Wall St. shrieks SOCIALISM at idea of returning bonuses.

[Derek Thunder]

What I'd like to see are rules against CEOs serving on their own compensation boards. As stated before, I personally don't know about the idea of a salary cap outside of companies that receive federal aid but there are large sociological costs to letting income inequality get out of control. Plutocracy is not a healthy system.

Additionally, one wonders if the whole "too big to fail" concept is an indication that maybe anti-trust laws have wrongly fallen by the wayside over the past few decades.

[SirNitram]

Enron and their ilk are no less evil than Countrywide bank, yet I don't hear anyone declaring that we need to cap the salaries of oil or energy executives.

I'll tackle this first: I am all onboard for pay caps. For any industry. The arguments against basically boil down to: The free market will set good pay. It's Randian 'Trust the Masters Of The Universe' chanting, and nothing more. Greenspan, her most loyal and powerful follower, has publically admitted this point of view is wrong.

Here's a tiny secret about the FDIC: The fees paid in do not even begin to cover the costs it must pay out, each time one of these new bubbles burst. Moreover, even if it was a period of normal operations, it would be a flat out lie to claim it covers itself, since the cap on insured funds has more than doubled to deal with this. So.

And plenty of institutions in this are paying into FDIC. Bank Of America is the big name, given this story, but hey, the TARP encouraged plenty of financials to change into 'Bank holding companies', and Paulson was quite happy to oblige.

Before you whine about your involvement, quick question: Is your current pay, sans benefits, more than 400k? If not, it has no place in a reality-based discussion, as that's the only pay cap being proposed.

'No precedent' is just 'No one's tried it before'. I realize Capitalism probably preaches against this vehemently, but that really doesn't effect someone who only supports capitalism's solutions when it is beneficial to society.

And it's not 'service industry'. Nice try on that dodge I missed. Even you should be able to grasp the difference between a service job and an investor when it comes to other people's money. If you do not immediately, step back, calm down, and challenge your basic assumptions.

[frigidmagi]

I don't know if I like the idea of the government deciding who should make what for what job Nitram. Sure we're setting this up with the best of intentions, but so was Diocletian when he set up the same in the old Roman Empire.

Where would this stop? Does the Government really have the right to tell me "This man should make this much and that man this much"? When it's not the Government's money?

Now the bit about the bonuses is a different thing entire in my mind. I think since they're using the taxpayers money... I.E. YOURS AND MINE, the Government as the legal holder of the funds in trust should have every right to say now wait a fucking minute...

In other words I agree with the part about "Use our money, play by our rules' that Nitram has suggested.

[SirNitram]

Frigid, a reminder: 'I don't know where it would stop' is a signature saying associated with the slippery slope fallacy. Fallacies, well, you know I don't give credit to them.

[frigidmagi]

You may not give credit to them but it is undeniable that powers given to a government expand in their scope and use, they do not contract. Also such centralization of power into a single set of hands does not strike me as a cure better then the illness.

[The Minx]

It's fair to ask, though, what justifies the government placing restrictions on one set of paychecks as opposed to another, and to wonder aloud whether that precedent could be applied elsewhere if no such distinction is defined when the first set of restrictions is put in place. So it's not entirely a slippery slope, IMHO.

[SirNitram]

You may not give credit to them but it is undeniable that powers given to a government expand in their scope and use, they do not contract. Also such centralization of power into a single set of hands does not strike me as a cure better then the illness.

I challenge this assumption: Deregulation. Each one is a removal of a law that allows the government power over economic situations.

[frigidmagi]

I challenge this assumption: Deregulation. Each one is a removal of a law that allows the government power over economic situations.

That is an idelogically driven exception at best and closer to the government letting go of responsibilities instead of surrendering up power in my mind. It is much more common to see the expansion of federal government power over time.

I offer the following counter examples.

No Knock Entry: Coming about in response to the Drug War, police may now enter your home without any announcement.

The FBI: Resulting from a court decision in 1886, which led to a law passed in 1887 that created a Federal responsibility and power of interstate law enforcement. At first it was just the DOJ underfunded and understaffed but it grew in scope and powers with the FBI being founded in 1935.

The Rico Act: If you are a member of an enterprise that has committed a 2 of a list of 35 crimes you can be charged with racketeering. Not only that but the US Attoreny can move to have your property seized Before the Trail even starts.

The War Powers Act: The President can deploy troops into combat zones for 90 days with out Congress even being told.

Federal Income Tax: At first the government preferred what is commonly called indirect taxes. But to pay for the costs of the civil war the first income tax was passed in 1861. It took til 1872 to get rid of it. However less then 30 years later in 1894 it was brought back, however the courts ruled in 1895 this was unconstitutional. The response was in 1913 the 16th amendment made it a fixture.

