Tuesday, January 12, 2010

Sen. Judd Gregg: CNBC Guest Jerk of the Day 1/11/10

After the last two years, you wouldn’t think that anyone would proclaim the kind of blind faith in market forces that Judd Gregg did yesterday.
If the banks have some sort of investment from the taxpayers, then the taxpayer has a right to control and have a large say in their compensation. If the banks are not getting an investment from their taxpayer, then the banks can do whatever they want. It’s their stockholders that they have to answer to and if the stockholders are willing to pay those kind of bonuses, they must be thinking they’re getting value for than that in terms of stock appreciation or dividends.

Oh really Judd? Must they be thinking that?

So you figure that AIG’s stockholders thought that it would be a good idea to pay billions in bonuses to executives to write insurance policies on mortgage back securities without setting up any reserves. They must have thought that, right? Otherwise they never would have bought shares in the stock in the first place.

FYI Judd, that was not my thought process when I bought AIG stock for my IRA. What I thought was that given low interest rates, I had very little choice but to invest in stocks if I hoped to be able to retire. I bought AIG because the research I did indicated that it was a conservative insurance company that produced consistent earnings.

What I find so interesting is that Gregg is perfectly willing to endorse say and control over compensation where the taxpayers have invested in the banks. If there is nothing wrong with the huge portion of financial companies’ profits that goes to executive compensation rather than building shareholder equity, why shouldn’t the taxpayer happily sit still for the same shit as the poor schlub who holds the stock through a mutual fund in his IRA or 401k?

Could it be that the little guy needs the government to do something in order to level the playing field? Isn't it possible that government regulation is necessary so that publicly held companies aren’t just honey pots for corporate insiders?

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