Financial Meltdown (1 Viewer)

[damian]

This thread is better than the BBC website for it's coverage of the Wall Street collapse. Thanks guys for all the posts.

 

[Njja]

This money was bogus and the real money paid out went to executive bonuses and packages, hirings, golden parachutes, etc. This is part of what I hear when I watch the hearings on the "bailout".

Gideon: You are of course correct, but we need to understand where these

Parachutes came from. Often when companies such as Home Depot choose a

new CEO as we did when we replaced Arthur with GE's Bob Nardelli we must

compensate them for leaving their old job. Bob had spent 29 years with GE so

the Golden parachute was designed to compensate him should his leadership

fall short of expectations.

Problem is once one CEO receives a package like this all CEO's of similar

size companies immediately seek the same package.

Resulting in people like Lee Raymond receiving $400 Million when he

retired from Exxon......of course he was CEO for 6 years.

And we are earning a 2% return via dividens......so who's

complaining

First step Federal Government should require Board of Directors for

publically traded companies to have substantial holdings in the company.

This would prevent the "rubber stamping" of exorbitant compensation

packages for CEO's as it would be their profits they were giving away.

I can't see any other legal way the governmant can mandate a private

citizens negotiated compensation package.

 

[Njja]

Frankly, I think we ought not to do the bail out and take our lumps now instead of dumping it on our children, after all it's our mess.


Ray: Excellent points. Everyone makes mistakes, but you should learn from

them and move foreward.....not be rewarded for them.

If we bail out bad credit debt, and bad car loans, and forgive mortgages in

forclosure what will these people learn?

They will run out and charge up whatever credit they are given, buy a new

car and smile while sitting in their free home.

Meanwhile people paying their mortgages, credit card bills, and car payments,

will pay more taxes.

I don't have a house payment, own it, no car payments or credit debt.....but

no one gave it to me, I earned it. Took 40 years, do I still have responsibilites

you bet!

I have a child, and new grandaughter, they deserve my resources not

someone Barney Frank thinks should be given a home.

 

[theBaron]

Brad,
What a great site, thank you for turning me on to it, I've put it on my favorites.
A breath of fresh air, cause all I've been smelling is BS!
Ray

Glad you like it! I found TownHall in the aftermath of 9/11, maybe looking up Ann Coulter after hearing her quote about what to do. I don't read her stuff any more, she's gotten too shrill, but there are some good, well-thought-out columnists whose articles are featured there.

If you like the content, go to the radio section and look for Dennis Prager's show, and try listening to the podcasts. I enjoy his show, too, it's more intellectual than just, "I'm right, you're wrong", or "Republicans are always right" (because they aren't and Republican doesn't necessarily equal conservative). Prager's favorite motto is "clarity over agreement", he'd rather that people on either side of an argument understand each other's point (understand does not imply accept, of course), rather than that they would agree. His show, along with Michael Medved's and Bill Bennett's, are the best on the radio, in my opinion.

Anyway, glad you liked it, prost!
Brad

 

[Njja]

I pretty much agree with you guys on this point. Here's the problem though, and I'd be interested if you could come up with an alternative solution: How exactly do you fix an economy (and this is all over the Western world) that is basically drowning in debt?

We have to return to reasonable credit limits. When I was a young man there

was a term the bank often used "Sufficiently Obligated" it was like your Dad

saying enough is enough Son.

Voice of reason, no new car this year, vacation around home, time to hunker

down and payoff the bills, or work harder and get a raise.

We have to get back to "reasonable credit" and if you can't afford it.....you

don't buy it.

Forgiving debt.......is not the answer.

 

[nmrocks]

Brad, I agree on Ann and Hanity as well, just over the top. I get Prager only on weekends and Bennett early in the morning, my favoruite now is Dennis Miller, great use of humor and still pretty sound fundimentals

Glad you like it! I found TownHall in the aftermath of 9/11, maybe looking up Ann Coulter after hearing her quote about what to do. I don't read her stuff any more, she's gotten too shrill, but there are some good, well-thought-out columnists whose articles are featured there.

