Gretchen Morgenson, Please Step Down From Your High Horse

Back in March, 2008, I sent an emal to Gretchen Morgenson regarding the Bear Stearns/JPM debacle, and her populist, Wall Street-hating coverage surrounding the situation.  For some strange reason though, I hoped, despite all indications to the contrary, Mrs. Morgenson would clean up her act, knowing that people who actually have some semblance of financial/economic knowledge read her nonsense work.

Alas, almost a year later, she's one-upped herself, this time with a new, more vengeful ignorance that by now I've regrettably come to expect from the paper that employs such Financially illiterate (arrogant, annoying, etc) types as herself and Floyd Norris.

Curiously, now Mrs. Morgenson fancys herself an expert not only in all things Wall Street, but all things involving compensation, incentives, and policy.  While I'm not particularly surprised or dissapointed at this point,  readers should understand the righteous indignation with which I'm tempted to rain down upon her with, and the restraint I'm showing by avoiding the use of expletives, ALL CAPS, various other means of expressing such feelings in text.  To clarify, explicitly, the following is not an attack on an individual (per se), but on the argument(s) which she presents, and will be sent to her in an email, again.

Gretchen,

Regarding your recent article, "Fair Game: Bailout Needs Some Strings Attached to Limit Pay", I'm not quite sure where to start?  At the beginning, perhaps:

“The panel’s analysis revealed that in the 10 largest transactions made with TARP funds, for every $100 spent by Treasury, it received assets worth, on average, only $66,” the report said. “This disparity translates into a $78 billion shortfall for the first $254 billion in TARP funds that were spent.”

More taxpayer money down the drain, alas. And all the more reason to focus closely on executive pay restrictions at any bank that receives TARP funding.

Lets ignore, for a second, the fact that claims of "value" are for all practical purposes useless, given that no one can actually value the instruments in question, but frankly, I mean, holy non-sequitur Batman!   If I'm following your "logic" here, because the Treasury overpaid for assets to which no one can accurately value, you conclude that we should limit the pay of the bank Executives that convinced them to do so, despite the fact that their job is to do precisely that, to get the highest possible price for assets?  Seriously?  Give me a break.

I think you'll agree that most of the ladies and gentlemen who sit at or near the tops of these firms are already financially well-to-do, no?  Your plan is, to summarize, that we give the people who have the knowledge, ambition, and wherewithal (if anyone can be said to posses such things), a disincentive to fix the mess they may very well be responsible for creating?  This, sense does not make. 

Given the enormity of the task at hand - restoring the stability of the Global Financial System - perhaps we should be primarily focused not on punishing those deemed "responsible", but on creating an incentive structure to make sure those to which this task is left are those best equipped, and most likely to succeed. 

I realize, however, because this concept makes sense, it has no place in your column, especially since it does so without fueling the indignation of the ignorant pitch fork & torch anti-capitalism crowd. 

Much to my chagrin, It gets worse (much):

Although our long-running financial despond has produced few real positives, surely this is one: Investors are finally seeing just how regally executives live on their shareholders’ dimes. Maybe now they will do something about it.

Yes, Gretchen, making it, per your own admission, the Shareholders' problem, not the Government's.  

During good times, banks either hide or try to justify such perks as fleets of corporate jets and Las Vegas junkets. But as companies run to taxpayers for their bailout billions, they are now being forced to forgo the Gulfstreams, the tee times at Pebble Beach and those sumptuous spa treatments.

No, Gretchen, these perks are not restricted purely to the Executives and Employees of Financial firms.  As a matter of fact, firms (yours included, I'd imagine) rely on such perks in their every-day course of business.  Are you suggesting that, at a time when Banks are already up the proverbial creek in terms of retaining, nay, generating new business, that we further restrict their ability to do so?  Do you ever engage your brain before you put pen to paper (or fingers to keyboard, as it were)? 