Trust busting and anti-monopoly powers: Ironically grabbed by Teddy Roosevelt, who felt it was the government's responsibility to play good Shepard over both main street and Wall street. Before this it was felt that the government had no business dictating to Wall street in matters financial. His larger then life prensence or any equalient in the modern Republican Party is sorely missed.

Patroit Act: Still not repealed.

Some of these expansions have been good things and we're happy to have them, other of these not so much. I'll leave to you to decide which is which for yourself.

[General Havoc]

I'm just gonna say right now that I'm getting a little tired of the notion that by gesticulating in the general direction of various logical fallacies, people are absolved from having to answer the questions posed thereby. Just because a given line of argument is "associated with" various logical fallacies, does not invalidate the argument. Some slopes are actually slippery, just as some people are actually not true Scotsmen. Logical fallacies are an interesting rhetorical device, but do not by themselves decide that one political philosophy is superior to another. And to rely solely on the notion that anyone who brings up a Slippery Slope is "wrong" is to indicate to me that you actually have no defense of your assertion beyond smoke and mirrors.

I'll tackle this first: I am all onboard for pay caps. For any industry. The arguments against basically boil down to: The free market will set good pay. It's Randian 'Trust the Masters Of The Universe' chanting, and nothing more.

I don't recall any Randian "Trust the Masters Of The Universe" chanting from anyone here, despite our arguing against it. My position is that I do not believe the government has any business or right legislating what form of compensation two institutions engaged in legal private business may agree upon at the whim of whichever party or organization is at the head of government right now. Imagine for a second granting that power to George Bush. He would no doubt use it to cap the salary of any doctor who agrees to perform abortions.

Now you can call that a slippery slope argument, and it is one. But governmental law in this country is based around the concept of the slippery slope. Walk out the implications of such a law and tell me you're comfortable with all of them. These are entirely valid concerns and it does nobody any good to pretend they are not by making up arbitrary rules about what arguments you will and won't consider.

Before you whine about your involvement, quick question: Is your current pay, sans benefits, more than 400k? If not, it has no place in a reality-based discussion, as that's the only pay cap being proposed.

Excuse me Nitram, but in a reality-based discussion, the utterly preposterous notion that because you are only applying this law to certain people, then it does not need to be considered for general implications would be laughed out the door. I do not intend to spend my entire life making very little money in this industry. Am I not allowed to consider that, should I prove to do very very well at what I am doing, I will run afoul of this cap you are proposing? Sports players make (in some cases) eight figure incomes for throwing balls back and forth. I am not athletic, and therefore should be denied the chance to make the same? A law does not have to apply to me right this instant for me to formulate objections to it.

We are either arguing that ALL industries should have pay caps (which while I still object to, is at least consistent) or that ONLY THIS industry should have pay caps. Both are wrong-headed notions, but the latter is pernicious as well as wrong-headed, and being as it is directed at my industry in particular, is one I find particularly incorrect.

And it's not 'service industry'. Nice try on that dodge I missed. Even you should be able to grasp the difference between a service job and an investor when it comes to other people's money. If you do not immediately, step back, calm down, and challenge your basic assumptions.

You were the one who suggested, Nitram, that because these "bigshot investors" (your words) actually own "Jack and Shit" (also your words), and because the money they invest is other people's, that they should be subject to these caps. My basic assumption was that if you define "bigshots" who need their pay docked as anyone who performs a service on goods they do not themselves own, then the entire tertiary economic sector, usually called the service industry, qualifies. I'm gonna assume you're already familiar with the three-sector hypothesis of economic governance (primary: Agricultural, secondary: Industrial/Manufacturing, tertiary: Services). If not, I can provide explanation.

[Cynical Cat]

I don't know if I like the idea of the government deciding who should make what for what job Nitram. Sure we're setting this up with the best of intentions, but so was Diocletian when he set up the same in the old Roman Empire.

Diocletian? Dio-fucking-cletian? Diocletian who mandated that every son follow in his father's trade and instituted empire wide price and wage controls? That slope isn't slippery, its greased to the point of being frictionless and pointing straight fucking down.

[SirNitram]

Right. Because huge expansion of McCaskill's 'pay cap if you took TARP cash' and 'Bonus reclamation from the same' is based on... What logic, exactly? The USA's strong stance on financial regulations? Oh yes, wait, they have been steadily removing those. It's a slippery slope fallacy. Deal with it or show it's not. The record does not follow the idea that financial regulation will expand.