If you like the content, go to the radio section and look for Dennis Prager's show, and try listening to the podcasts. I enjoy his show, too, it's more intellectual than just, "I'm right, you're wrong", or "Republicans are always right" (because they aren't and Republican doesn't necessarily equal conservative). Prager's favorite motto is "clarity over agreement", he'd rather that people on either side of an argument understand each other's point (understand does not imply accept, of course), rather than that they would agree. His show, along with Michael Medved's and Bill Bennett's, are the best on the radio, in my opinion.

Anyway, glad you liked it, prost!
Brad

 

[nmrocks]

All I can think of is the Gov't trying to manage 5% of the mortgages and properties in America??? you want to talk about disasters? can you imagine how many insiders and sweet deals are going to be dowled out? you think Wall streets full of shiesters, this will be a thiefs bizzarre!!
Ray

I pretty much agree with you guys on this point. Here's the problem though, and I'd be interested if you could come up with an alternative solution: How exactly do you fix an economy (and this is all over the Western world) that is basically drowning in debt?

We have to return to reasonable credit limits. When I was a young man there

was a term the bank often used "Sufficiently Obligated" it was like your Dad

saying enough is enough Son.

Voice of reason, no new car this year, vacation around home, time to hunker

down and payoff the bills, or work harder and get a raise.

We have to get back to "reasonable credit" and if you can't afford it.....you

don't buy it.

Forgiving debt.......is not the answer.

 

[Gideon]

This money was bogus and the real money paid out went to executive bonuses and packages, hirings, golden parachutes, etc. This is part of what I hear when I watch the hearings on the "bailout".

Gideon: You are of course correct, but we need to understand where these

Parachutes came from. Often when companies such as Home Depot choose a

new CEO as we did when we replaced Arthur with GE's Bob Nardelli we must

compensate them for leaving their old job. Bob had spent 29 years with GE so

the Golden parachute was designed to compensate him should his leadership

fall short of expectations.

Problem is once one CEO receives a package like this all CEO's of similar

size companies immediately seek the same package.

Resulting in people like Lee Raymond receiving $400 Million when he

retired from Exxon......of course he was CEO for 6 years.

And we are earning a 2% return via dividens......so who's

complaining

First step Federal Government should require Board of Directors for

publically traded companies to have substantial holdings in the company.

This would prevent the "rubber stamping" of exorbitant compensation

packages for CEO's as it would be their profits they were giving away.

I can't see any other legal way the governmant can mandate a private

citizens negotiated compensation package.

Well that's just it, right? Should the CEOs performance be under expectation then the CEO must go - that's the gamble. Right?

All I see in what you described (and thanks for describing this - you should have a colum in a major media outlet!) Alls I see is a closed loop for the lucky few corporate elite class with benefits and protections the likes of which only royalty have received. Am I wrong?

I found this clip which might be interesting to some:

http://www.youtube.com/watch?v=Gl27UziYXjE

It's simplistic which I like.

 

[jazzeum]

I used to practice securities law and it's going to state the obvious but executive compensation is a pretty complicated issue as I think John knows. Reams and reams has been written about it and even without this crisis more would be and will be written about it. I would recommend reading the Journal or the Times as executive compensation, particularly after companies file their proxy statements in February, gets incredible scrutiny.

As to to the idea of requiring ownership by board directors, good idea, but I don't believe it's workable because you're just not going to get people to make the investment in order to serve on the Board. Also, many companies have Director Stock Option Plans. Also, what is substantial or material, especially with large public companies? A very hard question to put into law or regulations.

 

[theBaron]

CEO's as a group are getting scapegoated, now, too, because that's how the media and the public mind work.

A couple of months ago, when housing prices fell and adjustable mortgages slid into trouble, the bugaboo was "predatory lenders".

When oil prices went up, it was "speculators".

Demonization worthy of a Ministry of Propaganda, and certainly not conducive to reasoned debate or discussion of the issue.

And in the hue and cry, Congress' role in all of this, going back to 1977, is conveniently forgotten.

 

[Njja]

Alls I see is a closed loop for the lucky few corporate elite class with benefits and protections the likes of which only royalty have received. Am I wrong?

Gideon:

Unfortunately once again you are correct. The new company boards are

often refered to as "Buddy Boards" you sit on mine, I will sit on yours.

