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Old 02-12-2009, 09:45 PM
Gravy Gravy is offline
Join Date: Feb 2008
Location: Cincinnati, Ohio
Posts: 50
Default Re: How's Obama Doing?

Enforcement of compensation limitations will not be necessary if the new administration elects to let existing banking regulations be enforced. Banks which are insolvent would be closed, cleaned and then re-opened. Current managements would be removed immediately and the separation indemnity clauses in their contracts would almost certainly be near the end of the list of liabilities to be honored. Solvent banks could continue to compensate their employees in any legal manner the directors see fit. Insolvency is conceptually much easier than TARP I or this new public/private asset fund. A principle benefit is that it completely erases doubt on asset values...whatever people pay for them is exactly what they would be worth. If values of certain asset classes slumped to 15% of book value, it wouldn't matter as the asset owner would already be insolvent. What is the purpose of the private/public partnership? TARP I and this new program seem to have identical goals of avoiding insolvencies of our financial institutions. On the surface this sounds good, but the only mechanisms that has been identified to do this is to use coerced funds to make either pretty lame equity purchases (preferred shares at half, or less, the coupon Buffett seems to get while leaving managment in place....they shouldn't have their salaries limited, they should be fired), or almost comically transparent price supports for lame assets. Now why would we do that? Gosh, almost all the public money eventually works it way to the bondholders. Do you think Sec. I-can't-figure-out-my-taxes knows this? My guess is somebody might have mentioned this to him at one time or another, but that is speculation on my part.
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