The Financial Market - Can I Scream Now?

[Ken H.]

Let’s see if I’ve got this straight...

 

Jimmy Cayne, retired in January CEO of Bear Stearns walked away with just under $900 million...

 

The stock’s 52 wk. range was $159.36 to $2.00...

 

Yesterday the 14,000 employees lost all their retirement, 401K, ESOP, and personal investments, etc. in their (30% employee owned) company, and many, of not most, will loose their job too...

 

JPMorgan bought what was left of the mess for $236M, the NY,NY building alone is worth double that...

 

And, AND, the US Government (read that – you and me) agreed to cover $30B (that’s Billion with a B) of their risk for doing so.

 

I was going to type, “What’s wrong with this picture?” But I think the correct question is, “What’s RIGHT with it?”

 

And this is supposed to fix everything / something / anything???

 

Can I scream now?

[Paul_Burkett]

Please don't be too critical of Poor Jimmy, he has a busy schedule and can not always be on the job. He has golf games to play and bridge tournaments to participate in, and his mind isn't always clear because he also smokes pot. Or maybe the old guy is trying to relax as he watches his ship sink knowing that he got his and doesn't care about any one else. I guess he bought into that notion of "only looking out for yourself".

I feel very badly for any one that looses as a result of this kind of behavior(greed) and hope that there is a class action law suit against people that do this kind of underhanded business. If James Cayne was negligent and underhanded,criminally, he needs to loose everything he gained as a result of his deeds, and go to prison for committing any crimes he committed, if there were any crimes commited. http://money.cnn.com/2007/11/01/news/companies/bearstearns_ceo/?postversion=2007110117

[George Brown]

Money Changers!

[eddd]

Yes, you are definately allowed to scream. There is nothing even remotely logical in any of that.

[smiller]

Let’s see if I’ve got this straight...

 

Jimmy Cayne, retired in January CEO of Bear Stearns walked away with just under $900 million...

 

The stock’s 52 wk. range was $159.36 to $2.00...

 

Yesterday the 14,000 employees lost all their retirement, 401K, ESOP, and personal investments, etc. in their (30% employee owned) company, and many, of not most, will loose their job too...

 

JPMorgan bought what was left of the mess for $236M, the NY,NY building alone is worth double that...

 

And, AND, the US Government (read that – you and me) agreed to cover $30B (that’s Billion with a B) of their risk for doing so.

 

I was going to type, “What’s wrong with this picture?” But I think the correct question is, “What’s RIGHT with it?”

 

And this is supposed to fix everything / something / anything???

 

Can I scream now?

And now we hear from some quarters that the government shouldn't get involved in trying to regulate the industry... because that might screw things up...

 

Hopefully we're not just seeing the tip of the iceberg.

[Albert]

Yes, you are definately allowed to scream. There is nothing even remotely logical in any of that.

 

 

Ed, great avatar . Sorry, end of hijack.

[Whip]

Hey Ken

 

I think you may have to re-think your position.........

 

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...cause I agree with ya.......

 

 

 

 

 

Whip

[SeanC]

Don't be too surprised by this mess. Our society rewards failure at a number of levels (or picks up the tab for it). Unless, of course, you're one of the 401k-investing, retirement-planning schmoes in the middle class, in which case you're on your own.

[hootowl]

Here's another take on the situation:

(Taken from: http://www.investorsinsight.com/otb.aspx)

 

 

***MODERATOR EDIT:*** the copyrighted article is available in its entirety at the above link.

[DavidEBSmith]

Just listen to Jim Cramer and everything will be OK:

 

"Bear Stearns is fine... Bear Stearns is not in trouble. Don't be silly... don't move your money."

[Lets_Play_Two]

Fortunately I have an advisor who now appears to be smarter than Cramer. Both my mother-in-law and I had Bear Stearns debt in our portfolios. Ten days ago we sold it...bought at 90 and sold at 91, essentially a wash. Last I looked it was at 71, but may be higher now.