Considering this suggestion, if put into practice, would necessitate further layoffs and bankruptcies amongst the very firms that depend on corporate travel and entertainment spending,  which we do not need any more of, I highly doubt it.

Could shame, that long-lost American character trait, be making a comeback? Not likely. So it’s important to make Washington’s plan to rein in executive pay airtight. Loud rebukes against executive excess are amusing, but a $500,000 cap on salary means only that the executives will be paid some other way. And requiring companies to recover compensation only if an executive is found to have lied on financial statements? Good luck with that.

Well, the voice of reason speaks, kind of.  This is really the best part though, where you, Gretchen, presume to teach us all how you think we'll get out of this mess, thank god!

Here’s an alternative approach. How about requiring that any severance pay over $1 million be subject to an excise tax of 20 percent? This is the amount levied on golden parachutes, and it could easily be applied to severance at companies tapping the TARP.

Ahhh, the inevitably arbitrary, yet impressively chosen "million dollar" threshold, what better way to rile the masses?  Far be it from me to point out that this approach simply amounts to a redistribution of money to The State, which I should remind you has such a great track record when it comes to deciding how best to allocate capital, but let's not let things like "logic" or "history" get in the way of your arguments here.

Furthermore, why not extract a 20 percent tax on all perquisites exceeding $50,000 that are given exclusively to top executives each year? These include such delectables as cars and drivers, country club memberships and personal use of corporate aircraft. If the government won’t bar perks outright, then executives should have to give something back for the freebies.

Gretchen, by what calculus did you arrive at these numbers?  Even if you're speaking only of use of jets, drivers, and the like for personal use, $50,000 is still an arbitrarily low number, when a country club membership alone can cost $100,000+/year for a mid-to-fairly high-level club around a major metropolitan area.  A driver, often included in compensation packages since an Executive's role is sometimes a 24/7 job, can cost substantially more than $50,000.  

And while we are on the subject of excise taxes, the government should ban the deplorable corporate practice known as the gross-up, in which shareholders pay to cover an executive’s tax bills. Rank-and-file employees at these companies, who have been hit hard by the crisis, don’t get these deals. Why should anyone?

Gretchen, I'm sorry, you are either a shameless pandering hack playing to the already-angry masses to sell Papers, or an ill/un-informed idiot. 

 If shareholders don't want the executives of their portfolio firms receiving gross-ups as part of their compensation, then can - get this - not hold, or sell their shares in that firm or firms.  Incredibly, they can also attend what we call a "shareholder meeting," among a variety of other ways they can air their grievances.  Feel free to return to the realm of reality at any point, we'll be waiting for you.

IT is also important for the government to provide as many incentives as possible to get taxpayers’ money paid back quickly. So any executive pay restrictions might also state that if TARP funds are returned within a certain period — say, 18 months — the penalties can be avoided or refunded.

Oh, because this proposition won't incentivize Executives to do anything silly, like maximize short-term results to the detriment of long-term sustainability, no, we'd never expect anyone to do something so preposterous!  Of course, this says virtually nothing of the fact that as long as Banks keep paying interest (preferred dividends) on TARP funds, repaying loans later, rather than sooner, may actually work out better for shareholders, as over a more distant time horizon, many asset values will likely increase closer (albeit likely not to) par.  This is a gross oversimplification for which I apologize, but you should be comfortable with such shortcuts, so bear with me.

That which does not kill you makes you stronger, as the saying goes. If out of this near-death economic experience, shareholders emerge stronger and tougher on directors about me-first executives, more to the good.

Yes, you've hit the nail on the head, finally!  Shareholders, not the Government, need to demand more accountability and results, more performance for the pay, so-to-speak.  I do not disagree with the basic premise that when Government (or, as you're careful to say, "Taxpayer") funds are used, certain restrictions may be a good idea to ensure that said funds are not abused.  However, not a single suggestion if your article comes close to making any sense whatsoever.   If adopted, your proposals would, as I've already pointed out, likely accomplish the complete opposite results for which we should be desperately hoping.

