I know these guys … I don’t begrudge them their compensation.
Quick: Who said it about whom? If you guessed the President said it about Jamie Dimon and Lloyd Blankfein you would be correct. (I’m sure if you forced me to source these statements I would be able).
But in a just released study, Bank Executive Compensation And Capital Requirements Reform conducted by Sanjai Bhagat, University of Colorado at Boulder and Brian Bolton, University of New Hampshire, brings into question whether “these guys are savvy businessmen”. In summary:
We study the executive compensation structure in the largest 14 U.S. financial institutions during 2000-2008. Our results are mostly consistent with and supportive of the findings of Bebchuk, Cohen and Spamann (2010), that is, managerial incentives matter – incentives generated by executive compensation programs led to excessive risk-taking by banks leading to the current financial crisis. Also, our results are generally not supportive of the conclusions of Fahlenbrach and Stulz (2011) that the poor performance of banks during the crisis was the result of unforeseen risk.
These very important findings, which I expect will be a critical exhibit in the event that additional litigation presents as a result of this report.
The paper is dense and not easily accessible in terms of comprehension. Therefore, this blog entry by Simon Johnson, (the former chief economist at the International Monetary Fund, and co-author of “13 Bankers”) helps distill the essential facts.
No worries; Ken Feinberg will get on the case.
I am hoping that by posting it here it will get out of my head.
I realize that statement may not make any sense at all. So as an example, neoliberals will claim that globalism raises living standards in third world nations do their middle class can grow. Yes, it is true that when jobs are outsourced to India from America the Indian community where the jobs go will flourish, and the American community that lost the jobs will become depressed. But the second part of that is while the standards of living in that Indian community rise, the income that is earned is based on “nonproductive labor”. That’s my own term and it means jobs that people do which provide little or no sustainable economic benefit. For example, tech support people in India are earning money but they ar building nothing of substance for their community or for the world. The chinese teen is making beads for Mardi Gras revelers to throw at women with exposed bosoms. Not a lot of future in that. And not how I wish to use the precious resources we have remaining on earth.
Additionally, if you look at how the income is being distributed, the countries hat seem to benefit in the short term actually end up creating greater economic disparity. This is hidden in the early stages because everyone gets to get a little, and for most that’s a lot. But eventually you see incredible vulgarity and consumerism and a growth of an economic overclass. How that functions for society is a subject of great debate amongst us.
Update 2/4/11 10:28 AM
If any further evidence was required in order to understand why we are in this predicament, I give you selected comments from a website called Democratic Underground, in reference to this film:
I didn’t make it through the whole thing. I thought it was awful
Here is a link to the thread for your enjoyment:
As a point of interest, and something to reflect upon is that not one of the erudite commentators were prepared to share their learned observations on the specific elements with which they took issue.
This is what a dumbed down and defeated citizenry looks like. No one said it would be easy.