Dr. Russ Roberts: "I Want My Country Back!"
Video - George Mason University Economics Professor Dr. Russ Roberts
What follows is my testimony before the House Committee on Oversight and Government Reform, delivered October 28, 2009. The topic was executive compensation and the Special Master for TARP Compensation, Kenneth Feinberg, who was determining compensation at the firms who had not repaid their TARP funds.
Americans are angry about executive compensation.
Rightfully so.
The executives at General Motors and Chrysler don’t deserve to make a lot of money. They made bad products that people didn’t want to buy.
The executives on Wall Street don’t deserve to make a lot of money. They were reckless. They borrowed huge sums to make bets that didn’t pay off. And they wasted trillions of dollars of precious capital, funneling it into housing instead of health innovation or high mileage cars or a thousand investments more productive than more and bigger houses.
Everyday folks who are out of work through no fault of their own want to know why people who made bad decisions not only have a job but a big salary to go with it.
No wonder they’re angry at Wall Street,
But if we keep getting angry at Wall Street, we’ll miss the real source of the problem. It’s right here. In Washington.
We are what we do. Not what we wish to be. Not what we say we are. But what we do. And what we do here in Washington is rescue big companies and rich people from the consequences of their mistakes. When mistakes don’t cost you anything, you do more of them.
When your teenager drives drunk and wrecks the car, and you keep give him a do-over—repairing the car and handing him back the keys—he’s going to keep driving drunk. Washington keeps giving bad banks and Wall Street firms a do-over. Here are the keys. Keep driving. The story always ends with a crash.
Capitalism is a profit and loss system. The profits encourage risk-taking. The losses encourage prudence. Is it a surprise that when the government takes the losses, instead of the investors, that investing gets less prudent? If you always bail out lenders, is it surprising that firms can borrow enormous amounts of money living on the edge of insolvency?
I’m mad at Wall Street. But I’m a lot madder at the people who gave them the keys to drive our economy off a cliff. I’m mad at the people who have taken hundreds of billions of taxpayer money and given it to some of the richest people in human history.
I’m mad at President Bush and President Obama and Secretary Paulson and Secretary Geithner and Chairman Bernanake. And I’m mad at Congress. You helped risk-takers continue to expect that the rules that apply to the rest of us don’t apply to people with the right connections.
You have saved the system, but it’s not a system worth saving. It’s not capitalism but crony capitalism.
Using a Special Master for Compensation to get our money back is too little, too late.
Many people argue that because the government handed out the money, the government has a right to dictate how it is spent. It’s a reasonable thought in personal relations. If I offer you money, I have a right to attach strings to my generosity. But in a constitutional democracy like ours, it is not the government that has rights. We, the people, have rights. The Constitution exists to restrain government, not to empower it.
Whether government has the right to limit pay isn’t the question. The question is whether it’s a good idea for the government to have the power to set compensation. Despite our anger, the answer is no.
F. A. Hayek, the Nobel Laureate economist, said: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
The Special Master imagines he can design compensation packages that “align incentives” while “retaining key talent.”
But it is impossible for any one person—no matter how wise—to anticipate the consequences of such decisions. Certainly the Special Master does not possess that knowledge.
The Special Master doesn’t even know who is key and who is not. Some of that talent should leave and some of those firms need to disappear. But he does not know enough to decide correctly.
Nor does he have any incentive to acquire that knowledge. He has no skin in the game.
A single individual has been given enormous arbitrary power with insufficient accountability or transparency. This is not good for the rule of law, democracy or capitalism.
By focusing on those who owe the government TARP money, the Special Master distracts us from other firms that benefited from government rescue such as Goldman Sachs and JP Morgan Chase.
The comfort we receive from seeing compensation reduced distracts us from the policies that created the problem in the first place—the rescue of Wall Street from its own recklessness.
It is a charade of political window dressing to make crony capitalism look respectable.
I want my country back.
Let’s get the government out of the auto business, out of the banking business and out of the compensation design business. We need explicit timetables to disengage from government ownership including a plan for how the Federal Reserve will draw down its balance sheet. Most of all, we need to stop trying to imagine we can design housing markets and mortgage markets and financial markets and compensation.
I want my country back.
I want a country where responsibility still means something. Where rich and poor, Main Street and Wall Street live by the same rules. We don’t need a Special Master to level the playing field. We just need to take the crony out of crony capitalism so we can get back to the real thing.
Nov 16, 2011 at 4:45 PM
Reader Comments (19)
Did they expect to be bailed out?
are incompetent or corrupt.
Something needs to be done about this. One term and they get
this for life. It's one of the main reasons I call them parasites.
