Krugman: Will Executive Compensation at Investment Banks Soar Back to 2007 Levels?

vampire bat street art photo by James Stencilowsky, used pursuant to CC license

by Damozel | Man, I can't even bring myself to mention this prospect to my co-blogger Deb Cupples, who has been writing for ages about the  insanity of permitting corporate managers to suck out the blood and bone marrow of their respective companies and was hoping that at least we'd learn that lesson.  Apparently not, though. In an op-ed entitled "Money for Nothing," Krugman writes:

Why is this disturbing? Let me count the ways.

First, there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks....

Still, you might argue that we have a free-market economy, and it’s up to the private sector to decide how much its employees are worth. But this brings me to my second point: Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a “welfare.”...

Furthermore, paying vast sums to wheeler-dealers isn’t just outrageous; it’s dangerous. Why, after all, did bankers take such huge risks? Because success — or even the temporary appearance of success — offered such gigantic rewards: even executives who blew up their companies could and did walk away with hundreds of millions. Now we’re seeing similar rewards offered to people who can play their risky games with federal backing.

So what’s going on here? Why are paychecks heading for the stratosphere again? Claims that firms have to pay these salaries to retain their best people aren’t plausible: with employment in the financial sector plunging, where are those people going to go?

No, the real reason financial firms are paying big again is simply because they can.  (NYT)

Instead of commenting myself on why this is a bad thing, I'm simply going to refer you to Deb's extensive, carefully researched commentary on this exact subject.   [You can find other blogger commentary on the Krugman piece at Memeorandum.]

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GM CEO Rick Wagoner to Resign: It's About Time

Bank Execs Might Give Back TARP Money if They Can't Pay Themselves Obscenely Well

Two Execs Sentenced to 20+ Years for Fraud, etc.

Sweeping Oversight Proposed re: Executive Pay & Other Things

Update: AIG to Give Bonuses and the Resulting Political Theatre

Citigroup Downgrades Wal-Mart Stocks over Possible Workers' Gains, but Ignores Executive Looting

AIG Gets Another $30 Billion: the Real Scandal

Obama's Executive-Pay Caps Don't Address the Root Problem

Richest Got Richer and Faced Lower Tax Rates

Citigroup Caves to Pressure Over Luxury Jet but Should Cut Executive Pay to Save Company and Jobs

Wealth Redistribution: Merrill CEO Shamelessly Spent Millions of Shareholder Dollars

AIG Scraps Bonuses but Gives Retention Pay (Which Looks Like a Bonus)  

Waxman Wants Executive Pay Data from Banks Receiving Bailout Funds

Save Jobs by Cutting Executive Pay  

Lehman Execs Re-Distributed Billions in Shareholder Wealth to Themselves, House Republicans Curse the Investigation  

 Wall Street Execs Paid $3 Billion While Driving Economy Toward Cliff  

See also:

Florida's Alan Grayson on His First Bill: The Pay for Performance Act ("No One Should Get Rich Off Abject Failure")

New FASB Rule: is our Government Encouraging Accounting Fraud?

Congressman Alan Grayson on Why AIG Went Broke ; Questioning Change to Valuation Rules ("Let's Make Inches Larger While We're at It")

"What's the Big Deal? It's a 10th of 1% of the Money We Gave Them for Sucking": Jon Stewart Tracks "The Enragening" (A Twofer)

Comments

[Best Forex Broker 2010]

I do hope that the lesson was learned and that if the people themselves didn't learn it well enough, they will be stopped by the government. I mean- it is their money.

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