In Obama's eyes, I must be one of the few people in America that isn't angry at CEOs getting lavish bonuses on the taxpayer dime.
The government attached no conditions to the first round of $350 billion in TARP money. As much as they told the American people their expectation was that this would get credit and money flowing, they did not make the companies who took the money sign anything to that effect.
So why are people surprised when the banks took the money, sat on it or paid it out in bonuses to CEOs who had contracts that said they could receive them?
Silly American people. Why are you getting upset about business-as-usual behavior from the Government?
And as to getting mad at CEOs for taking bonuses? Just because you might have ethical or moral concerns about such conduct doesn't mean your beliefs get projected onto others. From their standpoint, the CEOs had earned the money and more importantly, they had contracts that required it be paid. Absent an agreement on their part and that of their employer to modify those contracts as a condition of receiving government money, why would they need to modify them? Because you think so?
We may think so but that isn't our judgment call to make. My attitude is "More power to them.". If you had someone paying you millions of dollars per year, would you want the government to unilaterally modify the terms of that compensation? "Yes!" you cry, if it is CEOs, "They make too much!".
Okay, then apply that logic to yourself. Maybe someone out there who makes less than you thinks it is unfair that you get paid what you do. Think it is such a bright idea now? Would you want the government to decide that a talented doctor making $500,000 per year was "making too much" and decided to forcibly reduce their compensation? How long do you think the supply of talented doctors would last under those circumstances?
I can give you the answer: Look towards Canada where the government does exactly that by setting how much a doctor can make and bill. Why do you think a lot of doctors come here to work? Because compensation is more in line with what the market will bear.
It is all a matter of degree. Demanding something "be done" about CEOs who make lots of money is the same as anyone demanding wages be "made fair" in any profession. Beware of where that road leads you because you likely will not enjoy the resulting destination.
If you want to be angry at anyone about this waste of taxpayer dollars, be angry at Congress for passing the bill in a hurry without conditions because "something needed to be done.". Something was done alright. It just wasn't what you expected.
In the words of Megan McArdle: "The limits of your imagination are not the limits of reality".
The government does learn however. Even if it is in billion-dollar spurts. Bruce highlights how the government now wants to impose wage caps on CEOs of companies who take government bailout money.
Bet those companies are regretting that Faustian bargain now. You take the King's Shilling, don't be surprised when the King demands fealty afterwards. Even if it is by the point of a sword.
What the hell did you think was going to happen, sheep of America? That home loans would be handed out like candy and you'd be getting two more Visa cards in the mail like you always had? Seriously, what did you expect? That a piddling $700 billion dollars on the Taxpayer Visa for your grandkids to pay off was going to undo a $60 trillion dollar derivatives mess?
Welcome to Reality! Hope you enjoy the stay!
Bruce points out the great and true outcome of this wedge of bailouts on the taxpayer dime. The opportunity to expand the program well beyond its original intentions.
From Bruce:
What constraints, Mr. Frank? The so-called constraints Frank complains are lacking are, in fact, the very banking regulations those institutions currently operate under! The regulations said the banks could leverage themselves out to 25 or 30 to 1 so low and behold, they did! Where's the shocker in that? Regulations, I might add, were put in place at the bank's insistence so they could make more money or expand their business. Same goes for regulations that allowed banks to remove the barriers between investment banking and regular banking.
Are you shocked they pushed those regulations right to the limits? Unintended consequences, folks.
And you're seeing another example of exactly that in those highlight words. If you believe it is a good thing for the government to impose penalties or restrictions on how a bank can make money within the letter of the law in order to control their behavior, don't be surprised when the behavior they engage in is none at all.
My prediction is if Frank gets his wish, the affected financial institutions will simply not lend the money anymore in the government-controlled areas. So if you think that the end result will be the banks being forced to start lending to you again under the threat of government penalties, think again. They'll simply avoid the penalties completely and not offer you a single red cent.
I'll bet the average American who thinks this type of regulation is a good idea hasn't thought about that. Unintended consequences.
No one was complaining when the banks, supposedly lacking constraints, were making money hand over fist and everyone was buying houses and things to put in them like there was no tomorrow. But now that the banks have learned and many of us are realizing that on the other side of up is down, there is sudden outrage?
Stow it, American people. Your outrage is not borne by any thought put into the issue. You bought into the Government handing $350 billion dollars to failing businesses with no strings attached. Man up and live with that decision made on your behalf.
If you wrote your Representatives and told them to vote against it and they voted in favor of it anyway, good for you. You at least tried to have your voice heard. But if you did nothing or agreed that the Government needed to "do something", you have no one to be angry at but yourself.
It is said the most frightening nine words in the English language are "I'm from the Government and I'm here to help.". I wholeheartedly agree. I would argue though that the hardest four words in the English language to say are "It is my fault.".
Alas, the Government will never say those four words. You get the Government you elected and deserve. So don't throw a hissy fit because the Government is doing exactly what you should expect it to do.
Which is not what you would expect at all.
The government attached no conditions to the first round of $350 billion in TARP money. As much as they told the American people their expectation was that this would get credit and money flowing, they did not make the companies who took the money sign anything to that effect.