[David]

Thank you. But I'm afraid it's not as easy a message to rally around. Deeper thinking takes hard work and requires leadership and (some times) swimming upstream. It also avoids simplistic answers where villains are easily identified.

[Ken H.]

Of course Mauldin's position is (paraphrasing), 'A few million here, a few million there, it's no big deal, it's a bargain to save the system.'

 

But my biggest objection, well two, are that:

 

a) It just continues to facilitate the upper 5% getting more fabulously wealthy at the expense of the other 95% of the population. A winner-take-all philosophy that is unsustainable. It's the core disease that destroys a society/country.

 

b) IMO it won't work. No matter how you hide it in bundle securities, AAA rate paper, stack it, move in around from firm to firm, country to country, the basic core issue of 100s of 1000s of people holding mortgages they can't afford, and with record high debt loads; can't be escaped. The "American Dream" has turned into the American Nightmare and starving off the inevitable solves nothing.

[azkaisr]

Yes, tax-payers may eventually have to cover a few billion here or there on the Bear action. But the time to worry about moral hazard was two years ago when the various authorities allowed institutions to make subprime loans to people with no jobs and no income and no means to repay and then sold them to institutions all over the world as AAA assets. And we can worry in the near future when we will need to do a complete re-write of the rules to prevent this from happening again.

 

 

This author just made this simpleton's idiot of the day list. What a crock. Two years ago any critic was soundly beaten down for even suggesting this danger was even remotely real. There is a real easy trail to follow to get a few billion from the robber barons which would be the best way to send a message. Oh and I would love charge their families for the bullet.

 

Kaisr

[Joe Frickin' Friday]

Of course Mauldin's position is (paraphrasing), 'A few million here, a few million there, it's no big deal, it's a bargain to save the system.'

 

Um, actually that was Billion, with a B.

[David]

I'm not sure what you're saying, really. I think it as wrong for that CEO to take that money. But to focus our judgment primarily on that is naive and over-simplification. The primary culprit here IS the early regime at the Fed for not stepping in. In letting that happen, a lot of other wrong things were done by lenders, appraisers, real estate agents, sellers, buyers, CEOs, investors, and so on. The wrong they promulgated just isn't as catchy as the stuff you're latching onto.

[kcscout]

It's all about GREED according to Fred Fraily, Kiplinger's editor.

 

His editorial (linked above) was published in the April issue of the magazine. Probably written in late February.

[David]

I agree that it's about greed. What he left out in his article, though, is that the greed extends way down the chain to individuals.

[azkaisr]

I'm not sure what you're saying, really. I think it as wrong for that CEO to take that money. But to focus our judgment primarily on that is naive and over-simplification. The primary culprit here IS the early regime at the Fed for not stepping in. In letting that happen, a lot of other wrong things were done by lenders, appraisers, real estate agents, sellers, buyers, CEOs, investors, and so on. The wrong they promulgated just isn't as catchy as the stuff you're latching onto.

 

I think your wrong to assume that we can't hold these people accountable. Even if we recover only a percentage it is the right thing to do.

 

Kaisr

[David]

And how do we hold the other people accountable? Or do you just want to go after the CEO?

[SeanC]

And how do we hold the other people accountable?

Take all those who were in the critical decision-making loops and force them to babysit, mow lawns, pick up dog poop, paint the houses and re-tile/grout the bathrooms of those who were directly screwed by their decisions.

 

Or maybe force them to pick up all the roadside trash from NYC to SF. Then use what's left in their bank accounts to buy those "sponsored by" signs along the road. Like, "US Interstate 10 Sponsored By Some Greedy Assholes Who Really Should Have Known Better, And Are Now Wearing Orange Jumpsuits and Picking Up Litter For The Next 3000 Miles."

 

You know, stuff like that.

[steveknapp]

"US Interstate 10 Sponsored By Some Greedy Assholes Who Really Should Have Known Better, And Are Now Wearing Orange Jumpsuits and Picking Up Litter For The Next 3000 Miles."