Here is one example off the top of my head Exxon: A 415 Billion Dollar Co.

Director Steven Reinemund holdings 11,600 shares $928,000
Sits on Boards of:
1.Amer Express
2.Johnson & Johnson
3.Marriot
4.Pepsico

Director Ed Whiteacre holdings 8,000 shares $64,000
Sits on Boards of:
1.Burlington Sante Fe
2.Bud
3.AT&T

Here is a few members of the Bud board deciding fate of stockholders
50 Billion Dollar buyout offer:

Director Vilma Martinez holdings 3,893 shares $256,938

Director James Jones holdings 4,783 shares $315,678

Director Vernon Loucks holdings 4,882 shares $322,212

Director Joyce Roche holdings 2,124 shares $140,184

These directors represent 1/3 of Bud's board and have combined holdings
less then $1 Million.

How do you get this job with such a small stake in the company?

You can see by the Exxon directors I listed the number of boards these

folks sit on.

Until this problem is addressed, for publically traded companies the issues of

executive compensation will not be resolved.

 

[Spitfrnd]

CEO's as a group are getting scapegoated, now, too, because that's how the media and the public mind work.
...
And in the hue and cry, Congress' role in all of this, going back to 1977, is conveniently forgotten.

Absolutely true. As I keep noting, the root cause was the desire by our elected government to expand housing market penetration, which in turn could not be achieved without lowering borrowing standards. That is where this notion of the implicit government guarantee thru Fannie and Freddie originated. Rather than be explicit and simply provide grants for down payments, our friends took the more politically expedient course of assuming that mortgage failure was a manageable risk given the flawed assumption of low default rates and continuously rising collateral value. This was not a CEO problem, it was a failure of policy direction and key assumptions problem.

 

[Gideon]

CEO's as a group are getting scapegoated, now, too, because that's how the media and the public mind work.

A couple of months ago, when housing prices fell and adjustable mortgages slid into trouble, the bugaboo was "predatory lenders".

When oil prices went up, it was "speculators".

Demonization worthy of a Ministry of Propaganda, and certainly not conducive to reasoned debate or discussion of the issue.

And in the hue and cry, Congress' role in all of this, going back to 1977, is conveniently forgotten.

You are right. This was a national frenzy with many many many different types of people getting swept up in it - from the government to the $40k per year salary buying a $400k home, cars and then some.

But along the way, people were talking about what is happening at this very moment and few listened.

So what do we do? We can't afford to roll the ball the field any more. Our collective back is against the wall and I haven't heard one thing that makes sense. Let's just print more money and throw it at Wall Street - see if it sticks.

 

[Njja]

I used to practice securities law and it's going to state the obvious but executive compensation is a pretty complicated issue as I think John knows. Reams and reams has been written about it and even without this crisis more would be and will be written about it. I would recommend reading the Journal or the Times as executive compensation, particularly after companies file their proxy statements in February, gets incredible scrutiny.

As to to the idea of requiring ownership by board directors, good idea, but I don't believe it's workable because you're just not going to get people to make the investment in order to serve on the Board. Also, many companies have Director Stock Option Plans. Also, what is substantial or material, especially with large public companies? A very hard question to put into law or regulations.

Brad:

Good points, first off you are correct many companies have instituted Director Stock Option Plans as part of their compensation I believe because they were embarrassed by many of their directors lack of equity in the business they were charged with overseeing.

How do you obtain directors with a major stake?

Its really quite simple, lets take a look at the major share holders of say

GE:

1. Barclays Global stake 10 Billion
2. State Street stake 8 Billion
3. Vanguard Group stake 8 Billion
4. Capital World stake 6 Billion
5. Capital Research stake 5 Billion
6. Mellon Bank stake 4 Billion
7. AXA (again!) stake 2 Billion

And I didn't touch the Mutual Funds.....there is your board all with significant holdings

Wouldn't that make you feel your investment was being administered by
people with ownership?

Or do you trust:

Director James Mulva with.....get this 510 shares worth $12,750!

Yes I'm sure Jeff Immelt is going to "Shake" when he drops his 12 Mil salary

in front of this guy!

I would be embarrased to sit on the Board of GE with 500 shares!