Salary of retired US Presidents .............$180,000 FOR LIFE
Salary of House/Senate ..........................$174,000 FOR LIFE
Salary of Speaker of the House .............$223,500 FOR LIFE
Salary of Majority/Minority Leaders ...... $193,400 FOR LIFE
Average Salary of Soldier DEPLOYED IN AFGHANISTAN $38,000
Average income for SOCIAL SECURITY seniors $12,000
I Found the salaries shown are what they make when they are serving.
Members of Congress are not eligible for a pension until they reach the age of 50, but only if they've completed 20 years of service. Members are eligible at any age after completing 25 years of service or after they reach the age of 62. Please also note that Members of Congress have to serve at least 5 years to even receive a pension. The amount of a congressperson's pension depends on the years of service and the average of the highest 3 years of his or her salary. By law, the starting amount of a Member's retirement annuity may not exceed 80% of his or her final salary.
I still think they get paid a hell of a lot more then they deserve but the information in my earlier post is largely untrue.
I think I'll check the stuff I receive out a lot closer from now on.
( Representing the best interests of the people in their congressional district or state.)
They'd be working for nothing.
And how well they honor their Oath of Office.
( I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.
We'd have to charge them with treason for working with enemies, domestic and foreign to destroy the wealth of the American People and end Rule of Law in the U.S.A.
( Representing the best interests of the people in their congressional district or state.)
They'd be working for nothing."
Not quite, they would have to pay us for the "priveledge" of holding office if they were paid based on performance.
http://www.cbsnews.com/8301-250_162-57323832/who-won-the-gop-debate-take-our-poll/?tag=pop;stories
And I listened to Buffett this AM on Buffett TV, with it's lead anchor Becky-to-the-Quick spew the TARP lies re: taxpayers making $$$ on the deal, but he failed to mention AIG...at least Kernen mentioned that Warren directly benefits from the bank rescues, in that he is a huge shareholder of both Wells and BAC, with warrants on GSuchs...
Ron Paul on Obama’s “Elective Dictatorship”
http://www.ronpaul.com/2011-11-08/ron-paul-on-obamas-elective-dictatorship/
Ron Paul Article Removed from Huffington Post Despite Most Comments 08/16/2011
http://www.youtube.com/watch?v=ipYf_g_mTvI&feature=youtube_gdata_player
The world and US are too far along the road. The defacto large scale enserfment by the financial industry of underwater mortgagee citizens has already transpired.
And the residential asset is the iconic benchmark of wealth for the average citizen. That benchmark has been violated by system greed.
The historical asset collapse occurring within the next 2 and 1/2 weeks will grossly intensify the underwaterness by fewer surviving debt-money assets in the denominator and fewer wages to support the numerator.
What is needed is magic.
And Dr. Bernanke .... Dr. Krugman are in a very small, super capable minority who have the ability to see the large picture, a short period forward, and understand what is needed to, if possible, stabilize the system.
What is needed is simply his: the use of a country's sovereign currency to prevent dissolution of the society and with the society ... the currency and all debt obligations. The dysequilibrium of the world debt-money-asset system is unprecedented....
Asset collapse will occur and will occur in accordance with the time based laws of saturation macroeconomics which like the onion peel laws of energy-time-space physics are mathematical fractals of varying time scales.....
The Wilshire's 11 November 2007 nominal high was predicted prospectively by the elegantly simple laws of saturation macroeconomics.....
Lammert's Quantum Macroeconomic Collapse
The greatest collapse of asset prices in the history of the world is in the ante room. Retrospectively, it will be viewed in terms of the collapse of Euro system for 500 million people and that system's interconnectivity with the world currency, debt, and asset valuation systems.
But the rules of the system - partially corrected in the early 1930's with Glass Steagall and less than two decades after Wall Street's puppeteers had linked forces with a few politicians and created a privately held, incredibly lucrative 'United States labeled' central bank for the purposes price stability and full employment .. whose manipulations in debt market rapidly resulted in a caricature of capital markets with overproduction of assets, overvaluation of derivative of assets, system fostered easy citizen credit creation, asset over ownership, financial scheming .... and finally collapse into deflationary depression - the 1930's Glass Steagall corrective rules of the system were again overturned in the 1990's by lobbied well greased politicians, by an imprudent, over powerful central bank chairman, and by the unimaginably avaricious financial-banking industry who because of its sole laundership and management of United States debt have become indispensable - absolutely indispensable- to the international US bond holders and dollar holders: owners of the greastest virtual IOU asset class on the globe.
With the repeal of Glass Steagall, the financial industry once again was empowered to make money out of nothing recreating the roaring twenties with computerized leverage and manipulation of the monetary system, easy credit thru the GSA'a, creating the current historical mess and grotesque gross equilibrium of too too many assets, too many enserfed underwater mortgage owners, and unimagible unrepayable debt ... all sitting on a five mile high November 2011 unstable crumbling mountain ledge about to break with resultant unimagible nonlinear collapse of asset prices (except US long term debt).
