President Barack Obama will unveil a series of pay curbs on Wednesday, including a strict new limit on executive salaries for companies that receive "exceptional assistance."The rules represent the White House's attempt to ensure that financial institutions receiving government money are held accountable for spending it responsibly, an administration official said.
Under the new rules, companies that receive "exceptional assistance" from taxpayers may not pay any top executive more than $500,000 a year, an administration official said. Any additional compensation would have to be in restricted stock that will not vest until taxpayers have been repaid, the official said.
A reader writes to ask whether this is a good idea. Won't it mean executives will leave these firms in droves?
Under ordinary circumstances, perhaps. But executives are already leaving these firms in droves, supervised by security guards who carefully watch them clean out their desks. The market for used investment bankers is, as they might say, extremely illiquid.
Under those circumstances, I think this is reasonable. And while I am not particularly offended by the size of investment banking paychecks--though why they persisted in an allegedly competitive market is still something of a mystery to me--I don't think the taxpayer ought to be funding Swiss skiing chalets and Palm Beach Mansions. Get a house in Scarsdale and take the train like everyone else. If they don't like it . . . well, there's precious little evidence that any of them are the sole indispensible genius who can save their firm from the economic crisis, now, is there?
I do wonder what the term "executive" includes. The people who run investment banks often make less than their star performers. Are the traders also limited to $500K in total compensation? Because there is actually a risk there, I think--that all the traders who are really good at their jobs will strike out on their own. But with capital extremely tight, I'm not sure how big a risk that is.
And while I am not particularly offended by the size of investment banking paychecks--though why they persisted in an allegedly competitive market is still something of a mystery to me
Megan, don't you think it exceedingly likely, at this late date, that the reason why investment banking paychecks were so large is similar to the reason why people do not conserve oil in Nigeria -- viz., that it is very easy to siphon when you're standing next to the pipeline?
I can't think of a specific downside, but that doesn't mean it isn't there. Certainly, no company has to accept bailout funds.
This does set up a potential agency conflict. That is, the senior exec who should accept funds might not because he has a personal stake in keeping his $20 million. So what would he do instead? Allowing his company to go bankrupt (or waiting until the last possible second before it does) is one possibility. Going for a shareholder-unfriendly merger or acquisition is another possibility. Plus if the goal is to save the company, the feds will ride in with whatever it takes, no matter far down the hole the company is. But I really don't know.
And neither does President Obama. Let's be clear about this, the pattern for Obama has been to talk up the crisis as much as possible, and throw "solutions" at Congress that must be voted on, immediately. We see this for the stimulus, healthcare, and the banking crisis. Identify problem, vote on solution. Does the solution really solve the problem? Shut up, no time, this is a crisis. Just vote. You don't want to have done nothing, do you?
No matter how badly things turn out, President Obama can always say that they would have been worse. It's no wonder that the proposals are a mixture of knee-jerk reactions and political payoffs. We don't really know what's in the bill, let alone if it will work, and the pace is being intentionally manipulated to keep us from giving the bill any real scrutiny or debate, while giving each major lobbying bloc enough of a payoff for them to stay mum.
So no, on the timeline the President is looking for, I can't think of a specific reason why pay caps are a bad idea. Of course, the timeline I'm being given was designed to make sure I don't.
It's smart politics, but dumb policy.
That's sort of silly, Matt. Nigerians are next to oil through geographic happenstance. Investment bankers have to attract investors and provide returns.
Anyways, what's going to happen next is that the gov't-run firms will be unable to attract the best talent and will fail, further impoverishing the taxpayer and proving once again why the governmment should stay out of the private sector.
Smart move. The current political climate is VERY populist - might as well pass largely symbolic measures in order to satiate the crowd.
I mean, this sort of rule is totally unenforcable.
And while I am not particularly offended by the size of investment banking paychecks--though why they persisted in an allegedly competitive market is still something of a mystery to me--
This is like asking why Manny Ramirez could turn down $25M for one year of playing baseball, an activity which produces nothing intrinsically useful. (But remember, we're in a depression!) There's huge competitive pressure to win in MLB.
A competitive market has winners and losers. Guys playing AA take the bus. Manny could take a private jet. Some investment bankers do very well, some get stuck at a desk doing cold calls.
