White House to slash bailed-out bosse...

White House to slash bailed-out bosses' pay

There are 87 comments on the TwinCities.com story from Oct 21, 2009, titled White House to slash bailed-out bosses' pay. In it, TwinCities.com reports that:

The Obama administration plans to order companies that have received exceptionally large amounts of bailout money from the government to slash compensation for their highest-paid executives, according to people familiar with the decision.

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The Fixer

Euless, TX

#85 Nov 5, 2009
Peter wrote:
<quoted text>
Not really, Zen. When creditors interfere in the management decisions of a company, that can have major consequences. Lenders can be held legally responsible for this interference; it's called "lender liability" and any good banker knows to be very careful to respect his role as a creditor and to not cross over and act like an owner. There's another idea called "equitable subordination" where a creditor can have his claim cut to that of an equity holder if he's found to have acted in that capacity. That would put that creditor's claims behind those of other true creditors.
The Feds have major over-reached their roles as creditors. In the case of Citibank, fine, the Feds own 30% and are entitlement to represent that ownership stake. But for much of the rest of the industry, the interference is inappropriate bullying that no one but the Feds would ever get away with. So, much for the rule of law.
You are misusing the term "creditor" in this case, a "stock holder" is NOT a "creditor". A "stock holder" is a partial owner, equivelant to the amount of shares they own/control.

So in effect, the US government now "owns" 30% of Citi. If you are part owner you have every right, and responsibility, to ensure the money you INVESTED (not loaned), is used wisely.

So that, when you give a business 40 billion dollars, and agree to back hundreds of billions of potentially bad debt, you have a vest interest, express right, and moral obligation to make sure the "management" making the "decisions" doesn't "decide" to give themselves a great big fat pay check to the detriment of the company's bottom line, reducing the value of the portion of the company you've paid for.

Since: Apr 08

Twin Cities

#86 Nov 5, 2009
The Fixer wrote:
<quoted text>
You are misusing the term "creditor" in this case, a "stock holder" is NOT a "creditor". A "stock holder" is a partial owner, equivelant to the amount of shares they own/control.
So in effect, the US government now "owns" 30% of Citi. If you are part owner you have every right, and responsibility, to ensure the money you INVESTED (not loaned), is used wisely.
So that, when you give a business 40 billion dollars, and agree to back hundreds of billions of potentially bad debt, you have a vest interest, express right, and moral obligation to make sure the "management" making the "decisions" doesn't "decide" to give themselves a great big fat pay check to the detriment of the company's bottom line, reducing the value of the portion of the company you've paid for.
Thank you.
Peter

Houston, TX

#87 Nov 6, 2009
The Fixer wrote:
<quoted text>
You are misusing the term "creditor" in this case, a "stock holder" is NOT a "creditor". A "stock holder" is a partial owner, equivelant to the amount of shares they own/control.
So in effect, the US government now "owns" 30% of Citi. If you are part owner you have every right, and responsibility, to ensure the money you INVESTED (not loaned), is used wisely.
So that, when you give a business 40 billion dollars, and agree to back hundreds of billions of potentially bad debt, you have a vest interest, express right, and moral obligation to make sure the "management" making the "decisions" doesn't "decide" to give themselves a great big fat pay check to the detriment of the company's bottom line, reducing the value of the portion of the company you've paid for.
Yes, as an equity owner you're entitled, but that's what I said. But meddling like that with the creditor hat on is a different story and inappropriate.

Before you get too excited about the political pandering over bonuses, consider this. Take Citi, the Feds own 30%. So, if Citi retains $1 in bonuses, the Feds benefit by $.30. But if that $1 had been paid out, the Feds would've gotten $.365 (income tax + Medicare). NYC and NY state would've received another about $.105. So, government take with bonuses,$.47. Government take without bonuses,$.30. And this example is high; government ownership in other cases is lower or even zero. But it sure sounds good on TV!

It's the law on unintended consequences. NY needs those taxes. So, trash talking bonuses is a nice way to cripple NY's finances (even more). Obama trash talked attending conferences in Vegas earlier this year too. That'll be remembered by all those whose jobs are tied to Vegas when Harry Reid loses re-election next year. It'll just be too funny watching a Republican take down the Senate Majority Leader.
DJ A

Jefferson City, MO

#88 Nov 6, 2009
I'm glad my mortgage loan is with a non-bailed bank. They wouldn't dream of telling me what I can and can't do with my house (as long as it's otherwise legal). Their only dictate is that I pay my insurance and taxes.
The Fixer