Please, I implore you, issue a public defense of my criticisms, of your work.  Nothing would make me happier than to see some actual supporting evidence or logic to back-up your claims and suggestions, that is, to prove my criticism unwarranted; I am not excited about my seemingly ever-declining faith in traditional media outlets and traditional Journalists like as yourself.  Seriously, please, I beg of you, restore my confidence once more!

Regards,

Anal_yst

Comments

[Kid Dynamite]

ummmm - I agree.. if the Treasury overpaid by $78B shouldn't we cap pay at the Treasury? we can put all the crappy assets into a fund to pay comp to Congress - like CSFB did...

Populism will be the most dangerous political tool of the next several years.

Anal_yst - I think what gretchen meant to say was that since the government is giving the TARP firms money, the government has a right to demand concessions. I actually agree on this point - but i think that the government should buy common, VOTING, equity, so that this is easily accomplished - which i think was YOUR point.

[Anal_yst]

@ Dynamite

As usual your spot-on, and I love your CSFB-esque Congressional compensation plan, put that down on paper and get it on the Oval Office, stat!

You are also correct that yes, my point was that Morgenson is trying to reinvent the wheel; as you said, the mechanisms to accomplish her suggestions (the ones that aren't completely out of touch with reality) already exist.

I understand that the NYT is in the business of making money (although they're not so good at it, but I digress), part of which necessitates publishing material that sells the most papers/ad space or whatnot. However, I firmly believe that it is entirely possible to appeal to a broad audience without sounding like a schmuck to those "in the know," so-to-speak.

[Brian24]

Anal_yst,

Y'know, I normally agree with you. But most of your points here miss the fact that the executive pay caps here would not be imposed by government fiat. They would be contractually imposed. I.e., the government would say, "If you want to take some of our money, you must submit to these conditions." If a firm does not wish to submit to the conditions, fine: don't take the money.

I fail to see the problem. Frankly, I hope as many firms as possible see the terms as too onerous and remain free of the taint of government money. But the government has every right to impose such restrictions as a condition of funding.

Furthermore, I am as anal about the use of the English language as you are about economic literacy. And the New York Times can not employ "herself." Only Gretchen can employ herself; the Times employs "her."

Sorry, I just really hate the overuse of the suffix "-self" that is rampant in corporateworld.

[Anal_yst]

@ Bryan24

Appreciate your candor and keen eye! I'm pretty sure I corrected the "herself" thing on the version of this post that appears on the FT's Long Room but forgot to here, whoops?!

The problem which I thought I painstakingly and simply illustrated (apologies if this comes off as defensive), is that I think we can all (most?) agree that the Financial system is under what may very well be unprecedented stress. Yes, we should punish Executives who were more than just simply not that good at their job, but criminally negligent or worse, complicit.

The point of doing this is not to satisfy the Public's desire to see "bad men pay for their sins," although I'm sure it will be interpreted and spun as such. It is to discourage others from repeating the same crimes and/or mistakes in the future.

More importantly, it was my (perhaps most critical) point to remind Gretchen (readers, etc) that while discouraging future behavior detrimental to the Financial system (and all it's participants) is important, ENCOURAGING people to step-up to the mighty task at hand is even MORE important, as in it should be our immediate and primary concern.

Appreciate you taking the time to comment, and hope to see you around these here parts again.

[Brian24]

I certainly do agree that there's a whiff of witch hunt in the air, and that's certainly counter-productive. But as long as the rules Gretchen's obsessing over are conditions of taking taxpayer money, I see no reason to question any conditions set by the taxpayers' representatives. If she starts angling for legislation unrelated to taking gov't money, of course, I'm on your side.

[Anal_yst]

@ Brian24

So we get back to my main point: If by taking (regardless of "need" - that's another conversation) Government $, a bank (er, "bank") subjects itself to onerous restrictions as to how it can run it's business, attract/retain capable talent ("talent"), etc, what incentive does the Bank have to take Government funds, when the alternative is to call the Government's bluff and go it alone.

