolding mine...

 

[Martha]

Given the market I think paycuts are not going to result in a substantial loss of good people. How talented are any of these people? Talented at what? And people are more replaceable than some think. We better have strings attached when giving government money.

I read an article a while back about fears of wall street losing the best and the brightest. The author said the best and the brightest weren't in these job--they went to academia. The greediest and aggressive were in the big shot Wall Street jobs.

 

[Texas Proud]

In general I have no problem with the concept that if you want the government's help, it comes with strings attached that you should agree to accept if you want the bailout.

Having said that, the fact that (a) some of these businesses were *forced* to take the bailout and (b) terms are being changed and created after the fact is problematic. How would you like to take a loan where the lender was free to legally change the terms of the contract after the fact?

The ones listed were not 'forced'... they are the sick ones... they NEEDED the money to stay alive... the ones that were forced have already paid back the money and are now about to pay our record bonuses....

 

[bssc]

I see this like going into bankruptcy court. The government cuts your some slack but you aren't allowed to keep your fourth vacation home. Almost all contracts can be renegotiated or negated by the court.

 

[ziggy29]

The ones listed were not 'forced'... they are the sick ones... they NEEDED the money to stay alive... the ones that were forced have already paid back the money and are now about to pay our record bonuses....

Actually, there have been several cases where the businesses wanted to pay the bailout money back but the government refused to allow it -- presumably because they still wanted to tell these businesses how to run themselves, leverage they'd lose if the businesses paid it off.

 

[CuppaJoe]

....
I read an article a while back about fears of wall street losing the best and the brightest. The author said the best and the brightest weren't in these job--they went to academia. The greediest and aggressive were in the big shot Wall Street jobs.

Love it! That certainly jibes with the people I've known over the years.

 

[FUEGO]

I see this like going into bankruptcy court. The government cuts your some slack but you aren't allowed to keep your fourth vacation home. Almost all contracts can be renegotiated or negated by the court.

One of the proposals to modify pay included Chrysler and GM. For these two, I'd certainly be in favor of taking the bankruptcy approach. Renegotiate the labor union contracts and salaries of ALL workers to come up with a market rate. Slash the lingering retiree pension and medical payments (or let PBGC take over - since these are government owned car companies anyway, the $$ is all coming from the same pot).

Since we are arguing that execs can take a pay cut and won't leave, the same rationale applies to slashing the pay of the rank and file. We are in the middle of double digit unemployment here, after all, with rates in the teens in some of these heavy car producing areas. Let those that are currently starving and that have used up their unemployment benefits apply for the manufacturing jobs. You think these starving people would hold out for $80,000 or $100,000 a year? Of course this would never happen. Trying to actually cut costs where it matters? Not necessary when it is a government owned enterprise. What is the ratio of these top execs compensation to the total company payrolls? 1% 5%? How about revisiting the other 95-99% of compensation costs? We are in these difficult economic times, after all.

 

[Texas Proud]

Actually, there have been several cases where the businesses wanted to pay the bailout money back but the government refused to allow it -- presumably because they still wanted to tell these businesses how to run themselves, leverage they'd lose if the businesses paid it off.

Or the patient is still 'sick' but wants out of the hospital since the doctor is telling them they can not do what they want...

There were some requirements for the banks to do so they could pay back the funds... and IIRC, one was to get new capital on the open market... I have not looked, but has anybody done all the things on the list to pay back money and still not been allowed? Also, IIRC, there was a timeframe for them paying it back... the ones who paid back so far were 'early'...

 

[HFWR]

Actually, there have been several cases where the businesses wanted to pay the bailout money back but the government refused to allow it -- presumably because they still wanted to tell these businesses how to run themselves, leverage they'd lose if the businesses paid it off.

I believe the rationale was for everyone to take [-]it in the shorts[/-] bailout money, so that no one could be singled out as being more risky, possibly producing runs on those institutions. Not to say there were no hidden agendas...

 

[youbet]

And people are more replaceable than some think.

Absolutely! The concept that it takes decades of being on the job to become good at it is highly overrated. Whether it's corner office types in the private sector as we're talking about today or public employees putting in lifetime careers as a bureaucrat, generally some employee turnover is a good thing.