Something I completely do not understand...

[IlyaKEightSix]

In the wake of this crisis, I am asking myself the same question I've asked myself for a long time now...as Bud Fox put it...

"How many private jets can you own? How many yachts can you water ski behind?"

In other words, what is it that these mega-rich people do with their money? What for did they have to cause the greatest disaster since the depression?

And why is it that the imbeciles in Congress can't listen to Gordon Gekko when he says "Today, management has no stake in the company!"?

Is it so tough to pass a law that sets the compensation of all C_Os to some sum that a regular human being can survive on (say some low six figures)+stock options?

If you look at the people that make $1 a year, their firms are iconic and are in no way headed for any sort of bailout (though yahoo may be headed for a buyout). (See: APPLE)

If a company is going to get bailed out with its shareholders annihilated and taxpayers' money down the drain, shouldn't the people that sign on the dotted line be the first on the chopping block?

Wouldn't that go a long way into cleaning up any industry by actually forcing the executives to care about the vitality of their employees and the firm they work in?

Or am I just being a naive youngster?

 

[charlesdwright]

I thought you just said, "greed is good?"

Look, Wall Street was just a movie...

 

[IlyaKEightSix]

Greed IS good. That whole speech should be replayed over and over and over to Congress.

It wasn't greed that caused these problems. It was the corruption of greed.

Terrorists corrupt technology. Evil geniuses corrupt intellect. And thieves in charge of companies corrupt greed.

Look, I'm greedy, and I'm perfectly fine with that. In fact, I'm so greedy that my favorite algorithms are greedy, and my algorithms professor even nicknamed me Mr. Greedy!

It doesn't mean you can't be greedy and have a conscience.

 

[charlesdwright]

It doesn't mean you can't be greedy and have a conscience.

A conscience is only as useful as it is informed.

You may not be as greedy as you think you are. Just because Ayn Rand didn't distinguish between "greed" and rational self-interest doesn't mean you don't have to.

And there is a difference. Greed by definition is evil. Rational self-interest is healthy.

 

[myqee]

"How many private jets can you own? How many yachts can you water ski behind?"

I think after a point, it is no longer a matter of greed. It basically becomes a sport, i.e., trying to make more money for the sake of improving / proving one's abilities...

 

[IlyaKEightSix]

I thought about that...but can't you make MORE money by receiving stock rather than cash, and get even RICHER when the firm's stock price goes up?

I mean if you had to pay me $1,000,000 in cash or $1,000,000 in 100,000 $10 shares, if I did a good enough job to make my firm's share price go to $12, I just got myself a $200,000 bonus.

After all, if it's a sport...then while you don't know when you win, you know you're a big loser when your firm goes bust.

Which is where Dick Fuld, Stan O'Neal, and Jimmy Cayne will forever be in my book.

 

[Stefan Zota]

Long-term greed is one of the most important trigger in capitalist system ...

 

[myqee]

Long-term greed is one of the most important trigger in capitalist system ...

I think they should make a new reality show based on money-making as a sport. They should have 10 or so contestants who will all compete with one another for 6 months to try to make as much money as they can by any means -- but of course, the methods must be legal.

 

[Eugene Krel]

Apprentice comes to mind.

 

[myqee]

Apprentice comes to mind.

Yes but without the silly projects every week. Just pure money making. Period.

 

[alain]

I think they should make a new reality show based on money-making as a sport. They should have 10 or so contestants who will all compete with one another for 6 months to try to make as much money as they can by any means -- but of course, the methods must be legal.

If you have time to watch those stupid shows, you have too much time in your hands.

 

[myqee]

If you have time to watch those stupid shows, you have too much time in your hands.

I actually code better with the TV on. I'm not really paying attention to the TV except some of the bits and pieces filter through. It's a strange habit of mine.

 

[Prateek Bhatia]

There's something I don't understand as well. Would this whole crisis have happened if the people who borrowed for their homes paid back their mortgages? When somebody takes a loan and doesn't pay back - who is to blame? The lender who did not care much about the risk of default, or the borrower who did not anticipate that he wouldn't be able to pay back? Either way the negative effect of the excessive mortgage borrowing was magnified by the super leveraging of the banks using CDOs etc, for which I think they should suffer for not seeing the problem, in spite of being equipped with the 'smartest brains'.

And just to raise a moral question here- is excessive mortgage lending that wrong? Wouldn't you want people-even the poorest- to be able get homes? And wouldn't you want to keep them in their homes?

 

[IlyaKEightSix]

The poor who borrowed what they couldn't pay back can eat it. Their failure to plan is nobody's fault but their own.

As for everyone in homes--no.

This is America. To me, as an immigrant who had to live in a cockroach infested apartment for 2 years with my mom planting sticky paper to stop them all over the place, in my opinion, there is only one thing you are entitled to here in the United States:

NOTHING.

Here in the states, your potential to come from nothing and become loaded beyond your imagination is just that--potential. You have to WORK to get it, and work harder than anyone else in this world.

People hear "land of opportunity" and take it to mean "land of entitlement". Opportunity is just that--a chance. A chance to compete, and a chance to bust your *** and do good, honest, meritorious work.

If you don't do that, then you shouldn't be complaining. No free lunch. You get out what you put in.

