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Is Banker Backlash Going to Stifle Economic Recovery?
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| Groundhog Boy |
Thoughts? This has really been concerning me lately, as everywhere I look, there's been nothing but nasty rhetoric, criticisms for normal business practices, and limits on compensation implemented.
The latest incident is the Northern Trust Golf Tournament. This bank got $1.6 Billion of TARP funds handed to them by the government, even though they're making money and didn't ask for the money. As a promotional tool, in 2007, they contracted with the PGA for 5 years of tournament sponsorship to generate exposure. Along with it, they send employees and clients there, treating them to a good weekend for either a job well done or as a thank you for their business.
Northern Trust, if you haven't heard, is now under fire from Barney Frank and John Kerry, not to mention blogs everywhere. Maureen Dowd's column in the NY Times (http://www.nytimes.com/2009/02/25/opinion/25dowd.html) took aim at them and the comments section of Jack Cafferty's page on CNN (http://caffertyfile.blogs.cnn.com/2...rties/#comments).
I've now read that Morgan Stanley just announced today that they're still doing their sponsorship of an upcoming PGA event, but cutting sending anyone from the company.
The problem is that this is how business is done. People used to get toasters for opening a checking account. Wealthier people depositing 100x as much as the $1000 in someone's checking account expect 100x better than a toaster.
And we should all care that their businesses succeed, because we're all shareholders. The money is not lost, it's an investment, but most people, from the comments that I'm gathering, don't seem to realize that TARP funds were expensive to these banks and have to be paid back. Especially considering that the money was forced down their throats in some cases. The dividend rates (i.e. interest) is somewhere north of 8%, quite high when you realize that people can't pay their mortgages with 6% rates. I'll also add that these banks have already started paying back the money in dividend payments on the preferreds.
Not to mention the damage that Chris Dodd's little compensation amendment screwed all of the banks, and in turn, us. First, he's capping the pay for non-executives (i.e. traders), which will force some of the highly paid (because they made the bank a lot of money trading) into private equity firms, hedge funds, etc. because they can pay more. Now, S&P is looking at the language and determined that TARP funds aren't permanent capital because it implied that it could be paid back before expiration of the terms. As a result, an unnecessary credit rating risk has been created. It was definitely farther than the Obama administration intended when they talked about their $500K limit for EXECUTIVES, not all employees.
It's not as though I love the banks and the situation that they put us all in, but I'm getting quite fed up listening to the general public bitching about it and sounding like they know how to fix problems that are vastly more complex than their HS education can grasp. It kind of reminds me of a village killing off their seasoned doctor because someone died. Too bad for everyone else that could have been cured in the future.
What makes it worse is that they refuse to recognize many of them and their neighbors caused this problem by leveraging just as much as the banks were buying on margin, buying more than they could afford but expecting it to constantly appreciate in value.
I guess I'll end my rant, but I was wondering if anyone else out there, especially those who voted for Obama and other Dems, like I did, have been feeling the same way listening to the idiocy floating out of the mouths of people that you usally agree with on other issues? |
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| The17sss |
I..... I can't believe my eyes. Groundhog Boy, I like where you're coming from with what you just wrote. And I agree. This is the 2nd year that golf tourney has happened, and from what I understand that bank was one that wasn't in the red, and could pay for such activities with their own money, not just with stimulus money they were forced to take.
Paraphrasing from several media outlets today, and echoing what you just said, Barney Frank basically thinks banks should only give loans to the people he thinks are acceptable... he claimed the Northern Trust Open thing was simply about ego and had nothing to do with good business. This coming from a piece of who's never run a business. This is going to paralyze all of these banks and industries from taking any initiative on their own. They'll get into further trouble, and then Barney Frank will say, "See, the market doesn't work."
http://www.bostonherald.com/busines...f_extravaganza/
http://www.cnbc.com/id/29374295 |
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| Groundhog Boy |
I do want to say that I don't think the Republicans are doing a very good job addressing the economic issues.
I literally want to bang my head against the wall lately. I've been listening to all the hearings at work, listening to the CNBC feed in the office on other days where government officials are doing interviews, and to hear the incredibly ignorant coming from both sides...I just can't take it sometimes. It's like which is the lesser of two evils every other day. No wonder the volatility is so extreme. |
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| Lebezniatnikov |
| quote: | Originally posted by Groundhog Boy
It kind of reminds me of a village killing off their seasoned doctor because someone died. Too bad for everyone else that could have been cured in the future.
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To me it's more like limiting a doctor's compensation because he's been convicted of malpractice in the death of a patient. |
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| Groundhog Boy |
| BTW, I'll also note that the CEO of Marriott was commenting recently about how this type of backlash is hurting them. I guess we're not supposed to stimulate hospitality jobs? I could care less about Sheryl Crow or Earth Wind & Fire, but if those rooms aren't being used, the hotel cuts back and fire people. And it's not just that particular event, because the backlash is spreading like a disease and no one will go anywhere, killing hotels, airlines, and restaurants. |
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| Groundhog Boy |
| quote: | Originally posted by Lebezniatnikov
To me it's more like limiting a doctor's compensation because he's been convicted of malpractice in the death of a patient. |
Not really. I'd say that the fees on the TARP funds are the compensation cuts. Also, I guess it's more like taking a partnership of 5 doctors, where 1 killed someone. The other 4 were OK, but they're hauled out on a rail because all doctors suck since the 1 killed someone.