So why are people surprised when the banks took the money, sat on it or paid it out in bonuses to CEOs who had contracts that said they could receive them?
Silly American people. Why are you getting upset about business-as-usual behavior from the Government?
And as to getting mad at CEOs for taking bonuses? Just because you might have ethical or moral concerns about such conduct doesn't mean your beliefs get projected onto others. From their standpoint, the CEOs had earned the money and more importantly, they had contracts that required it be paid. Absent an agreement on their part and that of their employer to modify those contracts as a condition of receiving government money, why would they need to modify them? Because you think so?
We may think so but that isn't our judgment call to make. My attitude is "More power to them.". If you had someone paying you millions of dollars per year, would you want the government to unilaterally modify the terms of that compensation? "Yes!" you cry, if it is CEOs, "They make too much!".
Okay, then apply that logic to yourself. Maybe someone out there who makes less than you thinks it is unfair that you get paid what you do. Think it is such a bright idea now? Would you want the government to decide that a talented doctor making $500,000 per year was "making too much" and decided to forcibly reduce their compensation? How long do you think the supply of talented doctors would last under those circumstances?
I can give you the answer: Look towards Canada where the government does exactly that by setting how much a doctor can make and bill. Why do you think a lot of doctors come here to work? Because compensation is more in line with what the market will bear.
It is all a matter of degree. Demanding something "be done" about CEOs who make lots of money is the same as anyone demanding wages be "made fair" in any profession. Beware of where that road leads you because you likely will not enjoy the resulting destination.
If you want to be angry at anyone about this waste of taxpayer dollars, be angry at Congress for passing the bill in a hurry without conditions because "something needed to be done.". Something was done alright. It just wasn't what you expected.
In the words of Megan McArdle: "The limits of your imagination are not the limits of reality".
The government does learn however. Even if it is in billion-dollar spurts. Bruce highlights how the government now wants to impose wage caps on CEOs of companies who take government bailout money.
Bet those companies are regretting that Faustian bargain now. You take the King's Shilling, don't be surprised when the King demands fealty afterwards. Even if it is by the point of a sword.
What the hell did you think was going to happen, sheep of America? That home loans would be handed out like candy and you'd be getting two more Visa cards in the mail like you always had? Seriously, what did you expect? That a piddling $700 billion dollars on the Taxpayer Visa for your grandkids to pay off was going to undo a $60 trillion dollar derivatives mess?
Welcome to Reality! Hope you enjoy the stay!
Bruce points out the great and true outcome of this wedge of bailouts on the taxpayer dime. The opportunity to expand the program well beyond its original intentions.
From Bruce:
The bill, which the committee is working on in consultation with the Obama administration, also will require financial institutions that bundle mortgages into securities to share in potential losses. This would give banks and mortgage-specialists an incentive not to make bad loans, he said. Institutions that securitize loans improperly will incur tougher penalties.Those highlighted words should send chills up your spine.
"There have been too few constraints on major financial institutions incurring far more liability than they could handle," Mr. Frank said.
What constraints, Mr. Frank? The so-called constraints Frank complains are lacking are, in fact, the very banking regulations those institutions currently operate under! The regulations said the banks could leverage themselves out to 25 or 30 to 1 so low and behold, they did! Where's the shocker in that? Regulations, I might add, were put in place at the bank's insistence so they could make more money or expand their business. Same goes for regulations that allowed banks to remove the barriers between investment banking and regular banking.
Are you shocked they pushed those regulations right to the limits? Unintended consequences, folks.
And you're seeing another example of exactly that in those highlight words. If you believe it is a good thing for the government to impose penalties or restrictions on how a bank can make money within the letter of the law in order to control their behavior, don't be surprised when the behavior they engage in is none at all.
My prediction is if Frank gets his wish, the affected financial institutions will simply not lend the money anymore in the government-controlled areas. So if you think that the end result will be the banks being forced to start lending to you again under the threat of government penalties, think again. They'll simply avoid the penalties completely and not offer you a single red cent.
I'll bet the average American who thinks this type of regulation is a good idea hasn't thought about that. Unintended consequences.
No one was complaining when the banks, supposedly lacking constraints, were making money hand over fist and everyone was buying houses and things to put in them like there was no tomorrow. But now that the banks have learned and many of us are realizing that on the other side of up is down, there is sudden outrage?
Stow it, American people. Your outrage is not borne by any thought put into the issue. You bought into the Government handing $350 billion dollars to failing businesses with no strings attached. Man up and live with that decision made on your behalf.
If you wrote your Representatives and told them to vote against it and they voted in favor of it anyway, good for you. You at least tried to have your voice heard. But if you did nothing or agreed that the Government needed to "do something", you have no one to be angry at but yourself.
It is said the most frightening nine words in the English language are "I'm from the Government and I'm here to help.". I wholeheartedly agree. I would argue though that the hardest four words in the English language to say are "It is my fault.".
Alas, the Government will never say those four words. You get the Government you elected and deserve. So don't throw a hissy fit because the Government is doing exactly what you should expect it to do.
Which is not what you would expect at all.
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