 

That's just funny.

[azkaisr]

So we spend over $9Billion on law enforcement for drugs. Lets take 10% of that and go after these guys. We could even call it a loan and repay the $1billion to the DEA and Local Law enforcement folks like a bond with say interest. There is a much easier paper trail to follow to get these people David.

 

If we don't want the government to get involved I would even be willing to privatize it to say certain Russians by giving them say 20% of every dollar they collect.

[David]

I know how to go after the "filthy rich" CEOs. (And this is the place to insert that nobody did it better than Spitzer, a guy who is vilified by many for his role in it.) I wasn't asking about these people, I was talking about the idiot home buyers and sellers and appraisers and lenders and individual investors and so on.

 

Most any argument that consistently points to the same enemy/villian is simplistic.

[kcscout]

Rather timely. I saw this movie last night -> Fun with Dick & Jane

[Ken H.]

I'm not sure what you're saying, really. I think it as wrong for that CEO to take that money. But to focus our judgment primarily on that is naive and over-simplification. The primary culprit here IS the early regime at the Fed for not stepping in. In letting that happen, a lot of other wrong things were done by lenders, appraisers, real estate agents, sellers, buyers, CEOs, investors, and so on. The wrong they promulgated just isn't as catchy as the stuff you're latching onto.

I for one anyway am not just focusing on the CEO, their obscene raping of their companies, its employees, and investors is just the insult added to the injury. The whole system is profoundly, deeply and completely corrupt. 2008 is going to be year of reckoning when many, many of our past sins come home to roost IMHO.

 

Meanwhile the DOW jumped 420 points today as speculative traders, totally oblivious of the real world around them, again worked their spreads gobbling up more cheap money to cover their margins.

 

Meanwhile, meanwhile, barley making any news reports today; was the number that effects you and me - the consumer that drives 70% of the economic engine - core inflation (which excluded food and energy cost, which of course we the spenders actually can't) was up 0.5%.

 

As of today we're basically only a 2.25% prime-lending rate away from the US dollar being worthless.

[philbytx]

Reads almost like an Aesop's fable.

 

It all started with Madison Ave. (selling The American Dream) and the Money Lenders

Unregulated and unregistered mortgage brokers fed crap (read people getting loans (on often times overpriced housing) that shouldn't have gotten them in the first place) into financial institutions (run by overpaid, greedy folks that were legends in their own mind) where CDO's and assorted esoteric debt instruments were created mainly by unlicensed and unregulated geeks.

 

Now the government gets to spend our hard earned dollars baling out the folks that shouldn't have been in the boat in the first place......!!

 

Just like a financial Hurricane Katrina.....neat eh?

[MattS]

...those who were in the critical decision-making loops...

The what-loops? Just a very, very slight oversimplification. "Those greedy bastards! Let's get 'em!"

 

The only real problem with that ... is that pretty much anybody who is anybody is a greedy bastard, in some form or fashion; but in a way that inspires conspicuous consumption. Here the trend is fancy, expensive, imported motorcycles; elite, Prussian, worn proudly like badges.

 

If people choose to buy houses they don't need, then I say let 'em. I sold mine and gave the middle finger to the system. I'll be buying it back shortly at the discount price. Nice!

 

Please don't track down the responsible bastards; because it is possible to game the system and your efforts will only diminish my returns.

[Bheckel169]

My perspective is a little different. Hey, it's a business and the business failed. I don't hear anyone crying about his take when the stock was up there and they were reaping the rewards. These same small investors were investing in the company hoping it would do well enough to provide, income, increased valuation etc., and it did for a very long time. In fact, they would be thrilled and crow a little if it exceeded expectations. Well, it has finally failed and the signs were probably always there for those whose fiduciary responsibilities it was to audit, review and validate the strength of the company. Somebody screwed up and/or the economy caught up with them, but I don't see this as any different then any other company who is publicly traded. You depend on your broker and don't do your own review and due diligence to track its performance and these things can happen especially if you are looking for unrealistic returns. I once had a friend who was the first female stock analyst for Merrill Lynch who told me she never stayed in an investment longer then a 20% return. After that, you're beyond rational returns. She could be wrong, but I bet she didn't invest in Bear Stearns and if she did it wasn't until last week.

