24 December, 2008

Hilzoy Has Some Thoughts

Hilzoy borrows the Smack-o-Matic and gets to work on the banks:

From the AP:

"Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.


The super-rich seem to me, during the past few decades, to have wafted off into their own alternate universe, in which of course they are entitled to have their employers pay them not just large salaries, not just multi-million dollar bonuses every year, but the bills for everything that ordinary people pay for; in which flying on public airlines seems to them the way taking the public buses seems to much of the middle class; in which any possible contact with what the rest of us take to be reality has been airbrushed away by vast quantities of money.

Under normal circumstances, I'd think: nice work if you can get it, and worry about the effects of massive inequality on public life. But these are not normal times. The very people who are getting these bonuses and chauffeurs and private jets and financial planners have just sent the entire global economy into a nosedive. They have caused massive amounts of money to disappear. They are getting bailed out for their mistakes by the rest of us -- the people who, if we're lucky, get to fly coach, and if we're not, drive across the country or take a bus.

If they had any shame at all, they would stop. More than that: if they had any sense at all of how angry a lot of us are getting, sheer prudence would do the trick. This is our money. We are giving it to them to get all of us out of a problem that they caused. They should bear that in mind, not treat us as if we were one great big cookie jar.

Amen, sister.

I think all of us who have been watching the disparity between how the financial industry and the auto industry have been treated respectively, and come to pretty much the same conclusions Hilzoy has:

I've been wondering why such different standards are applied to financial executives and Detroit's auto workers. Consider:

* The financial executives helped cause the present meltdown. Auto workers did not.

* The financial executives run their firms, and are responsible for their troubles. Auto workers and their union, by contrast, just got themselves a good deal by bargaining with management. That's their prerogative. I don't see that they're any more to blame for the problems of the Big Three than people who accept unduly large cash back bonuses on their new cars would be, had the Big Three miscalculated and given away more in cash-back bonuses than they could afford.

* Financial executives have just destroyed a tremendous amount of value and ruined the global economy. Auto workers have been busy creating useful things.

* In exchange for destroying value, financial executives get paid a whole lot more than auto workers. Orders of magnitude more. They even get multi-million dollar performance bonuses when their firms lose money! And their benefits are a lot more cushy: not just good health care but private jets and chauffeurs!

* Punishing financial executives helps reduce moral hazard. Punishing auto workers does not.

Honestly: what sense does it make to stick it to a bunch of auto workers while letting the financial executives off scot-free?

Answer: none whatsoever. But, you see, UAW donates to Dems and the financial industry largely lines Con pockets, henceforth the disparity.

But there's an opportunity here to play political aikido. Hilzoy quotes rok for dean, who shows us the way:

...By way of comparison, in Europe, an average CEO only makes 22 times as much as an average worker, and in Japan, only 17 times as much.

If America wants to be competitive again, we need to reduce CEO pay to a level comparable to CEO pay in Europe and Japan. I know exactly how to accomplish this feat. The UAW should agree to immediately lower U.S. union worker pay to a level equal to the level paid by their non-union, non-American competitors. In return, auto CEO's must agree to permanently lower their compensation to only 20 times that of an average union worker.

Once this has been accomplished, Congress must move to apply the same pay standards to AIG and all of the financial institutions that took one penny of taxpayer money from the TARP fund."

Isn't that a beautiful idea? Quid pro fucking quo, baby. If the Cons want us to be so much like foreign competitors, if they think pay disparities between American and foreign workers are such an issue, the solution is elegantly simple: everybody gets to play follow-the-leader with Japan. Including our hugely overcompensated CEOs.

Fair, after all, is fair.

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