Why shouldn't government institute pay caps, instead of private enterprise? What makes private enterprise the best, logical arbitrator? Of course, these should not be arbitrary. They should be based on risk; which means that if you, personally, stand to lose it all if you fuck up, sure, grab a huge fee. But the insanity of Wall St. is not like any other service industry. If every decision by a normal Services CEO backfires for years, he loses a fuckload. As we see whenever a transport company or resturant goes belly-up.

But in a point I keep trying to nail home, Wall St. does not obey this common sense. It's the result of alot of factors, and frankly, their deviance from sane reality isn't partisan at all.(It's closer to unintentional, constant psychological conditioning, and that such a potent setup for it came into being without intent is scary.)

And so, in Wall Street, risk based pay is the excuse for why the CEO who loses billions of dollars in taxpayer money through the investments of various state funds get huge bonuses and obscene pay. After the fuckups.(Though frankly, wouldn't the large amounts of taxpayer money investment bankers and other industry's are trusted with, totally justify this by your rules? Then again, I'm not sure how widely-reported the 'State funds make flushing noises' reports were during this.)

[General Havoc]

Nothing makes private enterprise the best, logical arbitrator. The point is that nothing makes the government that either, and several things make it a worse one than the private sector. The base fact is that the government should not be instituting pay caps on one specific private sector because in this country the government does not get to do whatever it wants to. If the Government is granted arbitrary authority over private pay, they will use it. They have made use of every single power granted to them for political ends, some good, some bad, as Frigid pointed out. It is a slippery slope argument, but it is not a fallacy to say so.

The record supports the idea that ALL government legislation expands to suit the political interests of the party in power. It suited the Republicans' political interests to play fast and loose with the rules and permit toxic investments to go forward on behalf of their lobbyists. Granting the government authority to regulate pay in the private sector is an enormous expansion of federal powers.

And incidentally, claiming that it is not relevant to consider the implications of that, is just stupid.

[SirNitram]

No, they have not used all power they were granted. They had the power to regulate all energy trading in public. What happened? They ripped up that power for Enron. They had the power to seize control of companies in the asset-buying of TARP. Have they? No. So stop insisting it as Gospel Truth.

Yes, it's an enormous expansion of government powers, but so is the alternative you suggest. I don't view expansions of government powers as inherently bad.

I'm fine with restricting it to those firms with taxpayer dollars, but shouldn't we be honest about that, and remember that all but the most hoity-toity of investment firms had quite large amounts of such they were to manage?

[General Havoc]

Did you miss the part where I said all government legislation expands to suit the political interests of the party in power? I'll mark it out clearly this time. And I didn't suggest an alternative, so I don't know what the hell you're talking about with "my suggestion". Stop responding to arguments you are making up out of whole cloth. I am not getting into yet another shouting match with you where you dream up things for me to say so that you can make yourself sound better.

I believe something could (and should) be worked out in regards to restricting such limitations to taxpayer-funded programs. I'm not against expanding government power where it is warranted, I just want to ensure that the expansion is strictly delineated. Imposing maximum caps on the salaries of companies that deal in government funds would probably drive a large portion of the financial services industry out of the business of handling public money. To be honest, that's probably a good thing. Public funds are supposed to be invested extremely conservatively, not poured into whatever toxic deal the wizards have come up with to make huge commissions.

I don't have all the details worked out, but I imagine something of that sort could be worked out.

[SirNitram]

If you admit that laws and powers granted by then will be ripped up for political gain, and one party is beholden to the financial industry, why should we assume it will grow in influence and not be eviscerated noisily at the first change in power?

As for my comments on your alternative..

I see no problem with the government setting rules for companies that take taxpayer money as part of the stimulus package. Our money, our rules.

I simply don't think we should exclude those who are used to manage taxpayer funds from noose-like regulations. The reason is, well, the fallout we're seeing now, with states that shouldn't be running deficits going far red.(And many states' cannot have unbalanced budgets, even short term.)

[General Havoc]

I simply don't think we should exclude those who are used to manage taxpayer funds from noose-like regulations. The reason is, well, the fallout we're seeing now, with states that shouldn't be running deficits going far red.(And many states' cannot have unbalanced budgets, even short term.)

Well I don't know about noose-like, but I agree, public money is simply different, and needs to be hedged with heavy regulation and (almost more importantly) heavy regulatory enforcement. If that drives most major investment firms out of the business of dealing with public funds, so be it. Let the private equity companies take all the risk (and reap all the benefits) they like. Managing public funds is not supposed to be either glamorous or an opportunity for reaping enormous cash windfalls, especially with Wall Street's priorities as screwed up as they are.

[SirNitram]

Frankly, I'm strongly of the opinion that the financial industry needs to experience liquid-nitro levels of shrinkage. Since the .com Bubble, they went, IIRC, from 8% to 30% of the economy. And the vast majority of members have become part of this problem.

