The 1% are the very best destroyers of wealth the world has ever seen

Discussion in 'Economics' started by silver914, Nov 12, 2011.

  1. And my point is that this "kleptocracy" seems to be taking it on the chin pretty hard. Which, if it was an actual "kleptocracy", it wouldn't be doing. If you look at Blankfein's compensation, for example, you'll see that the largest component of it is tied to GS stock price. THAT'S why it's important to focus on the share prices, not because some rinky-dink pension fund is still holding the shares to get the dividends.

    As for why I say, "Why don't you go do X?", well, why don't you, instead of playing armchair quarterback? You seem to think you're the smartest guy in the room, so prove it, rather than assert it.

    You act as if MTM accounting doesn't have any issues in and of itself, but it does have the quite significant issue of being extremely pro-cyclical, so it's not as if it's perfect. The market's rise since then could simply be an assessment that the MTM marks that banks would have had to take would have been too extreme relative to the likely default rates on the assets being held, due to the pro-cyclicality of MTM, making the removal of the rule the better long-term policy, especially for illiquid assets.

    Also, I'm pretty sure that every single industry in the US is subsidized in one way, shape or form. I pointed out that the rationale for what seems to be skewed compensation is actually based on the company's pursuit of the best long-term human capital strategy, so that what seems egregious to you is actually quite rational for the company.
     
    #31     Nov 12, 2011
  2. Obviously we have different standards. I had to do a quick check on Yahoo, which shows 31 bil of revenue and 39 bil of profit; obviously something's weird about that number. But regardless: 1/3 of revenue or profits going to a single person is stupidly absurd. Net income available to shareholders, according to what I see, is 3.76 bil. So, the CEO, an employee, gets paid multiples of what the shareholders get paid.
    And to get specific about Goldman: they were in the middle of the mess that destroyed this country. It's not a wealth-creating, legitimate business, which by the way is one of the points of this thread. If we didn't have an administration that had been bought & paid for, I have no doubt a number of these "executives" would be in jail. The profits they and the other banks made off of packaging mortgages that should never have been issued to gulls too stupid to look inside what they were buying was legitimate only in the public service they performed in separating the gulls from their money. I have no objection to that part, since a fool and his money will find some way to part, but they took the entire country down with them, and then had the nerve to act like they were too smart to get caught with these things, which part turned out to be a blatant lie. The company shouldn't even exist.
    As for the rest of the employees of Goldman besides this thief and the others that participated in that grift, there's far better and more productive things they could be doing if, that is, they really are a talented bunch.
     
    #32     Nov 12, 2011
  3. maxpi

    maxpi

    These Marxist pieces of shit think the money is theirs!!

    Hee hee.. I hope the author hooks up with a Marxist woman.. We have a zillion Women's Libber useless bitches in England and USA, grab one of those and start the spirit murdering grind... I hope he is depending entirely on the Social Welfare system and gets a nice, safe, fixed income retirement just before the worst waves of inflation... They think that starvation can't come to their neck of the woods because they have Government watching out for them, LOL.

    Hey author, we've had decades of Marxist Socialistic leadership, let us know how that works out for you, ok? Write something for us!
     
    #33     Nov 12, 2011
  4. Yo, dude, Blankfein made $13 MILLION and the company's revenues were $39 BILLION.

    You were only off by a factor of a 1000. This is why I can't take you people seriously. You can't even get the details correct, yet, I'm supposed to believe you've got the correct "big picture" view? The more accurate assessment is that you're wrong on the details and the big picture. If I could have one wish, it would be that you could somehow experience the full force of your ignorance. That'd shut you up for the rest of your life.
     
    #34     Nov 12, 2011
  5. Interesting article that makes some valid points. Thanks for posting.
     
    #35     Nov 12, 2011
  6. I think that you're standing on a flimsy argument with this "share prices" that you keep repeating. The reality is that several institutions have been given a "protected" status and will be kept alive as long as needed (read zombie banks). If it WERE NOT a kleptocracy, we'd have already either nationalized these institutions or broken them apart. Stripped out the many departments and more than likely re-instituted Glass-Steagall. If it WERE NOT a kleptocracy, banks that received bailouts would never have been allowed to return to proprietary trading, leveraging up the hilt in various asset classes, essentially using no cost funding to pump up commodity, energy prices, etc, etc...If it WERE NOT a kleptocracy, all of these opaque, off balance sheet derivatives contracts would be brought onto a central clearing facility and REALISTIC marks would be assigned to them. They would not be hidden in some dark place and then played fast and loose with at the discretion of the institution.

    As for why I say, "Why don't you go do X?", well, why don't you, instead of playing armchair quarterback? You seem to think you're the smartest guy in the room, so prove it, rather than assert it.

    This argument isn't about me, I'm irrelevant to this broken system. It's pretty common knowledge that these pension funds have not been able to generate those requisite 8% annual returns. If there were some interest income (no ZIRP), at least the shortfalls wouldn't be so disastrous. Instead, once again the taxpayer is emburdened with making the pensioners "whole" with a combination of service cuts and an alphabet soup of fees and taxes.

    You act as if MTM accounting doesn't have any issues in and of itself, but it does have the quite significant issue of being extremely pro-cyclical, so it's not as if it's perfect. The market's rise since then could simply be an assessment that the MTM marks that banks would have had to take would have been too extreme relative to the likely default rates on the assets being held, due to the pro-cyclicality of MTM, making the removal of the rule the better long-term policy, especially for illiquid assets.