 

[nmrocks]

This is all happening way too quickly in my opinion and There should be serious pain attached to any decision that resolves this issue. right now we're buying into this supposedly "pain free" solution?? If this does not cost a lot of people alot right now I guarentee this will not fix this problem and only make it worse. There should be serious, painful sacrifice made or nothing will be learned. McCain says this will cost each and every household $10,000 and I'll bet it's double that, but you won't see that when they sign the bill before smiling faces and the big Photo Op.

You are right. This was a national frenzy with many many many different types of people getting swept up in it - from the government to the $40k per year salary buying a $400k home, cars and then some.

But along the way, people were talking about what is happening at this very moment and few listened.

So what do we do? We can't afford to roll the ball the field any more. Our collective back is against the wall and I haven't heard one thing that makes sense. Let's just print more money and throw it at Wall Street - see if it sticks.

 

[Spitfrnd]

...
Wouldn't that make you feel your investment was being administered by
people with ownership?

Or do you trust:

Director James Mulva with.....get this 510 shares worth $12,750!

Yes I'm sure Jeff Immelt is going to "Shake" when he drops his 12 Mil salary
...

I frankly don't care what the Directors of any company I own; nor do I care what the CEO makes. I issue for me is simply how well the company does relative to my other alternatives. Dividend growth or share value growth, either are fine so long as they are competitive. Also, I think it is important to realize that Directors only approve major decisions. They are a best some safe guard but any company is really run by its officers. I do like them to have significant ownership and they usually do.

 

[Njja]

So what do we do? We can't afford to roll the ball the field any more. Our collective back is against the wall and I haven't heard one thing that makes sense. Let's just print more money and throw it at Wall Street - see if it sticks.

First thing we have to do is THINK!

Only reason Washington wants to throw our money at this is

THEY CAUSED THIS MESS!

Through a little Gem called "The Community Reivestment Act" and a decision

to allow "Fanny & Freddy" to hold just 2.5% of Capital to back their

investments vs the normal 10%.

So now the Government is shifting the blame to Wall Street and throwing

Our money at them to keep them quiet.

I'm mad as hell because I knew this was going to happen.....and I'm not an

Economist.

How many "Flip This House" Shows are on TV?

How many times can a house double in price?

In California its common practice to agree on a sale price....then have a

house inspector come in with an estimate in the tens of thousands for

repairs......that is only possible in a housing market that has run away from

reality.

Can you even conceive of a time you would listen to a man in a house he

couldn't afford say......."But I didn't know what I was signing"

And someone please tell me why on Earth we should care?

 

[Spitfrnd]

This is all happening way too quickly in my opinion and There should be serious pain attached to any decision that resolves this issue. right now we're buying into this supposedly "pain free" solution?? If this does not cost a lot of people a lot right now I guarantee this will not fix this problem and only make it worse. There should be serious, painful sacrifice made or nothing will be learned. ...

I would agree with the premise but I don't think there is any thing about any solution proposed that will be pain free. Under the scenario most favorable to the institutions to be assisted, they would still lose significantly. Again the purpose is to limit the losses of those not directly involved, which would result from a more general failure.

 

[Njja]

I frankly don't care what the Directors of any company I own; nor do I care what the CEO makes. I issue for me is simply how well the company does relative to my other alternatives. Dividend growth or share value growth, either are fine so long as they are competitive. Also, I think it is important to realize that Directors only approve major decisions. They are a best some safe guard but any company is really run by its officers. I do like them to have significant ownership and they usually do.

Well then you have absolutely no complaint if you lose your investment.

I can't believe anyone with any kind of investment would have a lack of

concern with the very people in control of the company you invested in.

Boards control compensation packages, distribution of assets, mergers,

acquisitions, the very direction the company decides to go.

If we talking about an investment the size of diner and a movie, ok.

If not......well to each his own.

 

[Spitfrnd]

Well then you have absolutely no complaint if you lose your investment.
....

Neither should any other investor. We are all responsible for our own financial decisions. I know how boards operate, I know what information they have and I know who really runs companies. I am quite content with my approach to investing, it has worked well for me so far in good markets and bad over 35 years. I do not have or never did have any investment in any of these mortgage dependent companies for example