Wednesday, February 4, 2009
Obama's first good deed?
So far I've had rather mixed feelings about the happenings in the US's new administration. However, now I just read an article (http://www.nytimes.com/2009/02/04/business/04pay.html?hp) that makes me rather hopeful. The administration plans to have a rule that limits executive income to $500,000 a year for companies who receive bail-out money. I think that's great. It has always bothered me that in times of a recession, companies seem to need to lay off millions of people, pinch pennies left and right, but the chief executives are still making millions each year. I always thought, if maybe they'd cut their own pay checks a little, maybe they could keep more people employed, and lessen the drastic effects of a recession. Well, it thus makes me happy to see that Obama is not planning on letting those who ask for financial help pad their own wallets more than necessary. You should read the article. I think the most annoying part to me was this one guy suggestion how it's tough to only make $500,000 a year. Yeah, must be really really tough. I can hardly imagine the hardship.
Subscribe to:
Post Comments (Atom)
Posts
15 comments:
Isn't it sad that a paycheck of $500,000 is already considered a "cut" paycheck? Excuse me, but does one single person really need to earn this much? I think this world is distorted... Nevertheless, I applaud Obama for trying. I think he is doing his best.
I am as disgusted with the exorbitant salaries that CEOs take home even while their companies are laying off thousands and asking for bailouts as anyone. However, I stand by the principle (and the founders of this nation would be with me) that government dictating how things are going to be is starting us down a dangerous road. There needs to be competent oversight on where this money goes (I'm not confident that there will be considering that the US congress is perhaps the least competent group of individuals ever assembled) and the CEOs need to be held accountable for what they do with the money but it's a dangerous amount of power that the government is wielding by setting salaries within private companies. It's a dangerous precedent and one that is sure to spill over into other areas of the private sector. Once gained, governments do not usually abdicate power, they simply accumulate more and more and intrude further and further into our lives. Already, because of the bailouts, we have all of these banks and companies that are essentially becoming nationalized. Explain to me where it ends? And don't get me started on the $900 billion stimulus package that Obama says has to be passed now or disaster is looming. In fact it's so urgent(!!!) says Obama that only 20% of the money is going to be spent by 2011. Rather than urgeny it sounds to me like a total overhaul of our economy's structure. An overhaul in the direction of more and more government control.
Well, that one's easily answered Troy. If we're lucky, the US will turn into Germany, and then I'll finally feel home no matter where I am. ;)
P.S. On a serious note, I see your points and think they have validity, except that we have pretty different views politically, and I'm not as opposed or 'scared' of government running lots of things as most Americans are. That, of course, has to do with me coming from a 'socialized' country, in which I've lived happily and well. I agree though, that the founding fathers probably wouldn't quite agree with a lot of things going on these days.
P.P.S. I'm glad to see you're reading my blog so faithfully. Is that because you're bored, or because your guys' blog isn't as cool?
Don't dis the readers that read you Franny.
Henry
I don't agree that just because someone makes an exorbitant amount of money that it should be taken from them. People pay for what they like, and that money goes to the people who had the good idea and built it to it's great status. People pay exorbitant amounts for entertainment, sports, new technology, etc... If I am Steve Jobs or Bill Gates, or Michael Jordan, or U2, or Peter Jackson, etc.... I probably make a lot of money, and rightly so. People are willing to pay for the things they produce. We shouldn't take what they earned from them.
Though I do wish every rich person would be so philanthropic as to solve all of world hunger and illiteracy, blindness, etc.... Some are that way and some aren't. But that choice should be theirs to make.
On the begging the government for money issue, I think "Beggars can't be choosers" is an appropriate saying. I think, as a taxpayer who is involuntarily "bailing out" a company who has such severe debt, that doing what we can to ensure the success of these companies is important when we are investing so much in them. Limiting how much of that bailout goes to the CEO's pocket is a wise move. Should the government be able to do that after the loan is paid off, no. But while this loan is in force, yes. I consider them conditions of the loan.
But then again, should a bank tell me how much I can pay myself when I take out a loan for an Optometry practice? Maybe I'll have to rethink all of this.
Henry
I find myself agreeing with Henry here. I'm in complete agreement that none of the bailout dollars should be propping up the CEO's salary. No problem there. I think the government has every right to dictate how the bailout dollars are used. But telling a CEO how much of his company's profits he's allowed to take as a salary (a salary that he has earned), that's too much and it's not the government's place. Do these people make more money than they need? Of course, but it's an oppressive government that starts telling people how much money they're allowed to earn. Now, whether or not the bailout should have happened in the first place is a different issue. I'm not an economist, I'll never be able to make an educated argument against it. On principle, I'm opposed to such government intervention but who am I to say that things wouldn't have been drastically worse without these measures. Although I do feel that the powers in Washington are trying to propagate fear about the economy in order to sway public opinion and thus make it easier to pass the democratic economic package.
I think I should start censoring the comments on here, just for the fun of it.
Ok, so I agree that the government shouldn't dictate incomes, spending, and whatever else isn't really the government's business. I think we all agree, that it's very much appropriate for them to regulate how the money they hand out can be spent. I also don't find it inappropriate to request certain conditions (such as a certain income) if they want the bail-out money. If they don't like the pre-requisites, they don't have to take the money.
