Tuesday, November 18, 2008

Child Hunger in US rose 50 percent in 2007

Now I'm really insisting that the top execs at Goldman Sachs, and all the rest of the banks, give back their bonuses. The same year bonuses all over Wall Street ballooned to unprecedented levels, 36.2 million adults and children struggled with hunger in the United States. And you're telling me we shouldn't be spreading the wealth?

I'd take what some would call socialism....(I call it fairness)....any day of the week over the current "free market rules all" version of democracy.

Read the whole article


thegil said...

Quick counterpoint for you..
I work for one of these evil banks that have given away monster bonuses in the past so I may be a bit partial.

That being said; I know many people at my current(major bank) employer who are scared to death of getting no bonus. They are not rich, they are not middle management,they are low level analyst who count on their bonus to pay for things like mortgage payments or college tuition for their children. When you talk about the evils of financial companies, remember that everyone is not getting million dollar bonuses and many count on that money to survive.

The sad part is that when people at the top get less or nothing, what do you think the finance employees at the bottom will get?
Bonuses at most firms(not exclusive to finance) tend to be delivered in a trickle down format.
Goldman's CEO has enough money for a hundred life times, but I know many employees at that company who do not make the money that everyone thinks they do. I do not think that their top executives deserve to be praised for not taking tens of millions of dollars, but I worry about what it does for the little guy.
-the little guy

Mr. Stein said...

I hear you, but I'm refering more to top management. Maybe I'm wrong, you would probably know better, but don't you think if you took a look at the leadership of banks you would find that they get the lionshare of these bonuses?

I'm all for the little guy, that's who I'm trying to look out for. Bonuses are in place to award good performance, but how can that be based on an arbitrary time period between Jan 1 and Dec 31 of every year? It needs to be over a longer period of time.

I would go as far as to say that I think there should be laws limiting executive pay as well as a limit on what the highest paid employee (CEO) makes in relation to the lowest paid employee (secretary). Some would say that limiting pay takes away the incentive to work hard, but I disagree. I see it every day in Sweden, where there is a very steep progressive tax - the rich pay way more- and people still work hard and are actually very efficient, despite taking off five weeks per year.

There comes a point where enough is enough. These bonuses, and in many cases salaries, are over the line of what's moral.

As far as the little people in banks, I think we have to realize that many of these bonuses were based on revenue and profits which were based on, again, morally questionable transactions, such as sub-prime, packaging and repackaging, etc, etc.

We always have to ask ourselves, where is the money coming from and is anyone getting hurt in the process? In this case, I would say that the banks screwed over many of their customers (citizens, countries, other financial institutions, universities, pension companies - basically everybody) at the same time the banks were recording their best years.

So unfortunately, while I do feel for the little people who will be affected by this, I think each of us has to take responsibility.

thegil said...

I agree, but the problem is bigger.
Its human nature. If you put a person in a high level job and you tell them that they can indirectly have a say in their compensation, would they want less or more? In addition, you tell them that you will get a big salary whether the company does well or not, but if the company does poorly for too many years in a row, you will likely be ousted. That person is going to try to get as much as they can for as long as they can. The CEO turnover(not just finance) across industries is incredible. I don't think this is right, but its the way the system is currently built.

Year's ago, after the collapse of Enron, Tyco, World Com, Arthur Andersen etc., the Sarbanes-Oxley Act of 2002 was enacted requiring CEO to sign their company's annual report essentially vouching for the accounting within. What's my point? I think that you can put in any regulation/ legislation that you can think of, and bad things will still happen. Every time something bad happens in the market, there is shock/disgust and more laws are enacted trying to prevent it(see market circuit breakers after 1987). Politician step up to take advantage of the situation with phony outrage looking to demonize the ones with the deepest pockets. We write more laws to prevent it..and it happens again. We have congressional hearings where they take turns insulting and embarrassing the top people in charge. Then it happens again. The bonuses are a very small part of this and taking them away this year will probably happen to all firms involved, but they'll be back next year..the overall structure is mixed up.

Mr. Stein said...

It seems Jose tried to leave a comment but it wasn't recorded. here it is:

Agreed! the big guys have to be held accountable and government should definitely set limits in terms of their compensation... besides, I wonder how many of those banks have plenty of cash in their offshore accounts, which could be used to fix up the mess they helped create back at home, but prefer that the little guys bail them out.

Mr. Stein said...

Oh, the Gil,
It's just like the good old days when we used to debate politics. I love it.

I agree with you there, the system is built backwards, but by those who have always had the power. So that's what we need to fight against. As far as your argument about human nature - that's exactly why we need more regulation. Unfattered capitalism breeds corruption!...Teddy Roosevelt's quote.

I think we agree more than we disagree, but I have to say that more, thought-through, and most importantly enforced regulation is the key here. I love how Wall Street and all unbridled free market supporters are still holding onto this idea of less regulation. How can you argue for less regulation when you've just been bailed out by taxpayers? Basically we are nationalizing risks and losses and privatizing profits and that's exactly what the free marketers want, and lobby for.

I see what you're saying about politicians calling hearings, but you make it seem like the government is seperate from the corporate interests in America....I completely disagree, and history (read Howard Zinn's People's History of the United States) proves otherwise. From independence, the US government has been set up to protect the elites. Did you know that at the time of the revolution, George Washington was the richest man in America?

Bonuses are a small part and I think we really need to look at salaries. It's unjust. And deep down I think you know it.

Come on, give it to me!