The 1982 34/85 of 85 quarter Wilshire first and second fractal series ends October - December 2011 and will reduce the bad debt leverage of the last 29 years for the Wilshire and reduce it nonlinearly over a period of less than 3-4 weeks.
Are these recurring patterns for the Wilshire concluding the 1982 34/85 of 85 quarter :: x/2.5x first and second fractal with expected 85th quarter nonlinearity in November -December... occurring by chance and by chance alone?
March 2003: 18/44/45 of 45 months :: y/2.5y/2.5y
August 2004: 15/37/38 of 38 months :: y/2.5y/2.5y
March 2009: 5/12/10/8 of 8 months :: x/2.5x/2x/1.6x
Feb-Mar 2011: 7/17/14 of 17 weeks :: y/2.5y/2.5y
Aug 2011: 3/7/6/2 of 4 to 5 weeks:: x/2.5x/2x/1.5 -1.6x
Are these patterns an hourly, daily, weekly, monthly, quarterly, yearly self assembly self organizing integration of the debt-money-asset itself, representing the rules of a bounded macroeconomic system with exact eloquently simple mathematical properties?
Are these time based valuation patterned rules of the macroeconomic system equivalent to the patterned rules of physics, chemistry, and biology?
theeconomicfractalist.blogspot.com/
www.economicfractalist.com/
The final decay Wilshire fractal is a 1 November 2011 4/9 of 10/10 day y/2.5y/2.5y decay fractal with the low ending on Wednesday November 30 or Thursday 1 December 2011 and significantly below the Wilshiire's March 2009 low.
This will conclude the Wilshire's 85th quarter nonlinearity of the 1982/1990 :: 34/85 quarter Lammert first and second fractal series.
This will conclude the Wilshire's 1990 85 quarter series composed of a 17/34/36 quarter :: y/2y/2y Lammert decay fractal series
This will conclude the Wilshire's March 18/44/45 month y/2.5y/2.5y Lammert decay fractal series
This will conclude the Wilshire's August 2004 15/37/38 month y/2.5y/2.5y Lammert decay fractal series
This will conclude the Wilshire's March 2009 5/13/10/8 month :: x/2.5x/2x/1.6x Lammert growth and decay fractal series.
This will conclude the Wilshire;s bell weather performer's, i.e., Ford's: February 2009 21/52/42/34 Week :: x/2.5x/2x/1.6x series and
composing Ford's 42/34 week 3rd and 4th fractal of this series, this will conclude Ford's interpolated and self assembled 11/28/22/17 week :: x/2.5x/2x/1.6x series and composing the third and fourth fractals of the above Ford sequence, this will conclude a 31/78/78-80 day Lammert y/2.5y/2.5y decay sequence.
http://www.livestream.com/globalrevolution
http://www.ustream.tv/channel-popup/we-are-the-other-99
http://www.rawstory.com/rs/2011/11/17/warsaw-protester-launches-drone-to-spy-on-police/
As of today the shameful (89 seconds) not 90, 89 seconds. Ron Paul was afforded in this last debate again was addressed by non other than the not so Main Stream Media.
Dr. Pauls camp is asking for his supporters help with some counterweight.
Ironic I found a video that I actually read about this very issue before I ever found the DB. A former CIA employee articulates very well why there is no truth or news in the main stream media. DB had posted it a while back, though I did not know it. And as DB wrote "it's worth your time."
TYT on Ron Paul Polls Ignored by Mainstream Media. Runs shy of 3 minutes.
http://www.youtube.com/watch?v=Os85fo3kk0Q&feature=youtube_gdata_player
TIME: Overshadowed by the Cainwreck and Newtmentum, Ron Paul Climbs into Second | Ron Paul 2012 | Sound Money, Peace and Liberty
Party money obligation article in this. Though it's in the main page I wanted to place the link here. It allows you to check who and who is not for an audit. It also allows for an email to send to you congressperson. In NV where progress has seemingly been made for homeowners, I was a bit surprised (just just so) that only one is on this list.
Hope Ron Paul supporters find this useful. Cheers!
http://www.dailypaul.com/187830/time-overshadowed-by-the-cainwreck-and-newtmentum-ron-paul-climbs-into-second
There is a little spat going on re: Romney and Deval Patrick pertaining to Patrick providing Obama certain information about Romney.... this might get messy for all those involved including Romney....stay tuned.
http://www.huffingtonpost.com/2011/11/17/romney-campaign-accuses-patricks-office-of-dirty-tricks_n_1099795.html
[url= http://www.dressiton.com /special-occasion-dresses-2/club-dresses.html [/url] Thank you! You often write very interesting articles. You improved my mood.I'll be back again
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Congratulations for making to the summit. I bet this such a wonderful feeling to all the participants, specially to you guys. With all the effort and sweats you have shed...thanks for the share
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