[Matts_12GS]

Personally, I think this guy has it right...

 

The subprime mortgage collapse is another tale of unintended consequences.

 

The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent “redlining” - denying mortgages to black borrowers - by pressuring banks to make home loans in “low- and moderate-income neighborhoods." Under the act, banks were to be graded on their attentiveness to the “credit needs” of “predominantly minority neighborhoods." The higher a bank's rating, the more likely that regulators would say yes when the bank sought to open a new branch or undertake a merger or acquisition.

 

But to earn high ratings, banks were forced to make increasingly risky loans to borrowers who wouldn't qualify for a mortgage under normal standards of creditworthiness. The Community Reinvestment Act, made even more stringent during the Clinton administration, trapped lenders in a Catch-22.

 

"If they comply," wrote Loyola College economist Thomas DiLorenzo, “they know they will have to suffer from more loan defaults. If they don't comply, they face financial penalties . . . which can cost a large corporation like Bank of America billions of dollars."

 

Banks nationwide thus ended up making more and more subprime loans and agreeing to dangerously lax underwriting standards - no down payment, no verification of income, interest-only payment plans, weak credit history. If they tried to compensate for the higher risks they were taking by charging higher interest rates, they were accused of unfairly steering borrowers into “predatory” loans they couldn't afford.

 

Trapped in a no-win situation entirely of the government's making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of subprime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.

 

article linky

[Axe]

I worked in the banking industry for 40 years the last 15 at the senior management level. Although the Community Reinvestment Act and all the associated record keeping and added costs is a regulatory nightmare to comply with, It had little or nothing to do with the current melt down associated with mortgages. There are many banks, similar to the one I worked for that maintained "Outstanding" compliance ratings with the Act, and just never chose to get involved with the underwriting of mortgages of less than standard quality. The Community Reinvestment Act, contrary to the writers portrayal of it, is not about lending to "Black Borrowers" but is about making sure all individuals regardless of where they reside or their incomes have banking services including mortgages available to them. The Community Reinvestment Act never set underwriting standards and never forced a bank to make poor credit decisions. In fact our portfolio of loans made under the act performs very well thank you. Certainly better than the thousands of mortgages underwritten and supported by unrealistic real estate value appreciation and not solid time tested credit criteria.

[Matts_12GS]

I worked in the banking industry for 40 years the last 15 at the senior management level. Although the Community Reinvestment Act and all the associated record keeping and added costs is a regulatory nightmare to comply with, It had little or nothing to do with the current melt down associated with mortgages. There are many banks, similar to the one I worked for that maintained "Outstanding" compliance ratings with the Act, and just never chose to get involved with the underwriting of mortgages of less than standard quality. The Community Reinvestment Act, contrary to the writers portrayal of it, is not about lending to "Black Borrowers" but is about making sure all individuals regardless of where they reside or their incomes have banking services including mortgages available to them. The Community Reinvestment Act never set underwriting standards and never forced a bank to make poor credit decisions. In fact our portfolio of loans made under the act performs very well thank you. Certainly better than the thousands of mortgages underwritten and supported by unrealistic real estate value appreciation and not solid time tested credit criteria.

 

Axe, I'm not denying what you say is true as my experiences are all vicarious to banking collegues, but I will say you paint a very different picture than they have.

 

Someday the real truth will come out.

[Axe]

Quote

Axe, I'm not denying what you say is true as my experiences are all vicarious to banking collegues, but I will say you paint a very different picture than they have.

 

Someday the real truth will come out.

