Sunday, December 21, 2008

Frank: Playing Politics with Americans

AP declares that $1.6 Billions are paid in wages, benefits and bonuses to executives of Banks in the last year. It is not clear whether these pay outs were applicable to the period before these banks came for the bailout TARP money or after. Even if this payout was for services of these executives before the bailout period as per the contractual agreements; it is unknown whether similar payouts will be paid in future too.

We know what will happen some time next year around this time – these banks will be in reasonable financial position after the recession and again these executives will claim hefty bonuses. Public will be told – oh! they made the money and hence the bonus. It is for sure as what Paul Krugman characterizes – no matter what, these bank executives will always get enormous amounts of bonuses. Why not any American mother would want her baby to grow up as a Bank Executive if that is the only profession which always wins in America?

This is where Rep. Banry Frank has been disingenuous. In response to this AP news he is trying to ‘shame out’ these bank executives saying ‘these executives need bribes’. We have full blown politicians like Illinois Governor Blagojevich who do not shame at all then why would Bank Executives shame themselves when they are getting Billions? What the heck, you Rep. Frank were doing when in open these bribes are paid? What kind of law maker are you? Were you not supposed to stop this? In full day light tax payer money is stolen here by these executives and these Congress people are party too it and now trying to smart on that by saying these executives need motivation to do the job! Rep. Frank, you are resorting to sarcasm in order to hide your failure to control these thefts. Congress failed American people in putting appropriate controls on these executive payouts.

If Rep. Frank and the Congress Gang thought that TARP bailout could not have been used to stop executive payout; did these guys were ‘honest’ enough to come out and let people know about that in the beginning? Again these Congress people failed.

The argument that for competitive reasons these payout needs to be high is also not convincing. Starting from Wells Fargo and Goldman Sachs, whichever handful of banks were okay during this turmoil; all publicly traded major banks have taken money from TARP. In fact, even when some of these banks were not so enthusiastic (Wells Fargo in particular); the idea in forcing ‘tax payers’ money on them was to make the playing field equal. Then if ‘limit on executive’ pay was to be applied equally; where would these executives go? To foreign banks in USA or foreign branches of these USA banks? Are we to believe that Congress is impotent to stop all that? If so, then why have the Congress at all? Just burn it as like Britishers did centuries ago.

May be Congress is there to castrate UAW in the auto-bailout. Truth is America needs abolition of UAW. Labor Unions are there ‘to stop’ unjust exploitation of workers, but UAW has out grown itself into a monster which exploits consumers and gives ‘shaft’ to customers of these auto companies. UAW may not be the only source of destruction of these automobile companies; but for sure one of the main reasons. But along with slaying the dragon of Union Labor once and for all; America needs to stop the greed and open theft by Wall Street big boys too. (Usually they all are men on Wall Street.)

Rep. Frank and Congress folks are deceiving Americans by failing to stop this greed. This whole issue is exactly what Krugman says – head I win, tail you loose. For Capitalism to thrive we need share holder protection and we do not get that when these executives are paid in Billions with zero accountability.

The biggest fraud perpetuated by likes of Wall Street Journal, Larry Kudlow and the so called pro-business talking heads is to ignore outrageous payouts to publicly traded financial industry executives without any accountability as a way to promote Capitalism. As Ron Paul and true Conservatives would say; such a phony Capitalism has been the reason for America’s downfall. Are we going to wake up only when Sovereign Credit Default happens for Uncle Sam? Are we not going to prove those Cassandra’s wrong? Essentially, these Wall Street executives are there to ‘sale’ and to ‘bankrupt’ America and that will happen if we do not stop them now.

Obama would think that controlling Wall Street payout as some lesser important issue. That will be so wrong because it is the ‘cancer’ which is left out totally untreated in America and to top on it folks like Rep. Frank are hiding this failure. It is hard to believe Obama when he says ‘everyone has to sacrifice’ while he simply ignores the issue of Wall Street Executive payout reforms.

Remember, the way system works in America is all these proposed Trillion Dollar Main Street Stimulus Package (yah, we know how sensitive Obama is for the Trillion word and how hard he wants to avoid that; but come on Barack, leave aside such silly things when America is burning in crisis); that money will flow through these banks and again these banks will have their hands on giant bundles of dollars. Meaning, no worthwhile economic activity happens unless Banks get their cut which will again result in hefty bonuses to these executives and we will be there again.

Hedge funds are different because those did not go to Congress for the bailout money. But those publicly traded banks which have taken this money (or forced to take this money) must have appropriate ceilings on executive payouts.

What Obama needs to do is have a compact commission on Financial Industry Executive Payout which will give report in couple of months. There are many experts who have right set of ideas and reform proposals worked out to address this issue. What these Bank Executives will do for sure is they will try to ‘tie’ their bonus reform issue with the larger financial industry regulatory reforms. But Obama, if he wants to remain honest with American people, should not fall for this gambit and get executive payout reforms passed independently and quickly. Assigning lower priority to this issue is missing the larger point and effectively to renege on the promise of equal sacrifice by everyone. By then one significant difference between Obama and his predecessor will wither away.

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