The cynic in me immediately asks:
- what counts as "exceptional" support?
- which of the myriad of ways will powerful executives use to flout the rule?
This would seem like a huge business opportunity for anyone with some spare capital.
There must be a fair number of revenue positive bankers/brokers/traders who would be in a position to make more than 500k even in 2009. A few guys with a decent amount of capital could recruit them, start their own investment bank, and easiy make a dynastic fortune.
I do have a question though. Most brokerage firms charge something like 1% of assets under management vs. the old days when they charged fees to trade stocks. Of that 1% the brokerage firm takes 1/2 and the broker takes 1/2.
Would I assume that all the Merril brokers with a book of business greater than $100 million are going to move to another firm?
Wells, while I support at least the idea behind capping salaries -- after all it's our goddam money -- I have to point out that the place where your reasoning starts is flawed: as a matter of fact some companies were forced to take bailout funds.
TallDave wrote:
"Anyways, what's going to happen next is that the gov't-run firms will be unable to attract the best talent and will fail, further impoverishing the taxpayer and proving once again why the governmment should stay out of the private sector."
This is not what happened in the 30s with the RFC. They took over insolvent banks, liquidated management when necessary, then when the banks were returned to solvency, reprivatized them at a profit to the taxpayer.
I am not suggesting that this will happen this time--I don't have a crystal ball. But comments like yours suggest a certainty about what will happen that is contradicted by historical record.
Wells, that was the pattern of the Bush administration. Obama has been in office only two weeks.
I think TallDave is on to something here. Perhaps we should fast-track some legislation requiring all professional sports teams with taxpayer-funded stadia to pay their coaches and players a maximum of $500,000 per year.
If they don't like the terms, they can simply buy out our share of the facilities. Or at least make it to the playoffs, in which case we might see our way toward leniency...
Nigerians are next to oil through geographic happenstance. Investment bankers have to attract investors and provide returns.
Right -- they live in fear of having to take a $70 million settlement and leave the company.
Oil is worth money everywhere, and people should logically conserve it. Cocaine is worth money everywhere, and people should logically conserve it. Tuna is worth money everywhere, and people should logically conserve it. And yet in practice tuna is cheap on the beaches of Nha Trang, Columbian dealers are swimming in blow, Nigerians spill so much oil you can set their rivers on fire, and investment bankers have spent the past 25 years sucking down a percentage of America's cash flow out of any conceivable proportion to their contributions to the economy, because they were standing next to that cash flow and they figured out how to siphon it off while looking so confident and official that everyone assumed they were doing something important.
Now everyone agrees that the financial sector is going to shrink by 40% or more. But as for what they were doing for the past 25 years, well, they had to "attract investors" so clearly it must have been very significant indeed.
A good start but It's time to do more. Write your senator to pass a law to return the bonus money already paid to failed executives.
It's easy to do here: http://returnthebonus.wordpress.com/2009/02/04/executive-pay-limits-revealed-a-good-start/
The bankers will complain and lobby, but, like Megan said, they don't have many million dollar job opportunities in other industries either.
I recall the point made in "Liar's Poker" when Lewis using himself as an example explained that he had no great technical or financial skill but had an ability to be smart and get along well with others. Outside of Wall Street he was a struggling liberal arts graduate. On Wall street working for a major investment bank he was able to earn a huge salary.
My point is most of these guys don't make anything out of whole cloth. They are very smart and creative, but are really opportunist that take advantage of an organize financial system that was in place.
I don't say this in any negative way. I just think that these lads should keep their mouths shut, realize what a great deal they had, and go about the business of putting the financial system back in the place they found it. If they are not up to the challenge they can always use thier enourmous talents doing something else.
This is not what happened in the 30s with the RFC. They took over insolvent banks, liquidated management when necessary, then when the banks were returned to solvency, reprivatized them at a profit to the taxpayer.
Not exactly. Insolvent or not, they forced the banks to sell them preferred stock and put their own managers in, in order to make them start lending again. It probably made things worse overall.
But comments like yours suggest a certainty about what will happen that is contradicted by historical record.
Shrug. I don't have a crystal ball. I'm just describing the most likely scenario, based on the historical record.