Best case, they pull off a veritable miracle and get paid out the wazoo. Worst case, they continue on their current trajector and the Government bails their butts out anyway, just likely further into the abyss, which isn't good for anyone in the long run.

"Taxpayers" and the Government (everyone, really) needs to understand that until you create some incentive structure(s) to encourage people to voluntarily step up to such a difficult task, the probability of accomplishing said task approaches zero.

[awestruck]

Gretchen writes the same column every week. Same theme, rotating cast of villains. It's like the old "Batman" TV series from the 1960s.

[Anal_yst]

@ awestruck

I can only aspire to the kind of realistic detachment you've attained.

Seriously, that's a fantastic comment, so elegantly simple, yet so true.

[tmaker]

I propose we examine the existing laws in order to create an incentive structure for TARP executives and their anti-salary cap bloggers:

1.) Realize that 18 U.S.C. § 875(d) stipulates the following:

"Whoever, with intent to extort from any person, firm, association, or corporation, any money or other thing of value, transmits in interstate or foreign commerce ANY COMMUNICATION CONTAINING ANY THREAT TO INJURE THE PROPERTY or reputation of the addressee or of another or the reputation of a deceased person or any threat to accuse the addressee or any other person of a crime, shall be fined under this title or imprisoned not more than two years, or both."

2.) Realize that 18 U.S.C. § 880 stipulates the following:

A person who receives, possesses, conceals, or disposes of any money or other property which was obtained from the commission of any offense under this chapter that is punishable by imprisonment for more than 1 year, knowing the same to have been unlawfully obtained, shall be imprisoned not more than 3 years, fined under this title, or both.

Thus, I think that it is clear that the TARP executive who are pursuing an argument that salary caps will be a disincentive are, along with their allied blogger, committing extortion against the U.S. taxpayer. If one does not like salary caps, either STFU and leave your TARP funded institution or stay and do your patriotic duty to fix the mess that you helped to create.

[Anal_yst]

@ tmaker

While I haven't yet got my JD, as far as I can tell what you've provided is nothing more than a non-sequitur, at best.

[Anal_yst]

@tmaker (continued...)

I meant to include in my above response a question:

Do you realize that you've tacitly agreed with my point, as you say, "If one does not like salary caps...leave your TARP funded institution..."

EXACTLY

Ask yourself, seriously, if you were sitting on $5, $10, or $20+ million, were in your 50's or 60's, would you want to subject yourself to the incredible stress of taking the helm of a TARP-supported financial institution for $500m/year when the downside is so uncertain?

I suspect (and hope) that some will be motivated by "patriotic duty" or something along those lines, however, I'm too cynical to expect people to be jumping at the opportunity.

[tmaker]

Anal_yst, since TARP executives are on the public dole, they should realize that what normally would be OK (i.e. refusing to do a job unless they get "appropriate" compensation) could be taken as a threat of extortion. For instance, suppose the IRS Commissioner told Congress that he and his organization would not collect revenue unless their General Schedule (GS) pay grades were raised. Clearly, such an action would be extortion. Likewise, if a group of IRS agents, or, perhaps, their family members, blogged that the organization would refrain from revenue collection unless their demands were met, then, their collective act could be viewed as extortion or a racket (i.e. an organized illegal activity, such as bootlegging or the extortion of money from legitimate business people by threat or violence). I guess you have failed to distinguish how the actions and you and your TARP-taking Wall Street bosses differ from my hypothetical IRS example. Please educate me.

[Anal_yst]

tmaker,

I appreciate you trying to clarify your point, but you seem to be of the impression that all of these people (Bank Exec, IRS Commissioner, IRS Examiner, etc) have only 2 options:

1. STFU and work

or

2. Boycott work or strike to "extort" higher wages.

Back in the realm of reality there is AT LEAST one other option which I can't for the life of me understand you keep forgetting:

They can step down/quit/retire.