 

 

Thanks Matt,

Look at it this way the thoudands of poorly underwritten mortgages that got us in this mess in no way could be considered loans that would qualify as Community Reinvestment Act criteria loans. In the main they were not made to people of low to moderate incomes they were just made to people who could not afford a $500,000.00 house on a $50,000 income. But who was worried everyone knew the value of real estate was going through the roof. No sweat the $500K house today will be worth $550K next year. In addition we lived with the Community Reinvestment Act for near 30 years through a number of real estate bubbles and busts and never had issues.

[Ken H.]

So the banks and mortgage companies are victims!?! They weren't forced into anything. Their policies of dangerously lax underwriting standards - no down payment, no verification of income, interest-only payment plans, and weak credit history where their underwriting decisions made by their presidents and boards driven by only one thing - absolute greed for personal enrichment.

 

Jacoby's view that past administrations and gov't policies created this mess that "trapped" lenders, and thus it is the federal government's responsibility now to bail out their Wall Street 'victims' is absurd. It's blame-shifting at its worst.

[philbytx]

 

The only victims are (as usual) the American Taxpayers......

There is no thing as a "government" bail out....

[steve.foote]

It's a little too early to scream yet, Ken, but when you do, make sure you are screaming in the right direction.

 

Singling out the CEO is waaay too easy. Yeah, he was compensated $900 million, which seems like an absurd amount...to us. However, in the realm of Wall Street, it may be right on the mark. The point is, Cayne didn't walk into the Bear Stearn's vault and demand $900 mil at gunpoint. His compensation was negotiated with the board of directors and ultimately approved by the stockholders. If $900 million is truely more than he was worth, it is the board of directors and stockholders whom are to blame.

 

As for the rest of the sub-prime mess, well the blamethrower has to be set on its widest setting to get all of them. Everyone from the CEO of the company's involved all the way down to the sap who bought above his means deserves to be voted off the island. And, don't forget our "masters of non-responsibility," the US Congress. After all, they are the legislators who wrote these laws to begin with. And, no, I haven't forgotten a Federal Reserve and an Administration that looked the other way when trouble first started. All of these folks played a part in this drama, and none should escape responsibility.

 

What I have said before, and will say again, is that the real stinker here is that the people who acted responsibly are ultimately going to be the ones who will have to bail the irresponsible's out. I find this patently unfair.

 

Finally, as my Dad taught me, your first loss is your least loss. The longer the Fed tries to stave off the ultimate market correction, the worse the pain is going to be. We need to face the music and get it over with. Our economy will survive, and our way of life will continue. It's like pulling a Band-Aid off a scab.

[Boffin]

The only victims are (as usual) the American Taxpayers......

There is no thing as a "government" bail out....

 

Not only the American taxpayers. The UK bank Northern Rock collapsed as a direct result of the fallout form the US Sub-Prime mortgage fiasco and was recently nationalised by the UK government. Not only are my taxes paying for the "rescue" of that bank but my own mortgage interest rate (with another lender) is likely to increase as UK lenders are charged higher inter-bank loan rates in an attempt to offset the leveraged position the merchant banks have placed themselves in.

 

When the US economy gets a chill, the world catches cold.

 

Andy

[Lets_Play_Two]

"Jimmy Cayne, retired in January CEO of Bear Stearns walked away with just under $900 million..."

 

Do you have any idea of how much of that was the value of stock that he received? I don't, but my guess is a lot of that was appreciated stock value as is the case with most CEO "compensation." It certainly wasn't his last pay check. He may just have given back a LOT of that money with the stock at $2.

[steve.foote]

Do you have any idea of how much of that was the value of stock that he received? I don't, but my guess is a lot of that was appreciated stock value as is the case with most CEO "compensation." It certainly wasn't his last pay check. He may just have given back a LOT of that money with the stock at $2.

 

Actually, according to this article, his share value went from a high of almost $1 billion last year down to now being worth $12 million under the JPMorgan buyout agreement. I haven't read anything in the media which suggested he sold any of his shares while the company fell.