Matt:because they were standing next to that cash flow
Again, they don't just happen to be standing next to it. Those receiving large compensation are the competitive winners, like Manny Ramirez.
This is like asking why Manny Ramirez could turn down $25M for one year of playing baseball
Because he's the very best man alive at what he does and has made his teams succeed. Executives of banks which have gone insolvent can't say either of those things.
I think TallDave is on to something here. Perhaps we should fast-track some legislation requiring all professional sports teams with taxpayer-funded stadia to pay their coaches and players a maximum of $500,000 per year.
And now you see why the whole thing is so futile. Can you imagine any municipality voting for its team to be handicapped that way?
Mike,
What about the Detroit Lions? Many of them were paid millions of dollars too, and they failed to even win a single game.
Mike,
But what about the broker with 300 million under managment who has kept his clients out of trouble this past few years and have potential clients lined up around the block.
Do yout think he will switch firms when they tell him he can only make 500k rather than the 1.5million he should be getting?
How will Merril survive when all the top producers leave?
"A competitive market has winners and losers. Guys playing AA take the bus. Manny could take a private jet. Some investment bankers do very well, some get stuck at a desk doing cold calls."
True but there seems to be something drastically wrong with the employment markets in the financial sector. Manny gets paid like he does because he can hit a baseball like no right handed hitter since Joe Dimagio. He really is the best at what he does.
In contrast, the people at the top of the finance world seem to be as dumb as posts. They have succeeded in running their companies and the economy in the ground. Whatever is going on, it is pretty clear that our best and brightest are not getting MBAs or going into finance or if they are the system is not putting those people at the top.
I wonder if maybe the entire country is about to be doomed because we have created an aristocratic system based on connections and status of your birth and bears no relationship to merit. Certain jobs only go to those who went to certain colleges. Only those who are the right ethnic group or from the right family get into the right colleges and none of it has any bearing on who is actually the smartest and most competant.
As Tall Dave points out, the Detroit Lions had a similar season to Wall Street. I think you can consider Wall Street as an industry in competition with others in a similar manner to the Lions v. the Steelers, et al.
I don't think the real issue here is retention, it's attracting new talent. These firms need to attract fresh, competent management. How exactly do they do that?
"I don't think the real issue here is retention, it's attracting new talent. These firms need to attract fresh, competent management. How exactly do they do that?"\
Chances are they won't. By the time a company fails, its failings go a lot deeper than just the front office. These companies have an inbred culture of failure. If they didn't, they wouldn't be in the shape they are in. No amount of new talent is going to change an organization as large as these.
What needs to happen is the companies need to fail and cease to exist and new, more open and competant organizations need to rise in their place. The good talent from the old companies can then move on to the new ones.
There was an easy way to avoid all the questions around this. The gov't should have let the failed firms, you know, fail. Go bankrupt. Liquidate. Then the market would have sorted out which former employees of failed firms deserved (new) highly-compensated jobs.
(Of course the government shouldn't finance multi- million- dollar bonuses for failed-firms' staff. Of course the government shouldn't be setting salaries in "private" industry. How can we avoid both? Don't give government "bailouts" to private firms!)
However, the Lions could surely use some additional help. Maybe Stebenow or Levin can get a line item in the package to send some additional resources to Detroit. After all, with the automotive companies on the way out, a little good news would be welcome.
I think this is a back door way to encourage the Citis and BoAs to go under.
As Megan points out, while the market for I-bankers is pretty limited at the moment, that's not necessarily true for star traders or brokers. If you don't pay them, they'll leave. That's OK; Citi will end up with a loser Foreign Exchange desk to go along with its loser mortgage-backed origination and trading desks, and will be forced out of business. Yippee.
>And while I am not particularly offended by the size of investment banking
>paychecks--though why they persisted in an allegedly competitive
>market is still something of a mystery to me
There has historically been plenty of money to go around in the industry.
High salaries at the top are in place just as much (possibly more) to incentivize and attract the (much less well paid) college grads to commit their life to the firm in order to have the dream of one day making the big money.
Many leave or are disillusioned before this happens...