Warren, NJ

#89 Nov 6, 2009
Peter wrote:
<quoted text>
Yes, as an equity owner you're entitled, but that's what I said. But meddling like that with the creditor hat on is a different story and inappropriate.
Before you get too excited about the political pandering over bonuses, consider this. Take Citi, the Feds own 30%. So, if Citi retains $1 in bonuses, the Feds benefit by $.30. But if that $1 had been paid out, the Feds would've gotten $.365 (income tax + Medicare). NYC and NY state would've received another about $.105. So, government take with bonuses,$.47. Government take without bonuses,$.30. And this example is high; government ownership in other cases is lower or even zero. But it sure sounds good on TV!
It's the law on unintended consequences. NY needs those taxes. So, trash talking bonuses is a nice way to cripple NY's finances (even more). Obama trash talked attending conferences in Vegas earlier this year too. That'll be remembered by all those whose jobs are tied to Vegas when Harry Reid loses re-election next year. It'll just be too funny watching a Republican take down the Senate Majority Leader.
I get what you're saying, but to me it shows even more short sighted stupidity on the part of taxation (especially when it comes to NY):
Considering that the number of people whose pay is going to be controlled by the government is something on the order of only .000000001% of those paying the taxes, it should say QUITE A BIT, as to how much those people are pulling in that, some 75 to 250 people having their salary cut to "reasonable and fair" levels, equivelant to the performance of the business they're supposed to be running, would cause any significant damage to the bottom line of an entire state, or even of an entire city.
Again, the fact that these few, few, few people getting their salaries cut causes any financial pinch on any government, local, state or otherwise, goes to show us just how OVER PAID THEY REALLY WERE IN THE FIRST PLACE!!!
Seems like if that went strictly to the bottom line, or was paid in dividends then taxes on corporate profits and/or taxes on capital gains (which if I remember correctly is how dividends are taxed, but I'm not sure that's why I hire a professional every year...), "should" compensate for the lost personal income tax revenue.
Of course there are those of us who would say, "If they are paid an unfair salary, they SHOULD pay an unfair tax."
With unemployment over 10% now and at least partial blame resting squarly on these asshats shoulders, it doesn't hurt my feelings any that their salaries get controlled, and that it accidentally affects various governmental agencies.
It's more or less a 'two birds, one stone' situation.
Clueless

United States

#90 Nov 6, 2009
YO Mamma wrote:
Your not very smart are you.
They didn't take control...they PAID for control. The company could have said no to the purchase of all the stock. But they didn't, and you want to know why...because they couldn't...they were on the verge of going under.
Also, the government does take control of businesses, it's called BANKRUPTCY protection. However, in this case rather than the "BK COURT" it was the federal government. What you FOXNEWSians tend to forget because it was so long ago...Mr. Bush signed the bill for the "bailout", that invested money into these large banks and corporations.
Again, stop watching Glen Beck, Shawn Hannity, and Bill O'Riely and start thinking on your own, you wouldn't sound so stupid...or maybe you would.
What you know about Fox News wouldn't fit on a bumper sticker!!

When you actually WATCH Glen Beck, etc. you can lecture the
rest of us. If you did, it would only because you listened
to all sides and understood what they are saying; you don't
have a clue.

And I thought I was clueless.
:):)
Peter

Houston, TX

#91 Nov 6, 2009
The Fixer wrote:
<quoted text>
I get what you're saying, but to me it shows even more short sighted stupidity on the part of taxation (especially when it comes to NY):
Considering that the number of people whose pay is going to be controlled by the government is something on the order of only .000000001% of those paying the taxes, it should say QUITE A BIT, as to how much those people are pulling in that, some 75 to 250 people having their salary cut to "reasonable and fair" levels, equivelant to the performance of the business they're supposed to be running, would cause any significant damage to the bottom line of an entire state, or even of an entire city.
Again, the fact that these few, few, few people getting their salaries cut causes any financial pinch on any government, local, state or otherwise, goes to show us just how OVER PAID THEY REALLY WERE IN THE FIRST PLACE!!!
Seems like if that went strictly to the bottom line, or was paid in dividends then taxes on corporate profits and/or taxes on capital gains (which if I remember correctly is how dividends are taxed, but I'm not sure that's why I hire a professional every year...), "should" compensate for the lost personal income tax revenue.
Of course there are those of us who would say, "If they are paid an unfair salary, they SHOULD pay an unfair tax."
With unemployment over 10% now and at least partial blame resting squarly on these asshats shoulders, it doesn't hurt my feelings any that their salaries get controlled, and that it accidentally affects various governmental agencies.
It's more or less a 'two birds, one stone' situation.
And that's a good point, it does say a lot about tax policy. NYC receives half of it's income tax from just 40K people. But while you might consider them to be overpaid, it's a market. When people are connected to perhaps creating tens of millions, or perhaps billions, employers are very eager to pay them millions. In fact, it's considered a bargain. I know people paid many millions and have watched employers effectively fight over them. But they're really talented, really smart, really good at what they do, and extremely profitable for employers. It's like people that are at the top of their game in things like sports or entertainment. It's just a different world, but it's real.

Everyone's to blame for the recession. We all know people that went too far, just like Wall Street. Car loans, credit card loans, big mortgages compared to income, student loans, come on, the mentality was pervasive. It had been too long since a really good stinging downturn and people walked up their personal risk. Just kidding, but we should require recessions every 5 years. That way, people would keep a fresh understanding of bad times and be more cautious about debt. Our last really good whack was almost 30 years ago. That's too long for people's own good.

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