[philbytx]

Agreed Andy!

Unfortunately, greed is a worldwide phenomenon

[SeanC]

...those who were in the critical decision-making loops...

The what-loops? Just a very, very slight oversimplification. "Those greedy bastards! Let's get 'em!"

 

The only real problem with that ... is that pretty much anybody who is anybody is a greedy bastard, in some form or fashion; but in a way that inspires conspicuous consumption. Here the trend is fancy, expensive, imported motorcycles; elite, Prussian, worn proudly like badges.

 

If people choose to buy houses they don't need, then I say let 'em. I sold mine and gave the middle finger to the system. I'll be buying it back shortly at the discount price. Nice!

 

Please don't track down the responsible bastards; because it is possible to game the system and your efforts will only diminish my returns.

It's more than an oversimplification, Matt; it misses the mark entirely. As does your motorcycle analogy. And it's not even about people buying houses they don't "need."

 

Somewhere along the line, someone decided they could make a lot more money by lowering the standards and selling risky loans. There's a reason for those standards. There's a reason for credit scores, debt-to-income ratios, etc. But some greedy assholes devised a scheme to generate a lot more wealth by intentionally ignoring the added risk.

 

I have no sympathy for their customers -- those people who took out larger loans than they could afford, the so-called "sub-prime" applicants who would not have qualified for such loans before credit standards were recklessly abandoned -- nor do I have a problem labeling them as greedy bastards. However, they're not to blame for this fiasco. That blame lies solely with those responsible for providing the loans.

 

It's like, if you loaned a large sum of money to a friend who "needed it," whom you later discovered had a spending problem, employment woes, etc., don't complain when he loses his job and can't pay you back. You were the one responsible for assessing the risk.

[Lets_Play_Two]

Do you have any idea of how much of that was the value of stock that he received? I don't, but my guess is a lot of that was appreciated stock value as is the case with most CEO "compensation." It certainly wasn't his last pay check. He may just have given back a LOT of that money with the stock at $2.

 

Actually, according to this article, his share value went from a high of almost $1 billion last year down to now being worth $12 million under the JPMorgan buyout agreement. I haven't read anything in the media which suggested he sold any of his shares while the company fell.

 

Because of securities laws it is unlikely he could have sold much and if he sold any it would be public information. So the guy paid for his misadventures. We don't have to wring our hands about him any more.

[Ken H.]

Singling out the CEO is waaay too easy.

Oh, I agree (scary isn't it), as I said in an earlier reply: I for one anyway am not just focusing on the CEO, their obscene raping of their companies, its employees, and investors is just the insult added to the injury. The whole system is profoundly, deeply and completely corrupt.

[azkaisr]

Do you have any idea of how much of that was the value of stock that he received? I don't, but my guess is a lot of that was appreciated stock value as is the case with most CEO "compensation." It certainly wasn't his last pay check. He may just have given back a LOT of that money with the stock at $2.

 

Actually, according to this article, his share value went from a high of almost $1 billion last year down to now being worth $12 million under the JPMorgan buyout agreement. I haven't read anything in the media which suggested he sold any of his shares while the company fell.

 

Because of securities laws it is unlikely he could have sold much and if he sold any it would be public information. So the guy paid for his misadventures. We don't have to wring our hands about him any more.

 

So his ability to keep his $12million is ok when a lot of the people who worked there get zero? I think he can get closer to zero. And let me be clear, I am not saying that the CEO is at fault alone here. I work as a Tier 3 Leader in a Fortune 30 company. I know what the CEO controls versus the people at Tier 2 and 3 know. In my mind, we need to go after that level of leadership since odds are they are the ones that really directed the issues.

[Ken H.]

I have no sympathy for their customers -- those people who took out larger loans than they could afford, the so-called "sub-prime" applicants who would not have qualified for such loans before credit standards were recklessly abandoned -- nor do I have a problem labeling them as greedy bastards. However, they're not to blame for this fiasco. That blame lies solely with those responsible for providing the loans.

