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HomeStimulus Bill . . . Where’s the Accountability?
Posted by Larry Doyle on February 4th, 2009 4:31 PM |
I fully appreciate the dire circumstances of our current economic times. I am fully supportive of promoting programs that help those who are unemployed, losing their shelter, healthcare, and basic necessities. In times of crisis, Americans need to take care of our fellow citizens. History has proven we need bold moves and strong leadership. In the face of these needs, the politicians in Washington who crafted the economic stimulus plan loaded it up with so much pork that it is more in the camp of “feeding from the trough” than providing critically important stimulus.
We had written previously that we were concerned this bill would be more a promotion of the Democratic agenda than a focus on judiciously allocating capital to generate the greatest immediate impact and laying the foundation for real long term sustainability. Leave it to the base elements of our political process to start from a bad spot and work towards something acceptable than displaying real statesmanship right from the outset.
Who understands this? The American people understand and are voicing their opinions en masse to their elected officials. The pols are hearing them and representatives on both sides of the aisle are working to refine this piece of legislation. A lot of the “fat” in this bill must come out. Why can’t we get a public accounting of the politicians who include the different requests for shameless funding?
Why is it that virtually every economist I have read has repudiated the structure of this bill. Where’s the leadership? I am fully supportive of funding programs that will address real needs and pay long term dividends. In regard to water parks, Hollywood film production tax cuts, STDs, and the like, what country is this? Who proposed these programs? While Obama continues to defend this stimulus plan, the American populace is rallying for significant changes.
LD
Riveting Testimony from a Great American, Harry Markopolos
Posted by Larry Doyle on February 4th, 2009 10:22 AM |
Great American hero, Harry Markopolos
This morning I have been witnessing the Congressional testimony of a great American, Harry Markopolos, in regard to the specifics of the Bernie Madoff debacle and the state of the regulatory world at large. His service and commitment are truly heroic. I hold him in the highest regard. America needs more men like Harry Markopolos!! Mr. Markopolos and three of his colleagues dedicated thousands of hours to investigating the Madoff fraud over the course of more than ten years. His comments and condemnations are riveting. Here is a summary of Harry Markopolos’ remarks:
1. The SEC has been totally incompetent and neglectful throughout this entire process. He provided the SEC with reams of evidence and tips for them to pursue. They never fully investigated.
2. There were significant turf battles between the SEC Offices in Boston, New York and Washington D.C..
3. Markopolos claims it took him a mere 5 minutes in reviewing Madoff’s reported returns to know they were suspect. It took him approximately 4 hours to confirm his suspicions based on reviewing options trading volume.
4. He recommends one governmental financial regulator to oversee all of the other regulators so that all information is shared and tips are pursued.
Be Careful What You Wish For . . .
Posted by Larry Doyle on February 3rd, 2009 2:47 PM |
In the midst of the current economic turmoil, nobody in our country has gone unscathed. With rising unemployment and falling 401-K valuations, everybody is looking for scapegoats. Prior to my passing judgment on any situation, I prefer to investigate fully the details and circumstances rather than shooting from the hip. President Obama’s gunslinger approach may resonate with his constituency, but for those who care to understand the details, let’s probe further. Without a full review of compensation practices, a blanket condemnation, in my opinion, is the height of pandering and akin to a fan heckling an umpire without reviewing the videotape. Over and above that, widespread government intervention into compensation practices is a VERY dangerous precedent; be careful what you wish for!!
Let’s go into the world of Wall Street compensation. Any executive on Wall Street will readily admit that their assets walk out the door every night and back in the door every morning. Managing those assets is the crux to managing a business. In my opinion, the same could be said of any business. While there are a handful of smaller brokerage houses on Wall Street, the bulk of the business is executed with the larger shops. The compensation at all of these shops (Goldman Sachs, JP Morgan, Morgan Stanley, Bank America, Credit Suisse, UBS, Citigroup) is structured as salary plus bonus. The bonus can run upwards of 90% of the total compensation for revenue producers. Over and above the simple salary plus bonus structure, anywhere from 25-75% of the bonus will typically come in the form of company stock which is paid out over the course of three to five years. That stock component and delayed payout are known as the “golden handcuffs” because it restricts the ability of an employee to leave a firm. How and why? If an employee leaves a firm, he or she walks out without that portion of his compensation. Additionally, Wall Street firms further restrict a wide swath of senior executives by imposing non-compete agreements. How do these work? At many shops, if a senior executive decides that he wants to leave the firm, he can only receive his “delayed payout” if he chooses to work for a not-for-profit or in the field of education. If an individual is let go, he will receive his “delayed payout” on its’ schedule.