[General Havoc]

I think that's a bit extreme. If the Financial industry is actually 30% of the economy, then to say that most of them have become part of this problem means that 25% of the American workforce needs to be put out of work to fix it. I don't quite believe that.

Plus, I don't really think that the financial industry is even close to 30% of the overall economy. Even if you look at it by market capitalization alone (which heavily weights the numbers towards the Financial industry), the entire Financial Services industry only makes up some 20% of the S&P 500. Which means its overall share of the economy is probably between 12 and 15%, again just as back of the napkin estimates. I don't have actual figures.

Regardless though, I do not believe the solution to this economic crisis is to intentionally kill off entire industries. I have no problem letting the more badly run places die off, but let's not throw the baby out with the bathwater. The Financial Services industry generated most of the wealth that they then turned around and lost. I don't think treating them as something that needs to be culled will do anything more than drive the business overseas, at the expense of the overall American economy.

[SirNitram]

While I look up the source for the size(Though I'm sure it wasn't 30% of jobs, but 30% of money), can we not engage in the dishonesty of claiming wanting to shrink an overgrown and profoundly irresponsible sector by claiming I'm trying to kill off the whole industry?

[General Havoc]

You were the one who just said that you wanted the industry to under go "liquid nitro" levels of shrinkage, and that the "vast majority of its members" were "part of the problem".

Let's first engage in the honesty of not changing our arguments when it becomes inconvenient to remember them.

[SirNitram]

Okay, this dishonesty from you stops, now.

I have not denied I want the financial industry to shrink greatly. I am hardly backing off my claim that most of the players in it in the last 8 years were part of this problem. Show me that a majority of financial institutions did not go into Credit Default Swaps, unprecedented ease of subprime lending, Alt-A lending, securitization of bad assets, etc.

So, fuck yourself sideways. You're pretending I've retreated from those points when I haven't, simply to criticize me for retreating.

And this academic lecture is the source, though I misrembered percents: Link

New economies of scale facilitated by the information revolution, global financial integration, regulatory changes in the US allowing commercial banks to engage in investment banking and other previously restricted activities, the emergence of hedge funds and private equity have all resulted in a very dominant financial sector. Figure 4 presents a rather amazing picture. In the early 1980s the share of the financial sector in both, corporate value-added and profits in the American economy, was about 5 to 6 percent. The share of financials in value added has steadily increased and has reached about 8 percent in 2006-2007. The share of profits, however, climbed to reach an extraordinary 40 percent and more!

40% of every dollar earned in the US vanished into what used to be 5-6% of the economy. So. I was too conservative in my memory. If you'd like to stamp your feet about not remembering precise figures because of, oh, heavy neural damage, go fuck yourself. And go fuck yourself if you think you can play 'I say you've abandoned this point you haven't, so you are dishonest for avoiding that point.'

I've been reasonable, but look where this got me.

[General Havoc]

Sorry Nitram, you lost me at the first "Fuck you sideways".

And by the way, you are the last person on this earth who gets to lecture me on intellectual honesty. You are a biased, lying, fraud, and you may ram your moral indignation at having been called on it straight up your ass. You seem to be physically incapable of holding a civil discussion without screaming incoherently at anyone who disagrees with you. I am done having conversations of this sort with you. You have no intention of addressing any points made, you just want to fling dung.

Go to bed, you puerile child, and return when you have learned to behave in polite company.

[SirNitram]

Fine, run away because I insulted you. Your farcical claim can stand for all to see. When you grow a spine and try to prove your points, I'll be happy to continue.

[General Havoc]

Nitram, are you still here? I thought I told you to go to bed and return when you have learned how to speak in polite company?

Why don't you find an argument that does not consist of I'M RIGHT I'M RIGHT WAAAAAHHHHHHHH! mixed liberally with doses of "Go fuck yourself", and then I will respond to it. Until then, there are adults talking. Please go amuse yourself with 4chan if you want to be an internet tough guy.

[SirNitram]

Nitram, are you still here? I thought I told you to go to bed and return when you have learned how to speak in polite company?

Why don't you find an argument that does not consist of I'M RIGHT I'M RIGHT WAAAAAHHHHHHHH! mixed liberally with doses of "Go fuck yourself", and then I will respond to it. Until then, there are adults talking. Please go amuse yourself with 4chan if you want to be an internet tough guy.

I generally don't take orders from those invoking style over substance and strawman fallacies. You know, like screaming they can't debate because it uses a swearword, or claiming someone who wanted to shrink an industry wants to wipe it out.

Still waiting for that spine.