Garbage in, garbage out. It doesn't just apply to computers, but to people as well. And IMO, we shouldn't support the garbage. We should leave them to their fate. Those that want to work and have what it takes will not only survive, but prosper.

But first, you need to put in before you take out.

 

[alain]

...But what about the suffering of those poor who can't pay back their loans? Shouldn't they be bailed out as well, just like these guys are bailing out wall street? ...

Dude, what are you smoking? Suffering??... in that case, let me buy a mansion of XX million of dollars and let the government pay for it.

 

[bigbadwolf]

There's something I don't understand as well. Would this whole crisis have happened if the people who borrowed for their homes paid back their mortgages? When somebody takes a loan and doesn't pay back - who is to blame? The lender who did not care much about the risk of default, or the borrower who did not anticipate that he wouldn't be able to pay back? Either way the negative effect of the excessive mortgage borrowing was magnified by the super leveraging of the banks using CDOs etc, for which I think they should suffer for not seeing the problem, in spite of being equipped with the 'smartest brains'? But what about the suffering of those poor who can't pay back their loans? Shouldn't they be bailed out as well, just like these guys are bailing out wall street? Or should you bail out neither?

The borrowers were glibly told that since the price of their houses would keep rising, they couldn't go wrong: by the time the teaser rate ended, they could always "flip" their houses. And the mortgage brokers -- essentially commission agents -- passed the loans on to banks who sliced and diced the mortgages into mortgage-backed securities.

As for bailing people out, keep in mind that the US is the greatest welfare state in the world -- for the rich. The rich tend to get bailed out in the US. The poor (or, almost synonymously, taxpayers) are left holding the bag. And this is inevitable in a system where money buys influence and where there is a revolving door between Wall Street and senior Treasury jobs.

And just to raise a moral question here- is excessive mortgage lending that wrong? Wouldn't you want people-even the poorest- to be able get homes? And wouldn't you want to keep them in their homes?

If people were being paid living wages -- as they were fifty (or even thirty) years -- they would be able to afford houses. The connection between falling wages and ever more insecure employment on the one hand, and ever more virulent boom-and-bust cycles on the other, is being made by few people. It needs to be pointed out that what's happening today is a natural and inevitable consequence of Gordon Gekko-style capitalism.

Postscript: Just came across this piece by Pat Buchanan:

Is it fair that businessmen who fail in neighborhood stores have to close shop and often sell their homes, while Wall Street titans are spared the consequences of monumental stupidity and greed?


No, it is not fair. Yet, Treasury's Hank Paulson may be right. To save the sheep who might have been wiped out in a general financial panic, we may have to save the pigs.

 

[thetrystero]

And this is inevitable in a system where money buys influence and where there is a revolving door between Wall Street and senior Treasury jobs.

good highlight. at least my default association with the phrase "revolving door" is japan, never until this past week, the us. if the almost immediate approval for commercialization of goldman is anything to go by, we know that there's no way it will fail. even if this swan turns black, hank will personally paint it white himself.

 

[Prateek Bhatia]

Dude, what are you smoking? Suffering??... in that case, let me buy a mansion of XX million of dollars and let the government pay for it.

Sorry I didn't make my point clear. You might be able to but an XX million dollar home and even afford it. But there are many who are simply not earning enough to make mortgage payments even for simple homes, in spite of being paid living wages as bbw pointed out. What do we do about them? Should the gov bankroll them and keep them in their homes? Or should they be allowed to be kicked out of their homes for being gullable when they 'were glibly told that since the price of their houses would keep rising'.

These people who i am talking about, are probably not the smartest or the most skilled people in the world. Do we just allow them to rot. Shouldn't the gov assume greater responsibility for an auto worker barely earning enough to remain in his house than you alain-a highly skilled well educated quant?

It clearly should, but it doesn't 'because US is the greatest welfare state in the world -- for the rich. The rich tend to get bailed out in the US. The poor (or, almost synonymously, taxpayers) are left holding the bag. And this is inevitable in a system where money buys influence and where there is a revolving door between Wall Street and senior Treasury jobs.' -bbw

There was an excellent article on some thread here about how real icomes have been falling over the last two decades(posted by bbw i think). May be that has got a lot,if not everything to do with the current trend of mortgage foreclosures.

 

[alain]

You might be able to but an XX million dollar home and even afford it.

How do you feel if you and your neighbor own your respective houses... and then your neighbor is unable to pay for his house and the gov decides to start paying for it? It means, you will be paying for your mortgage and his mortgage as well. If you are ok with that, let me know so I can go out by a house and start sharing my mortgage with you (just kidding ) I think you get the idea.

..But there are many who are simply not earning enough to make mortgage payments even for simple homes...

So they should rent. There are many people that can't afford to buy a house (me included) so they rent. There is nothing wrong with renting.

I don't think the Gov should be bailing out anybody, neither companies nor people... but that's another discussion. I might be wrong but I came from a place where the gov controls every single thing you do so I am biased.

 

[IlyaKEightSix]

These people who i am talking about, are probably not the smartest or the most skilled people in the world. Do we just allow them to rot. Shouldn't the gov assume greater responsibility for an auto worker barely earning enough to remain in his house than you alain-a highly skilled well educated quant?

As terrible as it sounds, the government is not responsible for any one entity or individual. Its role is to maintain our society, but if some people fail along the way, that's not the government's fault.