I’m not quite willing to let the homeowner borrowers off the hook, after all they did sign the papers, but when home ownership has been sold as the ultimate American goal for at least 60 years in this country; when renters are made to feel like 2nd class citizens, every credit application has a Homeowner? Renter? checkbox, and renters' credit scores are automatically lower even though often we have better liquidity than homeowners; where “An Ownership Society” is trumpeted as the cure for all our social ills; where Countrywide Financial commercials bombard us with ZERO DOWN! LOW PAYMENTS! FAST APPROVAL! commercials hundreds of times a day for years (to say nothing of all the refinace, home equirty line of credits and other traps) where everyone’s sense self-worth seems to be tied to their house having something a bit (or a lot) nicer than the one next door; is it any wonder that millions of people bought into the story/fable? We are almost made to feel guilty if we don’t. Like somehow we’re being unpatriotic if we don’t get in debt up to our eyeballs, times three.

 

Couple that with a pile of mortgage, loan, and closing paperwork (been to a closing lately?) that it takes a lawyer with a 6-year degree to understand, to say nothing of last minute bait & switches, and there’s a reason Truth in Lending laws were originally created. Only to be thrown out the window with “creative financing.”

 

Yes there is plenty of blame to go around, but the deck was stacked from the start against the poor schmuck who just wanted to participate in “The American Dream.”

[MattS]

That blame lies solely with those responsible for providing the loans.

To me, this sounds like the same type of logic that blames tobacco companies for the lung cancers of their customers.

 

Either there is personal responsibility, or there isn't. Can't be half pregnant.

[Lets_Play_Two]

Do you have any idea of how much of that was the value of stock that he received? I don't, but my guess is a lot of that was appreciated stock value as is the case with most CEO "compensation." It certainly wasn't his last pay check. He may just have given back a LOT of that money with the stock at $2.

 

Actually, according to this article, his share value went from a high of almost $1 billion last year down to now being worth $12 million under the JPMorgan buyout agreement. I haven't read anything in the media which suggested he sold any of his shares while the company fell.

 

Because of securities laws it is unlikely he could have sold much and if he sold any it would be public information. So the guy paid for his misadventures. We don't have to wring our hands about him any more.

 

So his ability to keep his $12million is ok when a lot of the people who worked there get zero? I think he can get closer to zero. And let me be clear, I am not saying that the CEO is at fault alone here. I work as a Tier 3 Leader in a Fortune 30 company. I know what the CEO controls versus the people at Tier 2 and 3 know. In my mind, we need to go after that level of leadership since odds are they are the ones that really directed the issues.

 

I'm not making any judgment about what he should or should not keep. My point is that he did not walk away with $900 million while others suffered. 30% of the shares of this company were held by employees. My guess is that many of those employees, while they won't be fabulously wealthy will not need any tag days. Shareholders take a risk and there is no need to feel sorry for them, they should know the risks of their investments. If you (generic) invested in companies taking on sub-prime mortgage risk, shame on you if you don't know what that is going in. All hindsight is 20/20!!

[steveknapp]

but when home ownership has been sold as the ultimate American goal for at least 60 years in this country

 

I didn't think it was a unique, young, nor American concept.

 

In the basic needs:

- Food, you eat and hardly want to save the remains after your done.

- Clothing, has long been a status symbol. But it wears out.

- Shelter, needs to go somewhere, and owning your own piece of the earth to live on is a symbol of wealth. It can also produce food (farming) and clothing (cotton, wool). Plus it never "wears out", you can pass it on to your children, or sell it to someone else. It has real value.

 

http://en.wikipedia.org/wiki/Landed_nobility

 

As far as the ads and the American dream, marketing can't all be to blame here Ken. If you really think your fellow man is such a dufus that they believe whatever the billboard tells them all I can say is enjoy your expensive german "adventure" motorcycle with the carbon fiber gauge trim.

