I take it you agree executive pay is too lavish and should be restrained.
I think it’s unwisely lavish. I wouldn’t agree that it should be explicitly restrained. If anyone can figure out a way to incent the corporations to do it on their own, that’s fine.
One possibility would be to end the tax on dividends. If you’re a shareholder, especially a rich one, you don’t want dividends; they’re taxed in the year they’re received. What you want is capital appreciation in your shares, meaning you like buybacks, and you don’t mind that your execs are comped with them.
If there’s no tax on dividends, shareholders start demanding their money on a regular basis. Buyback start to get scrutinized, as does executive comp and perks.
How can they justify giving grants and tax breaks to corporations crying need when their CEOs are pulling down super-sized salaries?
Well, a lot of those grants and tax breaks were voided in the Trump legislation. The code was flattened.
But, to your argument, they’re NOT pulling down super sized salaries. They’re pulling down super sized COMP packages. Almost all of that is stock. Restricted stock is corporate America’s way of minting money. Further, those grants and tax breaks are an order of magnitude larger than those comp packages. The company can afford to comp an exec at 30M when 29M of it is funny money; but these tax breaks and grants are worth BILLIONS.
The executive sense of entitlement, often called narcissism (though I prefer, sociopathic), is huge.
That’s why I said it was unwise. Precisely.
However, if some of that executive pay is kept in the Corporation, it will stay as retained earnings or flow into dividends. Some small shareholders may get a benefit.
Hence my comment on not taxing dividends.
I don’t share your fandom of Rubin. He is one of the people who could have stopped the 2008 crisis. Brooksley Born, then head of the Commodities Trading Commission, warned of the likelihood of fraud in the CEO and CDS markets which were completely unregulated and hence well named shadow markets.
The events of 2008 required a long string of bad decisions, one building upon the other, with nobody connecting the dots. I know for a fact that Treasury did not have the statutory authority to intervene in the CDS markets. I suppose they could have messed with the CDO market, but keep in mind that the government invented the CDO; they didn’t have the same onus on them that, say, the options markets had.
Rubin believed that it was politically unacceptable to regulate the derivative markets. He, along with Alan Greenspan and Larry Summers (remember The Committee to Save the World), convinced Congress to pass an act so that not only were the CDO and CDS markets left untouched, they actively prevented Born from investigating. So, if there are people on whom the blame for the 2008 should fall, Rubin, for failing to act, is certainly a prime one of those.
TO the extent he could have intervened with the CDO’s, sure. I’d also add Andrew Cuomo to the list; he’s the one who decided to let Fannie and Freddie abandon their traditional underwriting standards and underwrite crap mortgages.
It’s the slope of the curve that is critical. It starts its upward climb in the early 1980s.
Uh, it was climbing since 1968, with a jig in the mid 70’s and other one in the early 1990’s. Roughly the same slope. The Reagan package had nothing to do with it; it was an ongoing event.
I believe a significant factor is the control of the Treasury Department by Goldman Sachs. Even Obama, who was dedicated to ending income inequality, was totally ineffective because the Treasury Department was filled with Wall Streeters.
I actually just wrote an article on income inequality, as I found some data which dispels the prevailing narrative. You might want to noodle on it for a bit:
The Triumph of Math Over False Narratives
People have ulterior motives and preconceived ideas — numbers don’t.
Neil Borofsky tells the story. He was the Special Investigative Counsel for TARP.
What % of the total TARP money went for bonuses? (I suspect it’s less than 1%). And if I’m right, why are we worrying about it?
We have one recent example of how Wall Street get’s control:
As long as politicians accept that the best people to regulate Wall Street are people from there, there will be no possibility of getting policies generated by the Treasury Department that will do anything but benefit Wall Street.
I don’t know if you’re familiar with this book:
Book Review: WALL STREET: A HISTORY (by Charles R. Geisst) : AH
WALL STREET: A HISTORY, by Charles R. Geisst, Oxford University Press, 404 pages, $30. In this first complete history…
….but it does a pretty good job of painting the following picture: Before the Depression era regulation on the capital markets, if you were a high-stakes shyster in the US, you went to Wall Street to game the system. The stories Geisst lays out are rather amazing. However, after regulation spoiled their fun, the shysters moved to another part of the economy where they could get rich. Politics. :-)
However, if there is an implied suggestion that only people who work on Wall Street understand it, with that I disagree.
I think the ones outside of the Street who do understand the workings of the large-cap banks and financial markets are few and far between. There is simply too much institutional knowledge. Bernanke seemed to understand it from a macro standpoint, but by my read, Paulson had loads of on the ground knowledge that Bernanke, from his tower at Princeton, simply did not have.
There are a number of people who understand the financial system and who have proven their loyalty to their country above their paycheck.
Sheila Bair comes to mind.