Question: will this limit apply to the executives at Fannie Mae? You know, the ones that collected tens of millions in compensation while debasing lending standards? The ones that started the frenzy of bailouts?
If so, I'm for it, but I can't believe that Obama would cut his party off from their cash cow.
Now Megan is endorsing government imposed wage ceilings?
Does anyone else remember when she used to be a libertarian?
jmo writes: "How will Merril survive when all the top producers leave?"
What about industry-wide wage caps? Setting aside the philosophical and feasibility concerns, if people have reasonable expectations that their money won't be frivolously wasted, gambled or stolen, then they may be willing to take their money out of index funds or savings account.
Top producers get their success. Failed producers go bankrupt. All is right with the world.
Staash,
The top broker at Merril last, I hear, has a $10 Billion dollar book of business and makes $50 million a year. His clients, mostly in Asia, love him - as he played it safe and kept their cash positions high. He did not and does not have anything to do with the I-bankers and traders who bet the firms money of some fly by night MBS scheme.
If anything happens to his pay he will bolt, along with his customers, to Nomura or Bank Baer any number of Merrill's global rivals.
Asb,
Yes, I agree with you 100%, but the ship has already sailed. We bailed out Merril and need to find a way to get our money back. The only way we can do that is to let Merrill go back to its bread and butter brokerage business.
jmo writes: "If anything happens to his pay he will bolt, along with his customers, to Nomura or Bank Baer any number of Merrill's global rivals."
Ok, then perhaps you can explain to me how he benefits the USA? Is it only through the taxes he pays on that $50 million? If so, are those taxes really worth the risk of having to bail him out?
Many people on this blog commented that the USA doesn't "need" an auto sector. Perhaps the same people can explain why the USA "needs" a financial sector; doesn't our beloved globalization take care of this? I thought we all agreed that the financial sector should not contribute to GDP calculation?
Staash,
Yep, it's quite a can of worms they've opened by involving Uncle Sam in the private sector. That's why many of us were always skeptical of the argument that these companies should be bailed out at all.
In fact, I'll go further and say this started with the LTCM bailout. That told the rest of the sector "Hey, don't worry, no matter how badly you screw up Uncle Sam will be there to fix things."
http://en.wikipedia.org/wiki/Long-Term_Capital_Management
There is some logic to capping the compensation of those who wouldn't be in business if it weren't for resources provided by the U.S. government. Why not extend it further? How about a $500k annual cap on earnings from former Members of Congress and federal appointees? Would it be too much of a hardship for men like Tom Daschle to make only $500k per year off of their government connections?
Staash,
I think you hit on it. We need to keep the banks/brokers/trading firms from being too big to fail. We need one firm doing brokerage, one firm doing trading, one firm donig custody, one doing the I-banking, one firm doing the retail banking, one firm doing the commercial banking, etc. etc.
I think I'm with Megan on this one, Libertarian or not, once you start having companies receiving financial help from the Government to stay solvent, then they give up the right to be independent of the strings attached.
If a company was forced to accept the money, then they should be able to pay it back quickly, after all, if they were smart the would have put it to the side and then sent it back ASAP anyway. And if they can't, well then maybe they needed the money anyway.
I hope they use a scalpel to determine who's affected. the idea of a major broker getting dinged through no fault of his own would be contrary to the idea of rewarding those who succeed. it's a valid point.
But really, in the grand scheme of things, the companies brought a lot of this fury on themselves, and the companies that are not begging the government to keep them afloat aren't affected, and as such should be able to pay what they want to their executives.
But what about the broker with 300 million under managment who has kept his clients out of trouble this past few years and have potential clients lined up around the block. Do yout think he will switch firms when they tell him he can only make 500k rather than the 1.5million he should be getting?
This guy absolutely should get the hell away from the failed heaps that employed jackasses! If somebody managed to keep 300m under management and avoid the mess that those around him created, he's the guy who we actually want allocating capital.
But most of the rest of the "smartest guys in the room" are way overpaid at 500k.
Again, they don't just happen to be standing next to it. Those receiving large compensation are the competitive winners, like Manny Ramirez. - TallDave
And those who can siphon the most oil in Nigeria are the biggest and most vicious guys, who can elbow their way closest to the pipeline. The competitive winners, like Manny Ramirez.