This isn't rocket science my friend, and it seems you're failing to see the forest for the trees here, i.e. getting caught up in the legalese/minituae and ignoring real options available to participants in the current situation.

[tmaker]

No, I realize they could retire or quit. That is fine, and, I think that is where the real work on incentives should begin. In some instances, it may be good for younger (and less wealthy) blood to be promoted within these organizations. Additionally, we should be thinking about compelling some of these people in their 50's or 60's to disgorge their bonus payments from 2002 to 2008 or, alternatively, pay a 5% excise tax on wealth conditional on past employment in the financial industry for the next 10 years. These kind of arrangements would create the proper incentives for them to continue working.

[Anal_yst]

@tmaker

That's a slippery slope, my friend. Be careful what you wish for...

[tmaker]

Anal_yst,

As you know, a slippery slope is a type of logical fallacy. Simply saying that something is a slippery slope is not an argument. I could just as easily say that socializing losses across the entire U.S. tax base is a slippery slope. The fact of the matter is that we have a class of people that were paid an extraordinary sum of money to destroy value. Furthermore, this same class of people is now attempting to extort even more money based on the claim that they can somehow restore the value previously lost. Proper incentives for eliciting value producing actions from this class of people may include the avoidance of substantial fines and jail time, NOT increased pay.

[Anal_yst]

@ tmaker

What is your background, don't have to be specific, please enlighten me as to what informs the curious opinions you've expressed here.

You appear by all indications to be engaging in subversive class warfare, insinuating that "those at the top" screwed/are screwing "those who are not".

This is not only a gross oversimplification, the likes of which I'd attribute to a NYT writer, but a gross perversion of reality.

Perhaps you missed this very prescient piece from Slate (on DB yesterday), http://www.slate.com/id/2210720/?from=rss.

You should realize this is not about "class," despite what those such as yourself may delude yourself into thinking.

If I'm reading your suggestion(s) correctly, you're advocating that we essentially jail "those responsible" and forcibly keep them working at the companies you believe they've destroyed.

I was willing to entertain your comments up until now, but I'm sorry, you're views - and the "logic" you use to support them - indicate that you're not only ill- or poorly-informed but frankly vindictive, if not downright vengeful.

I always appreciate the viewpoints of those with different backgrounds and perspectives than myself, however, I request that said perspectives be grounded at least somewhat in reality and supported by logic, and you've cleared neither hurdle (mostly due to your last comment).

For some strange reason you're under the impression that the "haves" are trying to extort the poor, defenseless "have-nots," but you seem not to have understood me, despite having repeated myself several times, that while this may describe the minority, this accusation is hardly applicable to the majority to which you ascribe it.

Please, feel free to comment again. Hopefully you'll bring more to the table next time.

Thanks for playing,

Anal_yst

[tmaker]

Thank you for the link to that article. Now, on to the meat:

"If I'm reading your suggestion(s) correctly, you're advocating that we essentially jail 'those responsible' and forcibly keep them working at the companies you believe they've destroyed."

Yes, that is what I propose. I use the term "class" interchangeably with "those responsible", so, to be clear, the class I am talking about consists of individuals with managerial power within TARP funded organization, subsidiaries of said organizations, and all predecessor organizations. The article you gave a link to states that this group is a "minority within the minority."

How realistic is it to identify these individuals. Pretty realistic is my guess. For instance, the 2008 FY budget provides $3.8 billion for the FBI’s counterterrorism, counterintelligence, and intelligence programs [1]. A fraction of this money goes towards compiling and maintaining the terrorist watch list which supposedly contains 2,500 "no fly" individuals and 16,000 "selectees" [2]. Furthermore, the impetus behind this list was an attack which caused an estimated $47 billion in lost economic output and $1.7 trillion in lost stock market wealth [3]. In comparison, losses from the credit crisis may reach $3.6 trillion [4].