Now, as I said, I don't think the government should dictate to people what they can and cannot earn. However, I DO find it appropriate to regulate certain areas of life. After all, some of the income some people receive is not solely based on what people want to pay them. Some of your tuition, Henry, may be funding some football player who the college deems worthy of funding, but you may not...do people really only get the salary they deserve, and people want to pay them? I don't think that's always the case, and some people we'd want to pay more, don't get it, because the tax-cuts or funding goes elsewhere.
I think it's a tricky balance, but moderation in all things usually is good. I think if the government regulates a little, but not too much, we can all benefit. After all, I think if there would have been a little more regulation in the mortgage business, maybe we wouldn't have to suck up financially consequences that shouldn't be our to deal with. As much as I agree that everyone should be free to govern themselves, even in the business world, this is not possible without affecting others in one way or another. And who's to say that it's not my right to oppose consequences I didn't bring upon myself by my own doing...
I hope this makes sense.
This is a great topic. I think one thing that gets missed about the subject of the mortgage crisis is that government intervention did play a role in causing this crisis. Subprime mortgages were created by Congress not by banks. The Community Reinvestment Act (CRA) was passed by Congress in 1977 which compelled banks to make loans to low-income borrowers in "communities of color" (the act's own language). Estimates from the US Senate Banking Committee report that $100 billion in these subprime mortgages were lent over the first 20 years of the act. The CRA was overseen by 4 federal bureaucracies. The law was set up so that any bank merger, expansion, or new branch creation could be denied or postponed by one of these bureaucracies if a formal protest was filed against the banks for not adhering to the lending practices laid out in the act. Community organizing groups seek to "win" loan commitments from banks in these low income area and threaten formal protests if the loans are offered. This put the banks and investment banks (Fannie Mae and Freddie Mac) in a Catch 22. They couldn't expand if they were viewed as discriminatory banks not abiding by the CRA yet placing themselves at great risk if they did make alot of these risky loans. The US Housing and Urban Development's (HUD)mortgage policies also put pressure on banks. Amendments were made to the CRA in the mid-'90s that may have resulted in even more subprime mortgages being made. In order to promote home ownership under the Clinton and Bush administrations the government was paying incentives to investment banks to buy up mortgage backed securitites (a pool of mortgages or parts of mortgages) many of which included subprime loans. In 1996 HUD directed the investment banks that at least 42% of the mortgages they purchased should be issued to borrowers whose incomes were below the median in their area.
So let's not kid ourselves. The whole thing isn't to blame on greedy bankers and unwise homebuyers. Government pressue on banks to change their lending practices of banks played a big role as well. But then it's crazy to think that banks would know more about making loans than the government, right?
I disagree...while the government may have been partially to blame, I think a lot of banks/lenders etc. jumped too happily on the bandwagon, including citizens, who couldn't actually afford what they bought. It's still the case that all of us, at some point, have to suck up for the bad choices of someone else.
Maybe the problem in the states is that whenever government does get involved it does a bad job, and only causes problems. Seems to work better in Germany :). In Germany, it's a lot harder to get a loan than it ever was/is here. If you've never had debt, and you have a steady income, you're a prime candidate. Here, I need to use my credit card or I don't even have a chance for a loan. In Germany, a lot of people don't even have credit cards. You got to admit that something is out of whack here with the financial sector (and that's banks, citizens and government...).
I wanted to edit my comment, but that doesn't work, so here's an addition. Maybe the banks got their hands forced, but that still doesn't explain why they ohhh so happily hand out credit cards to everyone and their dog. Banks are greedy. Maybe they got pushed, but I'm sore a lot of them happily handed out mortgages. I also think citizens are to blame. If you buy something you can't afford, you make a bad choice, and you're being unwise. I don't think just because something is legally possible, I'm freed from the responsibility to think for myself and make wise choices. This crisis still may not have been as bad, if maybe the poor would have gone for something more in their price range instead of buying houses with mortgages 4 times their monthly income or something.
I'll keep this one much shorter.
We're coming to some common ground Fran. I don't place the blame squarely on the shoulders of the US government. The banks probably could have put up more of a fight against this interfering legislation. But it's not in the banks' interest to see a collapse so I don't think they, alone, would have let things get so bad.
Maybe you're right. Maybe government is more efficient in Germany, I can't speak to that. I can only say that I'm against government interference because the US federal government hasn't been very competent recently (the Katrina response and managing the Iraq war following the fall of Saddam come immediately to mind.)
Wherever they stick their noses things seem to go drastically wrong. This is why I'm for strictly limited government, as per the US Constitution.
Well, all the government incompetencies you mentioned go back to one man - Pres. Bush, who (no offense intended) I think was one of the least bright presidents this country's had. Maybe if public education was better, people would be overall more intelligent and responsible, and we'd have better government officials?? Of course, I agree with you that probably not one single party is completely responsible, but I do think banks are very greedy.
Public education? Better? You mean like in Germany where they still enforce Nazi-era laws that outlaw homeschooling by imprisoning the families who practice it?
John, when you can write your comment flawlessly in a language other than English, we'll discuss your comment. Other than that, I'd just ask you to keep the tone of your comments civil, since I don't know you and find it hard to judge your comments appropriately otherwise.
Post a Comment