The question is what they were winning at. They claimed they were winning at allocating capital to the most productive tasks. As it turns out that is not what they were winning at, at all.
While I believe less is more when it comes to government intervention, on this issue I wholeheartedly agree that income and perks should be limited for those who participate in the bailout until the money has been repaid. A good start but It's time to do more. How about the stocks and other options that could easily add up to millions of dollars?
"This guy absolutely should get the hell away from the failed heaps that employed jackasses! "
I know, but if he does we can kiss the TARP money goodbye.
Does anyone who is discussing how great this would be for Merrill or Citi or Fanny realize that Obama is not talking about any of the banks that have already accepted money?
And those who can siphon the most oil in Nigeria are the biggest and most vicious guys
Sigh. Not a consensual transaction, only accessible by geographic coincidence, and stealing oil is not a market.
it turns out that is not what they were winning at, at all.
Some won, some lost.
If you think it's so easy to "siphon money" start your own investment banking firm and see how much you can pay yourself.
Libertarian or not, once you start having companies receiving financial help from the Government to stay solvent, then they give up the right to be independent of the strings attached.
So the strategy is buy insolvent banks, then further cripple their competitiveness.
I almost wish the federal government would buy an NFL team so we could see how efficiently they compete.
This is why I wish the government would nationalize these failed banks and then sell them off. Giving a failed bank money is setting up all sorts of perverse incentives, and it's rewarding bad decision-making on the part of the people who are ultimately in charge, the shareholders.
If these banks aren't to important to fail, let them fail. If they are, then nationalize them, recapitalize them, and sell 'em off. Shareholders and bondholders get nothing.
Then there's no need for salary caps, because the shareholders are gambling with their own money again instead of mine.
What about the Detroit Lions? Many of them were paid millions of dollars too, and they failed to even win a single game.
By your logic, they should all receive bonuses to stop them from being snapped up by the other teams.
THE EMPEROR OF WALL STREET HAS NO CLOTHES
(The Emperor has No Clothes-Hans Christian Anderson)
WilliamBanzai7
Just a few years ago, there was a Wall Street CEO, who was so excessively fond of stacking new lines of business, that he spent all his shareholder's money on building a financial supermarket otherwise known a "universal bank". He did not trouble himself in the least about his shareholders; nor did he care about his other stakeholders; clients, customers, creditors, bondholders and the rest of the public, except for the opportunities they afforded him for raking in exorbitant fees, paying obscene compensation to himself and his soldiers and displaying his fancy new French Jet and haughty collection of French antiques. To support this bank juggernaut he cloaked himself in new and evermore sophisticated financial schemes for each passing hour of the day; and as of any other king or emperor, one is accustomed to say, “he is sitting in council,” it was always said of him, “The 'Emperor CEO' is sitting in his splendidly diversified wardrobe."
Time passed merrily in the city which housed his Headquarters; strangers arrived every day at his commodious office suite. One day, two rogues, calling themselves quantitative engineers made their appearance. They gave out that they knew how to structure exotic new securities offering magnificent risk free returns, the profits from which should have the wonderful property of remaining invisible to everyone who was unfit for the office he held, or who was extraordinarily simple in character.
“These must, indeed, be splendid securities!” thought the Emperor. “Had I such structured products to hawk, I might at once find out what bankers in my realms are unfit for their office, and also be able to pull the wool over the eyes of both the wise and the foolish! These structured securities must be spun for me immediately.” And he caused large sums of capital to be given to both the "Quants" in order that they might begin their work directly.
So the two Quants set up shop, and affected to work very busily, though in reality they did nothing at all. They asked for the finest AAA mortgages to pool and the purest streams of income to repackage; after running out of both in short order; they substituted the AAA mortgages with toxic sub-prime mortgages they managed to scrounge up from a broker named Frankie the Flipper and continued their pretended work at the printers until late at night.
“I should like to know how the Quants are getting on,” said the Banker CEO to himself, after some little time had elapsed; he was, however, rather embarrassed, when he remembered that a simpleton, or one unfit for his office, would be unable to see the manufacture. To be sure, he thought he had nothing to risk in his own person; but yet, he would prefer sending somebody else, to bring him intelligence about the Quants and their work, before he troubled himself in the affair. All the people throughout the city had heard of the wonderful property the structured products were to possess; and all were anxious to learn how wise, or how ignorant, their neighbors might prove to be.
