Regnat Populus

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Posts Tagged ‘Wall Street’

$2.5 Billion Profit for Treasury

Posted by Max Barron on April 17, 2009

Fresh off of the wire from Fox News

Per Barnes/FBN

Treasury reports receiving $2.5 billion in dividends so far from bank TARP investments, will publish dividend reports monthly — letter

Form the letters to Congress on transparency:

As of today, Treasury had received $2,518,531,260 in dividend payments under the CPP. Going forward, Treasury will begin

publishing these dividend payments on a monthly basis so the American people can see and

evaluate the dividend income they are receiving from these investments. In addition to dividends,

Treasury takes warrants in every institution in which it invests to ensure that taxpayers benefit from

any appreciation in the value of these companies.

Letters posted here: http://www.financialstability.gov/latest/04162009Letters.html

I have numerous questions regarding this $2.5 billion in dividend payments:

  1. Who paid up, specifically?
  2. Did the money come from banks that never asked for bailout money and are seeking to get out from under the government debt?
  3. Where will this money go?  –My theory: Undoubtedly it will find its way back into the coffers of Fedzilla… Not back to the people who fronted the money – Taxpayers.
  4. Will the Treasury relinquish its interests in banks that repay the funds? –I doubt it… Especially if it is profitable and will help forward their domestic agenda.

I also cannot help but wonder how much longer banks and institutions that took, or were forced to take, bailout monies from the government will continue to turn dividends.  If Fedzilla continues attacking those that accepted tax payer money for political purposes, it will continue to chase away the top talent that will turn the banks and companies around (i.e. AIG, BoA, Merryl Lynch).  Many of the major institutions are loosing their top intellectual muscle to start-ups and other firms that didn’t eat at the federal trough.  If Wall Street and top banks continue to hemorrhage their top tier talent to other firms… the firms that we bailed out grow less and less likely to return to profitability — thus losing our investment or forcing us to invest more.   Don’t get me wrong here.  I’m glad that banks and Wall Street firms  are paying dividends, and trying to repay their debt.  Maybe I’m just cynical and jaded, but I highly suspect that not only will the dividends begin to scale down, but also that the Treasury will continue to hold stakes in any and every firm that took money – even if/after it’s paid back.  I also foresee the inevitable collapse of many of these major players due to the loss of their best and brightest through political pressures.

I’ll continue to monitor and update this as I get answers to my questions and find new information.

UPDATE: I attempted to contact the Department of Treasury via both the general information line and the media phone line.  The person who answered General Information told me that my inquiry needed to be made to the Public Affairs office.  PA basically gave me the cold shoulder.  I will attempt to contact them again tomorrow.  As a tax payer I have a right to know who has paid back what amount of my money.

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Gov’t capping CEO Paychecks?

Posted by Max Barron on February 4, 2009

It has been said a dozen times here and elsewhere, that any opportunity the federal government has to reach in and regulate a free market, will be taken and with all due haste.  This is just another example of the type of knee-jerk reactions that we can expect from the over-simplified economic view of our legislators and new President.  Recently, the federal government (President Obama and Congress) have called for legislation to limit the salaries and bonuses of executives in bailed-out banks and Wall Street firms.  They have decided, in their infinite ignorance, to limit the salaries of said executives at $500,000.00, as they consider it unconscionable for these people to make more while they run a company that is in receivership.

I understand the point of view, and I empathize.  It does not seem right that a CEO or other executive be paid millions of dollars salary and millions more in bonuses while they are accepting tax dollars to prop up their companies.  In order to stem the so-called greedy behaviors of such executives, the liberals in Congress and President Obama have called for salary caps.  There in lies the numerous rubs. 

  1. The government should NEVER be imposing wage and salary limitations on private enterprise.  As with every other “power” granted to the government, it will inevitably expand beyond that of companies in receivership.
  2. By setting a salary cap, the government then ensures that the best-of-the-best executives will not take or keep jobs at firms in receivership.  This in turn diminishes the chances that the company will return to profitability (at least in the foreseeable future), and pay back the tax payer money.
  3. By diminishing the entity’s ability to pay back the funds, the government ensures that the company remains in receivership for longer, and thus allows the government to maintain control of the company and in all likelihood expand their control.
  4. Class warfare.

It is extremely important to note that by capping the salaries of executives, the effective potential of the company is limited.  This is because the best and brightest, the “winners”, will not take a pay cut (especially to the tune of millions) in order to return a company to profitability.  This means that either the current, and in several cases worthless, executives will remain in place while the propped up company spirals even farther into the ground.  It also means that many boards will be unable to replace executives with those talented and dedicated enough to return the company to profitability.  They will instead be forced to hire / keep executives that are inferior but willing to accept the pay.  Essentially it’s like telling a NFL team that they cannot draft until the 4th round and they cannot play (or must cut) their starters, and then expecting that team to reach the playoffs.  The government, through compensation limiting, is in fact limiting the return on our dollars.

This is not to say that I believe that these companies should continue the bloated perks or retreats.  It is to say, rather, that the government should not be capping salaries and handicapping private enterprises.  The outrage about many of these CEOs making multi-million dollar salaries and multi-million dollar bonuses is understandable.  I do empathize.  However, sometimes the solution is worse than the problem.  This is one of those times.

UPDATE: Apparently, I am clarevoyant.  It begins.    I hate to say it but – See, I told ya so.

Posted in Politics | Tagged: , , , , , , , | 1 Comment »