    That's a recipe for abuse. So they can mark things favorably when it suits their needs and simply say "hey this price is too low" so now I'm not going to MTM. Sorry, this is the epitome of moral hazard. It's also why this off the balance sheet, leveraged debacle continues to plague these markets. Without an intermediary to keep things honest, this cycle will continue to replay time and time again. All one has to do is look at the mess banks have gotten themselves into investing in European debt. Heck, I've read any number of reports of just how much Euro debt these companies really have on the books. Money market funds, corporations (vendor financing), banks, etc...Chasing yield thanks to perpetual ZIRP.

    Also, I'm pretty sure that every single industry in the US is subsidized in one way, shape or form. I pointed out that the rationale for what seems to be skewed compensation is actually based on the company's pursuit of the best long-term human capital strategy, so that what seems egregious to you is actually quite rational for the company.

    Of course it's rational to the company. Either we have regulations, a system of laws and enforcement or we don't. This is the crux of the matter and a by-product of moral hazard run amok. Until institutions actually believe they will live or die via their pursuit of outsized risk, we will continue to see a complete mis-allocation of resources and investment. Why invest in the economy, if "we the company" can just lever up on some sovereign debt and then create another "superfund" to buy up all our bad assets and make us whole again.
     
    #36     Nov 12, 2011
  7. Indeed, Sir Richard Branson was nearly bankrupt before signing Phil Collins and Boy George. And his fortunes reversed after that.

    Was that luck or just plain "never give up" attitude ? I think the latter.

    He hung in there long enough till his fortunes reversed. Many would have quit long before then.
    Be careful with that word "lucky"....as many times, it is disguised.
     
    #37     Nov 12, 2011
  8. Yeah, OK, it's a kleptocracy where the guy who's allegedly at the center of it all (Blankfein) has taken a nearly 80% hit in total comp since the market peak in 2007, while the average worker has taken a few percentage points hit. Whatever, man. Basically, in your subjective opinion, a kleptocrat is someone you don't think deserves his compensation, not someone who has actually broken any laws. That kind of subjective relativism is what's destroyed the Western mind for logic.

    Also, this is the United States, not Sweden, so banks can't just be nationalized on a whim. The attempted nationalization edict would have gone to the Supreme Court and the government would have lost, so fantasizing about "nationalizing the banks" is just that. And some days, I wish Glass-Steagall had never been repealed, too, just so that I wouldn't have to read idiotic rantings about how "Glass-Steagall's repeal caused the financial crisis" because it's about the biggest red herring in the whole thing. As for banks taking on outsized risks on the theory that they'd get bailed out, that's just revisionism. In fact, after Bear Stearns had been allowed to fail, banks started de-risking as much as they could. Of course, by then it was too late to stop the later carnage, but you certainly can't argue that at that point, with the failure of Bear and then later with Lehman, that the banks could have possibly been laboring under the assumption they'd get saved. At best, they might have been laboring under the assumption that the Fed would try to broker deals to keep things functioning as well as they could. I believe in the legal world this is called "assuming facts not in evidence". In fact, a bank CEO looking at the world in mid-September of 2008 would have had to assume that he would not be bailed out (why do you think the market was crashing during that time period? If the market thought bailouts were coming, it should have been going up. Duh). Again, by then it was too late anyway, but even a bank CEO looking at the world in mid-2007 would not have been able to assume a bailout would be forthcoming.

    As far as taking away MTM being a recipe for abuse, I had to read through the earnings calls transcripts for a large number of financial institutions in the 4Q of 2008 and 1Q of 2009 and all of the calls basically said that the CFOs of those companies thought the market was marking those "toxic assets" too harshly. Yeah, obviously they had an incentive to say that, but guess what? It turns out that they were pretty much correct in that assessment. So while rescinding MTM may have opened the door to abuse, it was also reflective of the judgment of many people who said the market was overreacting and that basing marks on the forced liquidation pricing of illiquid assets by "motivated sellers", i.e. hedge funds facing massive redemption requests, probably wasn't a good idea.
     
    #38     Nov 12, 2011
  9. The upper end of the spectrum is grotesquely overcompensated.

    Is Corswine going to have to forfeit every cent he owns?
     
    #39     Nov 12, 2011
  10. http://www.tandfonline.com/doi/full/10.1080/10683160310001634304#tabModule

    Abstract
    Current categorical classification systems of personality disorders (PDs) remain widely used amid growing evidence that argues against the conceptualisation of PDs as independent, discrete entities. Adopting the dimensional perspective of Morey et al. (Journal of Personality Assessment, 49, 245–251, 1985), this study compared PD traits across forensic, psychiatric and “normal” senior business manager samples.

    There was particular interest in the relative representations of elements of PD closely associated with psychopathic PD because of research suggesting that some “psychopaths” operate within mainstream society, and links that have been made between elements of these so-called “successful” psychopaths, and characteristics associated with success in senior business management roles.

    The dimensional Minnesota Multiphasic Personality Inventory Scales for DSM III Personality Disorders (MMPI-PD) were shown to be internally consistent for the “normal” sample. Evidence for the qualitative equivalence of the four PD profiles emerged. The PD profile of the senior business manager sample was found to contain significant elements of PD, particularly those that have been referred to as the “emotional components” of psychopathic PD. The findings provide strong support for the continuous distribution of personality disordered traits.

    http://www.tandfonline.com/doi/full/10.1080/10683160310001634304

    Full text
     
    #40     Nov 12, 2011