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This administration paid off a political debt by taking care of the unions, so GM probably will fail again. It's called moral hazard...the fact that a party insulated from risk may behave differently from the way it would behave if it would be fully exposed to the risk.
There is no such thing as retroactive moral hazard. The government's choice was to let the auto industry crash and burn on the spot, costing the nation a short-term loss of some three million jobs, or to provide the bridge financing necessary to enable completion of the sort of restructuring that the companies themselves had been involved in when they were undercut by the credit crisis and eventual economic downturn.
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Originally Posted by Dockside
What did the unions learn from this? That the government will bail them out when they force larger and more onerous labor contracts on a company, stripping of its ability to compete against other companies.
How is it that a group of people has actually come into being that believes that it is perfectly alright for several thousand stockholders to appoint a handful of people to sit down and negotiate on their behalf, but that it is some sort of insidious evil if several thousand workers appoint a handful of people to sit down and negotiate on their behalf? You do realize I hope that one of the strands that brought us into the unfortunate economic situation we now confront was that productivity gains were siphoned off into corporate profits and away from wage increases in a manner that would not have been possible had there been a greater union presence in the process? I have to wonder further whether you realize at all the degree to which these other fiercely competing non-union companies in fact offer compensation packages closely parallel to those of union shops in order to attract and retain their workforce.
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Originally Posted by Dockside
I don't care if the financial firms pay bonuses. It's easy to see that Washington is using them as scapegoats to cover their own actions.
The right-wing is opposed to itself. It rails over big time bonuses one minute then over legislation to limit them the next. An example of clueless people in action...
Last edited by saganista; 10-25-2009 at 10:16 AM..
If you are going to proclaim that once money changes hands its no longer any concern as who's giving the money what happens to it, the same can be said for compensation pay for businesses.
A benefactor is perfectly within his rights to place limits upon the purposes to which his donations may be put, but that bit wouldn't come into play at all in those cases where the donations were in fact purchases of a controlling interest in the recipient's operations. The government does not stand in the position of either benefactor or owner with respect to the vast majority of its contractors and suppliers, else it would be perfectly justified in asserting its preferences with those as well.
A benefactor is perfectly within his rights to place limits upon the purposes to which his donations may be put, but that bit wouldn't come into play at all in those cases where the donations were in fact purchases of a controlling interest in the recipient's operations. The government does not stand in the position of either benefactor or owner with respect to the vast majority of its contractors and suppliers, else it would be perfectly justified in asserting its preferences with those as well.
TARP is not a grant dude. TARP is a conditional asset. The business has to pay it back. The money is not theirs; it's basically a low interest investment in the company. The reason the business is wrong in giving high bonuses is principle, not practical. If they take TARP and yet continue to lay people off, but pay high bonuses, there's a defect somewhere. TARP is designed to encourage them to keep jobs, hire talent, get the business back on track, pay creditors, etc. Not pay people who failed the company massive bonuses that are not warranted.
we do bailouts like we do parenting, reward bad behavior.. we hate punishment and discipline we just hate it. this will bring us down. let me esplain you, this is how bad it is.
we are hoping when we send somebody up the river for a heinious crime that the other thugs in jail will punish him, bek we dont have the guts to do it ourselves.
A benefactor is perfectly within his rights to place limits upon the purposes to which his donations may be put, but that bit wouldn't come into play at all in those cases where the donations were in fact purchases of a controlling interest in the recipient's operations. The government does not stand in the position of either benefactor or owner with respect to the vast majority of its contractors and suppliers, else it would be perfectly justified in asserting its preferences with those as well.
The Government was neither a benefactor or owner of those companies who received TARP either until Obama took turned loans into Equity.
I have no doubt that you defend his turning of loans into Equity (given your history of defending the "Obama can do no wrong" mantra), one must now compute the costs of managing these equity positions, including the borrowing costs, and the defaults into the equation and one will most likely find out that the "compensation" disputed amount is massivly overwelmed by the carring cost to maintain control.
Wall Street’s Bonus System Was a Major Financial Crisis Catalyst
In the final analysis, the fundamental question that needs to be addressed is a straightforward: Are Wall Street executives worth what they are paid, given the risks they take with money that actually belongs to shareholders (and, now, the U.S. taxpayer)?
The short answer – and I say this as a formerly well paid Wall Street executive – is “no.” The prevailing school of thought, as espoused by those who earn such outsized compensation packages, those who are paid to do the bidding of the well-heeled and greedy, and those who aspire to the mantle of “Master of the Universe,” is: “We want the smartest people running these firms and in order to get them you have to compensate them or they will go elsewhere.”
That is the biggest sales job on all of Wall Street. No one is that smart.
You don't find a robust and capable military to be a benefit? Air traffic control and food safety inspections? The National Weather Service? Nobody is likely to be a supporter of every federal program out there for one reason or another, but claiming to see no evidence of the government's acting to benefit the nation and/or its citizens is probably a little bit goofy, actually.
The things you mention are notable, however were as a result of many previous representative bodies. To me, the last decade or so seems to significantly lacking in this area. I feel this to be true regardless of which party is in control.
Person A starts a business. Said business has 10 C-level executives. A private business. Said executives make less as a percentage of sales or profit than almost all small businesses in America.
Government intervenes and mandates that said private business must modify it's business practice and provide services to a segment of the population it had previously determined not worthy for its services.
Said business testifies before Congress on numerous occasions that said practice will result in substantial losses.
Said business recognizes predicted losses and is later FORCED to accept bailout funds regardless of need by federal government.
Said government subsequently refuses repayment of said funds.
Said government utilizes powers granted in conjunction with said "loan" to manipulate the practices of a previously private business.
................Just like you rightfully proclaimed that once tax money is given to the government its becomes the governments money, once these funds are given/loaned to these privately owned businesses, it also ceases to be the governments money.
If you are going to proclaim that once money changes hands its no longer any concern as who's giving the money what happens to it, the same can be said for compensation pay for businesses.
Well said!!
Makes me wonder whether I should deposit money in a bank account....
Person A starts a business. Said business has 10 C-level executives. A private business. Said executives make less as a percentage of sales or profit than almost all small businesses in America.
Government intervenes and mandates that said private business must modify it's business practice and provide services to a segment of the population it had previously determined not worthy for its services.
Said business testifies before Congress on numerous occasions that said practice will result in substantial losses.
Said business recognizes predicted losses and is later FORCED to accept bailout funds regardless of need by federal government.
Said government subsequently refuses repayment of said funds.
Said government utilizes powers granted in conjunction with said "loan" to manipulate the practices of a previously private business.
I just wish most people got what you are saying. Many of the unsound practices have been subsidized by the government. Not all businesses that fail have been encouraged by government and the congress to go down the wrong path. Banks were opposed and denied authorities to open new branches and acquire assets for opposing ACORN, yet some stood fast. The fact is, while the government does some important duties, it has become top heavy subsidizing failure. Take corn based ethanol, for example. If consumers wanted to stick corn in their car, that would be fine. But subsidization has created a glut of marginal corn to fuel activities while also causing food shortages. And these payouts have become another third rail of politics.
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