 

After all, we all know it's not marketing that tells us carbon fiber is cool because it's expensive and light. You're smart enough to know that it's really a functional element of your "adventure" bike which we've discussed is really the bare essentials of what's needed. Not at all a "nice to have".

 

"(been to a closing lately?)" - Yes, within the last 30 days. It was painless. No bait/switch, some standard haggling, the lawyer was on my side and took care of business.

 

You? The veggie who's an expert on hamburgers is the same guy that's a renter who's an expert on closings?

[drdave39]

"To me, this sounds like the same type of logic that blames tobacco companies for the lung cancers of their customers.

 

Either there is personal responsibility, or there isn't. Can't be half pregnant."

 

If the tobacco companies deliberately supress data on the addictiveness of tobaco and its carcinogenic qualities (and lie to Congress under oath about it) you're darn tootin' it's their responsibility!

 

As to this subprime mess- no one has mentioned the inherent conflict of interest in the mortgage brokerage industry. The industry pushed the model of selling mortages with no money down, then re-selling them several times until they ended up as hot investment properties on Wall street. Why worry about the homebuyer's ability to pay the loan when the interest rate goes up- it's not your problem any more!

 

I love the Republican mindset that says when a lower middle class individual gets into financial distress due to illness or job loss, they should take personal responsibility. But when a Wall Street financial company is looking at going belly-up through greed and stupidity, the taxpayers must save them! "Privatize the profit, socialize the risk". Puke...

[SeanC]

That blame lies solely with those responsible for providing the loans.

To me, this sounds like the same type of logic that blames tobacco companies for the lung cancers of their customers.

 

Either there is personal responsibility, or there isn't. Can't be half pregnant.

You're still missing the point. Let's continue with a tobacco analogy... There are standards (ordinances and laws) that govern to whom tobacco companies and tobacco retailers may sell their product. They can't sell to minors, for instance, simply because a minor may want or need some smokes. And if they do, they're responsible for the consequences. They're to blame, not the minor.

 

In a similar vein, there were (and still are) standards for determining credit worthiness and risk. Most banks don't offer loans to people with poor credit ratings or beyond a certain debt-to-income ratio or below a set equity level. If they do, and they get burned, it's their fault. They're the ones ultimately responsible for determining credit worthiness and limiting their risk, NOT the loan applicant.

 

But those who devised the sub-prime lending schemes figured out a shortcut: Since loans are bought and sold almost as commodities, if you write more loans, more money can be made early in the cycle. How do they write more loans? Lower the standards and barriers to borrowing. They hoped that the additional risk would be diluted by a strong economy, but even if it weren't, the bulk of the wealth was already harvested up front. If the economy falters and things go to hell, let taxpayers bail it out.

 

Again, there's a reason for credit ratings. There's a reason loan officers are called "officers." They have a fiduciary responsibility to the bank and its shareholders. Lenders don't share that responsibility with their borrowers.

 

As for all the sub-prime jag-off borrowers who got in over their heads, they're paying a price for it. Bankruptcy. Foreclosure. Ruined credit. Etc. Certain politicians running for office (who shall remain nameless to keep this from becoming political) are suggesting that taxpayers should bail the borrowers out, but for the most part, that's unlikely to happen (nor should it, in my opinion). The irresponsible lenders, however, will have their industry bailed out. And the corporate officers, i.e., those who made the critical decisions, those who devised the sub-prime lending schemes to jack the system to begin with, have already made their fortunes and won't be losing any of it.

 

That's what I'm talking about when I say they're solely responsible for this fiasco. They are. And there's no reasonable argument to be made that they merely share the blame of writing sub-prime loans.

 

My 2.5 year-old always wants candy, and when it's offered, he snaps it up. However, I'm the one solely responsible for his nutritional and dental health. I control the supply of candy and determine whether his behavior-to-sugar ratio warrants my granting him sweets. He may suffer the pain of a tummy ache or dentist appointment, but I'm to blame for it.