“I will send my faithful old Chief Risk Management Officer to the Quants,” said the Emperor at last, after some deliberation, “he will be best able to see how the structured finance business looks; for he is a man of sense, and no one can be more suitable for his office than he is.”
So the faithful old Chief Risk Management Officer went onto the floor, where the Quants were working with all their might, at their securitisation models. “What can be the meaning of this?” thought the old man, opening his eyes very wide. “I cannot discover the least bit of financial common sense in these spread sheets” However, he did not express his thoughts aloud.
The Quants requested him very courteously to be so good as to come nearer their computer screens; and then asked him whether the models pleased him, and whether the numbers were not very beautiful; at the same time pointing to tranches and tranches of securitised toxic sub-prime mortgages. The poor Chief Risk Management Officer looked and looked, he could not discover anything of value in the spread sheets for the structured products designed by the Quants for a very good reason, viz: there was nothing there. “What!” thought he again. “Is it possible that I am a simpleton? I have never thought so myself; and no one must know it now if I am so. Can it be, that I am unfit for my office? No, that must not be said either. I will never confess that I could not see the stuff.”
“Well, Mr Risk Manager!” said one of the Quants, still pretending to work. “You do not say whether the stuff pleases you."
“Oh, it is excellent!” replied the Chief Risk Management officer, looking at the spreadsheets through his spectacles. “These risk models, and the profits yes, I will tell the Emperor CEO without delay, how very beautiful I think them.”
“We shall be much obliged to you,” said the Quants, and then they named the different tranches and described the risk/return profile of the pretended stuff. The Chief Risk Management Officer listened attentively to their words, in order that he might repeat them to the Emperor CEO; and then the Quants asked for more working capital, saying that it was necessary to complete what they had begun. However, they put all that was given them into their bloated bonus knapsacks; and continued to work with as much apparent diligence as before at their structured finance models.
The Emperor CEO now sent a emissary from the Rating Agency of his court to see how the men were getting on, and to ascertain whether the structured products would soon be ready. It was just the same with this gentleman as with the minister; he surveyed the spread sheets on all sides, but could see nothing at all but financial schlock.
“Does not the stuff appear as beautiful to you, as it did to our Chief Risk Management Officer?” asked the Quants of the emissary from the Rating Agency; at the same time making the same gestures as before, and talking of the diversification hedges and safe returns which were not there, all as they signed the lucrative Rating Agency Contract of Engagement.
“I certainly am not stupid!” thought the emissary. “It must be, that I am not fit for my good, but very profitable office! That is very odd; however, no one shall know anything about it.” And accordingly he praised the safe returns he could not see, and declared that he was delighted with both the risk model and profits. “Indeed, please your Imperial Majesty,” said he to the Emperor CEO when he returned, “the structured products which the Quants are spinning are extraordinarily magnificent.”
The whole city was talking of the splendid structured product business which the Emperor CEO had ordered to be woven at the expense of his shareholders.
And now the Emperor CEO himself wished to see the costly manufacture. Accompanied by a select number of officers of the bank, among whom were the two honest men who had already admired the spread sheets, he went to the crafty Quants, who, as soon as they were aware of the Emperor CEO's approach, went on working more diligently than ever; although they still had not designed a single asset with intrinsic value.
“Is not the work absolutely magnificent?” said the officer and emissary, already mentioned. “If your Majesty will only be pleased to look at it! What a splendid risk model! What glorious returns” and at the same time they pointed to the toxic spread sheets; for they imagined that everyone else could see this exquisite piece of quantitative wizardry.