Since it is feasible to identify our target class of approximately 20,000 to 200,000 individuals, the next issue is to determine what legal remedies we may pursue...

We may not:

1.) Single out an individual or group for punishment without a trial since this is forbidden by the Constitution (see Article I, Section 9 - No Bill of Attainder) [5].

2.) Enslave a group of people (see Amendment XIII) [6].

We may:

1.) Retroactively tax, as long as we can avoid any due process complications [7].

2.) Declare the individuals "enemy combatants" and do as we please.

3.) Have taxpayers in each state file civil suits against the TARP-taking organizations arguing that said taxpayers were bystanders injured by defective products (e.g. CDOs). If the organizations lose, they can pursue claims against their employees (e.g. negligence in modeling financial products - similar to how an engineer is liable for constructing a faulty bridge) [8].

4.) Utilize provisions within the Racketeer Influenced and Corrupt Organizations Act (RICO).

Thus, there are ample legal tools to achieve my policy objective of draining resources away from TARP executives and thereby giving them incentives to continue working. As an added benefit, the Treasury and/or the taxpayers may recoup approximately $20 to $200 billion dollars.

As far as labels go, I am not really interested in them. If desperate, though, I suppose you could call me a Republican who became a Libertarian who was then influence by Henry George into a sort of geolibertarianism and who now despises labels and is reconciled to the fact that we live within a form of state monopoly capitalism.

[1] http://www.whitehouse.gov/omb/budget/fy2008/justice.aspx
[2] http://www.cnn.com/2008/TRAVEL/10/22/no.fly.lists/index.html
[3] http://www.house.gov/jec/terrorism/costs.pdf
[4] http://www.bloomberg.com/apps/news?pid=20601087&sid=aS0yBnMR3USk&refer=home
[5] http://www.archives.gov/exhibits/charters/constitution_transcript.html
[6] http://www.archives.gov/exhibits/charters/constitution_amendments_11-27.html
[7] http://www.heritage.org/Research/Taxes/HL613.cfm
[8] http://www.law.com/jsp/article.jsp?id=1202211782244

[thoth]

tmaker - I going to presume here, but I don't think Anal_yst was asking about your political leanings; rather, your work background. Your liberal use of legal non-sequitors and stated belief in compelling people to work seem to indicate you don't work in a business setting (certainly not a financial industry).

As far as your compulsion argument goes, there is no way anybody will compel me to stay in a job I don't feel like staying in. Like Anal-yst, I don't have a JD (nor do you, is my guess), but I do not believe the government has a legal ability to compell work. I suspect that would fall under the "takings" clause of the constitution. And no, that is not extortion, since I am merely removing myself from a compensated job, not threatening to injure the property.

I hae no idea why you brought the "no-fly" list up....was that supposed to be relevant? It helps if you don't just cite parts of the law that you found on wikipedia...

If you worked in the industry, you would probably know that a retroactive tax would generate much less revenue than you think - most of those executives receive large amounts of their compensation in restricted stock. That stock has subsequently lost the vast majority of its value at the time of award.

Finally, I think you misunderstand entirely what happened here. It really wasn't a case of "defective products." CDO's, CLO's, RMBS, etc certainly suffered from stupid risk-taking, but that is what it was. Any financial instrument (including the US Treasury) involves risk. Whoever buys the instrument should take that into account. Whoever doesn't, say, the pension funds who bought all those RMBS, deseres whatever they get. They're stupid for not examining the risk themselves. Bad underwriting is not criminal behaviour.

[Anal_yst]

@ Thoth

Correct, you are in your presumtion, and I couldn't agree with your assessment much more. Frankly, I'd given up on @tmaker after that last comment insinuating the Gov't should prosecute Financial employees under RICO, among other idiotic ideas.

You put it better (and less angrily than I almost did), thanks.

