Proper Roll of Government?

[rushmc 18]

http://www.nytimes.com/2009/03/22/us/politics/22regulate.html

Administration Seeks Increase in Oversight of Executive Pay


Published: March 21, 2009
WASHINGTON — The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.


The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.

Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

The plan is being put together in advance of the meeting of the Group of 20 industrialized and developing nations in London, which is expected to be dominated by the global financial crisis and discussions about better oversight of large financial companies whose problems could threaten to undermine international markets.

An important part of the plan still under debate is how to regulate the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis.

Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. But in a sign of the fragility of the economic system officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.

“The argument some are making is that they don’t want to be stepping on the gas pedal and the brake at the same time,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics and a former top official at the International Monetary Fund.

Administration officials are also debating how tightly to supervise hedge funds. A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. But officials have not decided how much the funds will have to disclose about their investments and trading practices.

A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large, troubled companies that are not now regulated by Washington, like insurance companies and hedge funds.

That proposal would, for instance, make it easier for the government to cancel bonus contracts like those given to executives at the American International Group, which have stoked a political furor. Under the proposal, the Treasury secretary would have the authority to seize and wind down a struggling institution after consulting with the president and upon the recommendation of two-thirds of the Federal Reserve board.

Long before he became Treasury secretary, Timothy F. Geithner had sought broader authority for the government to resolve problems at financial institutions that were not under the supervision of bank regulators.

The government now has the power to take over only the banking unit that controls federally insured deposits of large troubled institutions, not the parent company, a limit that could pose problems if large financial conglomerates like Citigroup or Bank of America continued to spiral downward.

In unveiling the regulatory plan this week, President Obama would signal to Europe that he intended to crack down on the risk-taking and other free-wheeling practices by the financial industry that resulted in the global economic meltdown.

France and Germany especially have suggested that the better response is not more government spending but tighter regulation.

The Obama administration has urged European nations to do more to restart their economies through financial stimulus. Mr. Obama is hoping that by showing a serious commitment to tighter regulation he can more easily persuade other countries to increase government spending and stimulate demand by consumers and businesses that would help pull the global economy out of a serious decline.

But the administration’s efforts, especially on tighter regulation of hedge funds, are not expected to assuage some European countries. Moreover, the hedge fund industry has significant influence on Capitol Hill and has shown that it can defeat proposals it finds onerous.

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While a growing number of hedge fund advisers have voluntarily agreed to register with the S.E.C., many of the most prominent ones are expected to oppose efforts to require them to provide what they consider proprietary information about their holdings and trading practices, even on a confidential basis.

From the outset of the Obama administration, officials and European leaders have disagreed over how much to limit pay. And Mr. Geithner has discouraged the administration from imposing across-the-board limits on compensation of all employees at troubled companies receiving federal assistance and more burdensome pay restrictions at healthy institutions that the administration is trying to encourage to take government money so they can increase lending.

Last week, Ben S. Bernanke, the Federal Reserve chairman, also called on regulators to supervise executive pay at banks more closely to avoid “compensation practices that can create mismatches between the rewards and risks borne by institutions or their managers.” In advance of Mr. Obama’s trip to the economic meeting, which begins on April 2, Mr. Geithner will describe the regulatory plan when he appears before Congress on Thursday.

Much of the plan would require the approval of Congress, where divisions are already forming over how best to overhaul financial industry oversight.

Representative Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said he believed that giving the government new authority to take over troubled companies could be adopted by the House relatively quickly, particularly after the furor over the A.I.G. bonuses.

“This would give the government the same powers that you would get as if the company were in bankruptcy,” Mr. Frank said in an interview shortly after meeting with Mr. Geithner on the plan.

But Mr. Frank and other lawmakers said other elements of the plan could take more time, like expanding the authority of the Federal Reserve to become a systemic regulator.

In a hearing on Thursday, Senator Christopher Dodd, the Connecticut Democrat who heads the banking committee, expressed skepticism about that proposal.

“Whether or not those vast powers will reside at the Fed remains an open question,” he said, pointing out that the Federal Reserve had failed to apply tough oversight of the companies it now regulates.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[BikerBabe 0]

I prefer King's Hawaiian Sweet Rolls, myself.



I am also a smartass....

I'm of the opinion that if the banks are going to take money from the government via a bailout...then they need to be ready to follow the government's rules. That's the role of gov't in this case.