“How is this?” said the Emperor to himself. “I can see nothing! This is indeed a terrible affair! Am I a simpleton, or am I unfit to be an Emperor CEO? That would be the worst thing that could happen–Oh! the risk model is charming,” said he, aloud. “It has my complete approbation.” And he smiled most graciously, and looked closely at the toxic sub-prime spreadsheets; for on no account would he say that he could not see what two of the officers of his court had praised so much. All his retinue now strained their eyes, hoping to discover something on the screens but they could see no more than the others; nevertheless, they all exclaimed,
“Oh, how beautiful!” and advised his majesty the Emperor CEO to have a new sub-prime CDO suit made from the profits generated by these splendid toxic sub-prime assets, for the approaching Bailout Procession. “Magnificent! Charming! Excellent!” resounded on all sides; and everyone was uncommonly gay. The Emperor CEO shared in the general satisfaction; and along with a massive Multi Million Dollar bonus or two, presented the Quants with the riband of an order of Managing Directors, to be worn in their Ferragamo button-holes, and the title of “Gentlemen Investment Bankers.”
The Quants sat up the whole of the night before the day on which the magnificent Bailout Procession was to take place, and had sixteen mainframes running so that everyone might see how anxious they were to fabricate the Emperor CEOs new CDO suit. They pretended to roll a positive P&L off the toxic sub-prime spreadsheets; blew hot air with their pitch books and threaded mathematical needles without any thread in them. “See!” cried they, at last. “The Emperor CEO's new structured clothes are ready!”
And now the Emperor CEO, with all the grandees of his court, came to the Quants; and the rogues raised their arms, as if in the act of holding something up, saying, “Here are your Majesty’s Clothes! Here is the Level III scarf! Here is the sub-prime mantle! The whole suit is as light as an opaque toxic sub-prime cobweb; one might fancy one has nothing at all on, when dressed in it; that, however, is the great virtue of this delicate cloth.”
“Yes indeed!” said all the courtiers, although not one of them could see anything of this exquisite manufacture.
“If your Imperial Majesty will be graciously pleased to take off your bespoke Saville row clothes, we will fit on the new sub-prime CDO suit, in front of the financial looking glass.”
The Emperor CEO was accordingly undressed, and the Quant rogues pretended to array him in his new sub-prime CDO suit; the Emperor CEO turning round, from side to side, before the financial looking glass.
“How splendid his Majesty looks in his new clothes, and how well they fit!” everyone cried out. “What a model! What risk free returns! These are indeed royal robes!”
“The bailout canopy which is to be borne over your Majesty, in the procession, is waiting,” announced Hank Paulsen, the chief master of the ceremonies.
“I am quite ready,” answered the Emperor CEO. “Do my new asset backed clothes fit well?” asked he, turning himself round again before the financial looking glass, in order that he might appear to be examining his handsome sub-prime CDO suit.
The lords of the Finance department, who were to carry his Majesty’s Bailout Business Model train felt about on the ground, as if they were lifting up the ends of the toxic sub-prime mantle; and pretended to be carrying something; for they would by no means betray anything like simplicity, or unfitness for their office.
So now the Emperor CEO walked under his high canopy in the midst of the Bailout Procession, through the streets of the Wall Street financial district; and all the bankers and traders standing by, and those at the windows, cried out, “Oh! How beautiful are the Emperor CEO's new asset backed clothes! What a magnificent business model train there is to the toxic sub-prime mantle; and how gracefully the Level III scarf hangs!” in short, no one would allow that he could not see these much-admired clothes; because, in doing so, he would have declared himself either a simpleton or unfit for his office. Certainly, none of the Emperor CEO's various suits, had ever made so great an impression, as these invisible ones.
“But the Emperor has nothing at all on!” cried a little child hedge fund manager.
“Listen to the voice of transparency!” exclaimed his father; and what the child had said was whispered from one to another.
“But he has nothing at all on!” at last cried out all the hedge fund managers and bear traders.
I almost wish the federal government would buy an NFL team so we could see how efficiently they compete. - TallDave
"The Packers are the only non-profit, community-owned major league professional sports team in the United States. Beginning with the 1992 season, the Packers had 13 non-losing seasons in a row (their worst record being 8–8 in 1999), two Super Bowl appearances, and one Super Bowl win (Super Bowl XXXI). The Packers' 13 consecutive non-losing seasons was an active NFL record until the team finally suffered a losing campaign in their 2005 season. They returned to have an 8–8 season in 2006 and a 13–3 regular season in 2007, both under new head coach Mike McCarthy."
-- http://en.wikipedia.org/wiki/Green_Bay_Packers