Along that line, there was big HuffPo topic last week where everyone criticized Jamie Dimon for saying that people "underwater" should continue to pay their mortgages if they can afford it. HE'S RIGHT! If you bought a house and it's gone down in value, you are still responsible for paying if you can. I bought stock, it went down, Ameritrade didn't offer to cover my losses and made me pay for them. That's how it works.
I will say that the most irritating thing to me is that it's the view on intelligence that Republicans showed when Palin was introduced. Why do both sides cave to stupidity so easily? What about the rest of us that support credit where it's due and wealth expansion for those who aren't idiots, but also some type of broad health care, unemployment expansions if needed, infrastructure? |
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| Arbiter |
| quote: | Originally posted by Groundhog Boy
It's not as though I love the banks and the situation that they put us all in, but I'm getting quite fed up listening to the general public bitching about it and sounding like they know how to fix problems that are vastly more complex than their HS education can grasp. |
This gets me every time.
For all the romanticization majoritarianism receives in our "democracy," the potentiality of genuine government ad populum should be a chilling prospect to anyone of sound mind...
The reality of the majority is this. Their competence is fragmentary at best, more often manifestly wanting in the entirety. Driven by vulgar predilections (here, jealousy is most salient), there exists an impenetrable barrier between their consciousness and reality. Yet, they possess an unwavering confidence in the veridicality of their perceptions. They think that their prison is the entire universe, and assume that anything incongruent with it is a threat to be eliminated.
If these are to be the engineers of our society, then we should expect it to be an awkward, lurching abomination, a fitting reflection of the buffoonery of its makers. It seems to me that's pretty much what we've got so far. Always trying to move "forward," although with no particular destination in mind, the first problem is that this contrivance has a peculiarly schizophrenic sense of direction. Unsurprisingly, it got its feet tangled whilst wandering aimlessly, and thus it has fallen flat on its ass. Now, it's impotently flailing about like an insect trapped on its back.
Sometimes I cannot tell whether I'm watching a tragedy or a comedy. But as things go spectacularly wrong time and time again, I do know where to point the finger. And it is most definitely not at a mere handful of bankers who, acting individually, could have done nothing to avert the present crisis. |
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| jerZ07002 |
| quote: | Originally posted by Groundhog Boy
BTW, I'll also note that the CEO of Marriott was commenting recently about how this type of backlash is hurting them. I guess we're not supposed to stimulate hospitality jobs? I could care less about Sheryl Crow or Earth Wind & Fire, but if those rooms aren't being used, the hotel cuts back and fire people. And it's not just that particular event, because the backlash is spreading like a disease and no one will go anywhere, killing hotels, airlines, and restaurants. |
i had over 50K miles for business trips last year, and to this point I have 0 for this year. The lack of deals is killing business travel. To be sure, I have been upgraded to first class on EVERY flight i've taken so far this year. It's a good thing flying is so cheap right now. As a result of the price declines, I can keep my status by taking more vacations.
As for the public backlash on banker compensation, I tend to agree. For the lack of better words, generally, the average person that forms the "public" is stupid. Perhaps more than people from any other occupation, bankers tend to spend their money frivolously (blowing it on cars, tvs, alcohol, hotels, etc...). Consequently, they do more to stimulate the economy with their earnings than most people in other occupational groups. More importantly, I can't support limiting the contractual rights of private parties. Even though these companies accepted public money, poor business practices (such as paying bankers huge bonuses for incurring loses) will be punished by the markets. Basic accounting informs that when expenses (employee compensation) is greater than revenue (bankers fees and trading income) the company will become insolvent and unable to operate.
The government needs to keep its head out of this issue. If the average person doesn't like the fact that he makes only $45,000 a year while a goldman banker makes $650,000, then perhaps that person should have spent the necessary time -
1) Preparing for the SAT to get accepted into a good university;
2) Performing above average in college, and graduating with honors;
3) preparing for the GMAT to get a high enough score to gain acceptance into an ivy league MBA program;
4) working for several years in a prestiguous bank or consulting firm (e.g., McKinsey, Goldman, PwC)
5) Performing well in the ivy league MBA program;
6) Impressing recruiters at the on campus interview programs while competing with hundreds of other qualified candidates; and
7) working his ass off for 80 hours a week, while traveling around the country without seeing his family for days at a time.
Nothing gets me going more than an 'average' person who coasts through life being appauled at the salaries of people who worked their asses off to achieve their success. |
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| LazFX |
That says it all. |
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| LazFX |
| quote: | Originally posted by jerZ07002
For the lack of better words, generally, the average person that forms the "public" is stupid. |
Elitist are we?? |
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| jerZ07002 |
| quote: | Originally posted by LazFX
Elitist are we?? |
i knew someone would say that - it, my 9 years of post high school education permits me to think that way. |
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