Otherwise...not sure, to be honest. i can see both sides, so i guess i'm on the fence.

Never meddle in the affairs of dragons, for you are crunchy and taste good with ketchup!

[TomAiello 25]

Quote

I'm of the opinion that if the banks are going to take money from the government via a bailout...then they need to be ready to follow the government's rules. That's the role of gov't in this case.

Negative.

The Obama adminstration wants to enforce pay limits (and oversight) on _all_ financial institutions--not just the one's receiving bailout funds. It also appears to want a permanent role for the government--not just during this crisis, or until the loans are paid off, or whatever.

-- Tom Aiello

[email protected]
SnakeRiverBASE.com

[kbordson 8]

HELL NO!

[Gawain 0]

What's really got me wondering is how this poll would look 15, even 10 years ago...it wouldn't be this close...

So I try and I scream and I beg and I sigh
Just to prove I'm alive, and it's alright
'Cause tonight there's a way I'll make light of my treacherous life
Make light!

[Beachbum 0]

The way it's worded in that article ... a resounding NO ... but I'm also with BikerBabe relative to those surviving on bailout $$$ ... I don't have a problem with them setting limits on the use of "our" tax dollars to pay people who've already proved their ability to screw up.

As long as you are happy with yourself ... who cares what the rest of the world thinks?

[jerryzflies 0]

Quote

I prefer King's Hawaiian Sweet Rolls, myself.



I am also a smartass....

I'm of the opinion that if the banks are going to take money from the government via a bailout...then they need to be ready to follow the government's rules. That's the role of gov't in this case.

Agreed. If taxpayers foot the bill for these "executives'" screw ups, then taxpayers have the right to impose limits.

If you can't fix it with a hammer, the problem's electrical.

[Andy9o8 0]

Quote

Proper Roll of Government?

Promotion of edumacation, in particular literacy.

[billvon 2,475]

If you are an independent company, using your own money to make your own decisions - no.

If you are a company dependent on the US government, using taxpayer money to pay such bonuses - yes.

Easy answer - if you don't want government control of your executive pay, don't take billions from the government.

[TomAiello 25]

Quote

Easy answer - if you don't want government control of your executive pay, don't take billions from the government.

It's not that simple, for two reasons:

1) The Obama administration is trying to impose control on the entirety of the financial sector--including firms who never received any bailout money.

2) Many conditions have been imposed _after_ the bailout was received. As a result, several large financial companies are trying to give back the bailout money they received--and the treasury has yet to accept it.

3) Originally, the conditions imposed by the bailout were things that would prevent the banks from taking additional risks, and push them back toward fiscal sanity. Lately, though, we've seen a move toward additional conditions that actually push the banks toward making _bad_ financial decisions (letting customers renegotiate loans so the banks end up with a loss, for example, or pushing banks to lend money to people who don't qualify under the banks criteria, in the name of "getting the economy running," even though bad loans were one of the prime drivers getting us into the current mess).

-- Tom Aiello

[email protected]
SnakeRiverBASE.com

[rushmc 18]

Quote

If you are an independent company, using your own money to make your own decisions - no.

If you are a company dependent on the US government, using taxpayer money to pay such bonuses - yes.

Easy answer - if you don't want government control of your executive pay, don't take billions from the government.

+1

But that is not what Obama is planning

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[jerryzflies 0]

Quote

Quote

If you are an independent company, using your own money to make your own decisions - no.

If you are a company dependent on the US government, using taxpayer money to pay such bonuses - yes.

Easy answer - if you don't want government control of your executive pay, don't take billions from the government.

+1

But that is not what Obama is planning

Obama is planning to take billions from the government?

If you can't fix it with a hammer, the problem's electrical.

[rushmc 18]

Quote

Quote

Quote

If you are an independent company, using your own money to make your own decisions - no.

If you are a company dependent on the US government, using taxpayer money to pay such bonuses - yes.

Easy answer - if you don't want government control of your executive pay, don't take billions from the government.

+1

But that is not what Obama is planning

Obama is planning to take billions from the government?

More than likely.....

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[cliffwhite 0]

Interesting that we are discussing whether or not setting these rules is the proper role of government.
I'd suggest that bailing out private corporations in itself is an improper role of government.