[tmaker]

@Thoth

1.) I did not make an argument for compulsion. I said that I would like to compel them, but the country can not legally do so. Therefore, I gave a list of ways in which we could recoup some of the compensation paid to the "experienced" people that got us into this mess. With less wealth, these individuals would hopefully find it worthwhile to continue working for less pay and not seek out an early retirement. What is wrong with that?

2.) Anal_yst requested that my perspective "be grounded at least somewhat in reality." The no-fly list was an attempt to demonstrate that modern technology allows us to easily identify and track networks of people. In modern times, saying that we can not figure out who did what within Countrywide two years ago is false. We can and we should. Putting together a list of employees, their bonuses, and their position/role within the securitization chain, while not trivial, is a lot simpler than repricing "toxic" assets. It took less than $3 billion to figure out Al-Qaeda's structure, so we could find "those responsible" for the current crisis with approximately 0.3% of the stimulus package's funds. If we only recoup $20 billion dollars over three years via the courts, we are still talking about a simple annualized ROI of 188%. Even if we recovered nothing and just put the information online, it would be an incredibly brilliant piece of make-work. Why not do this?

3.) Ya, I'm not a big fan of the retroactive tax.

4.) You say that:

"Any financial instrument (including the US Treasury) involves risk. Whoever buys the instrument should take that into account. Whoever doesn't, say, the pension funds who bought all those RMBS, deseres whatever they get."

Yes, I agree with you; however, under strict product liability, you must make sure that your product does not harm bystanders. For instance, if you bought a crappy lawnmower and the blade flew off and hit me, I could then sue the manufacturer of said lawnmower for damages. I was not a user of CDOs, CLOs, or RMBSs, yet I, and my fellow taxpayers, are now losing money because of them. We have been harmed for actions entirely outside of our control. I think that this is the strongest argument going forward. I especially like it because it would hold financial engineers liable for the negative externalities caused by their products. Furthermore, any judgments against these financial engineers would be paid out of future earnings! Whats wrong with demanding taxpayer-safe financial products?

I am not trying to anger you guys, and I am not angry. I do wish you would address my actual points instead of straw men, but if you do not want to do so, that is fine with me.

[Anal_yst]

@tmaker

The problem is not the tools, themselves, but how they were used/abused.

In well-trained, cautions hands, a sledgehammer is a very useful tool. However, in untrained/irresponsible hands it has the potential to be horrifically abused, not only to the detriment of the user, but to others as well.

Also, you suggested using RICO to prosecute the employees of financial firms, which would presuppose that highly-regulated firms were in actuality criminal enterprises, right? Do you realize the implications of your words?

Necessarily, you've implied that the "Government" was complicit in aiding & abetting criminal enterprise, and would thus have to prosecute itself, causing a circular reference of the worst variety.

The unintended consequences of your suggestions would reach far and wide, if you can't see that, I'm sorry but I don't have either the time or the inclination to walk you through it.

You sound like there's a smart guy in there somewhere, just spend less time focusing on your vengeful witch-hunt and more time thinking about what decisions/actions will help us get out of/through our current predicament ASAP, in the best shape possible.

[tmaker]

@Anal_yst

Thanks for the complement. Also, I admit that RICO is probably the last refuge of prosecutorial scoundrels; however, it has been used on Wall Street before (with limited effect) by Rudolph W. Giuliani:

6 Charged With Racketeering In Wall Street Insider Inquiry

http://query.nytimes.com/gst/fullpage.html?res=940DE5DF113CF936A3575BC0A96E948260&sec=&spon=&pagewanted=all

Please note that there were no unintended consequences of this action and that the Government did not end up prosecuting itself.

If you want ideas for the future, well, I am sort of pessimistic since I think that, to a certain extent, business cycles must play themselves out. You might want to look at the following post for some innovative ideas on pricing toxic assets:

http://paul.kedrosky.com/archives/2009/02/03/how_to_handle_t.html#comments

[Supra Vega Shoes]

When shepherds quarrel， the wolf has a winning game.

[Supra Vega]

Learning makes a good man better and ill man worse.