Blues,
Cliff

2muchTruth

[rushmc 18]

Quote

Interesting that we are discussing whether or not setting these rules is the proper role of government.
I'd suggest that bailing out private corporations in itself is an improper role of government.

Blues,
Cliff

Absolutly. Your example along with many others that have been going on for decades

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rehmwa 2]

Quote

Interesting that we are discussing whether or not setting these rules is the proper role of government.
I'd suggest that bailing out private corporations in itself is an improper role of government.

Blues,
Cliff

I'm hoping that's because this is so completely obvious that it's just overlooked because they are already screwed that up.

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[cliffwhite 0]

I'm of the opinion that if the banks are going to take money from the government via a bailout...then they need to be ready to follow the government's rules.
__________________________________________________

Here is something of which not too many may be aware. The fact is that the government is borrowing money from the Federal Reserve Bank to bailout banks which are shareholders of the Federal Reserve Bank.
Kind of circular isn't it?

Also much of the funding to AIG is being used to prop up european banks at the expense of Americans.

Blues,
Cliff

2muchTruth

[billvon 2,475]

>Also much of the funding to AIG is being used to prop up european
>banks at the expense of Americans.

True, but China's lending us much of that money, and the Europeans are buying lots of stuff from China - it's all part of a very large and very secret nefarious plot.

[rushmc 18]

Quote

>Also much of the funding to AIG is being used to prop up european
>banks at the expense of Americans.

True, but China's lending us much of that money, and the Europeans are buying lots of stuff from China - it's all part of a very large and very secret nefarious plot.

Do you really see someone looking for black helos? Or is this just a smart ass response to someone you do not agree with?

Damn billvon, what kind of replies do you want to get?

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[JohnRich 4]

Quote

The Obama adminstration wants to enforce pay limits (and oversight) on _all_ financial institutions--not just the one's receiving bailout funds. It also appears to want a permanent role for the government--not just during this crisis...

Yep, that's the camel's nose in the tent.

Then they'll want to regulate all CEO pay.

And the next thing you know, they'll be controlling how much plumbers are allowed to earn.

Sieg heil mein Fuhrer!

[wmw999 2,174]

What he said.

Wendy W.

There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

[pirana 0]

My general opinion on how far into the weeds a government should go probably aligns closely with Libertarian philosophy. Less is almost always better.

<> Defend our borders and foster productive relations via diplomacy.
<> Keep domestic order and maintain a legal code as necessary to do so.
<> Tax & spend authority as needed to maintain infrastructure.
<> Record keeping & a census. Born, married, died (or as we geographers put it - hatch, match, and dispatch).

That's about it.

Owning, subsidizing, propping up, giving breaks, etc to any private business would be right out.

While we're on the topic though; the glaring inconsistency in most people's principles is at a level I'd call totally fucking ridiculous. Subsidization of sports teams happens pretty regularly with no questions asked; well, not enough to stop most local governments from giving their fellow millionaires a couple hundred million in "incentives."

But auto companies and banks get a different response. And what about small businesses? If any business group deserves a break it is the independent entreprenuer.

Further proof that most humans are emotive animals that occasssionally plug in their brain instead of thinking animals that are subject to occassional fits of emotion.

" . . . the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging them and kicking them into obedience." -- Aldous Huxley

[billvon 2,475]

>Do you really see someone looking for black helos?

It's a joke, my sensitive friend.

[idrankwhat 0]

Quote

My general opinion on how far into the weeds a government should go probably aligns closely with Libertarian philosophy. Less is almost always better.

<> Defend our borders and foster productive relations via diplomacy.
<> Keep domestic order and maintain a legal code as necessary to do so.
<> Tax & spend authority as needed to maintain infrastructure.
<> Record keeping & a census. Born, married, died (or as we geographers put it - hatch, match, and dispatch).

That's about it.

Personally I think it's a good thing when the government steps in and keeps companies like Microsoft from (completely) eliminating the competition. I also like it when my government steps in to help make sure that I can pick some food off a store shelf and not have to worry whether or not I'll be convulsing in a pool of my own waste in about an hour or on my way to the morgue the next day.
On the other hand, THIS is government getting out of control.

[rushmc 18]

Quote

>Do you really see someone looking for black helos?

It's a joke, my sensitive friend.

Alright, sorry. I have to admit I have one hell of a time trying to figure you out sometimes

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln