Let’s Have Another Round of Oversized Bloated Banking Bonuses

The public has generally been outraged over the Government’s bailout of the financial industry. The public’s major issues revolve around the CEOs and other executives of those companies not only keeping their jobs, but also receiving large bonuses after their stellar performance in bringing on the crisis. On top of this is the insult added to that injury, of the Government not providing bailouts for other businesses and industrial areas that were as dramatically impacted by the near financial collapse. Financial companies were assigned surgeons to help repair their life-threatening problems, while the rest of the economy was ask to handle their injuries with some band aids.

Now that the economy is beginning to show viable signs of a sustainable come-back, the executives of the financial companies are rewarding themselves with more super-sized bonuses. And we will hear from them the ever popular refrain about how these bonuses are essential to keeping these highly valued individuals who would go somewhere else if they weren’t paid these huge sums.

The Government’s solution to this is mostly non-existent because they are not allowed to directly interfere with the operation of a public-sector company. At least the Government does not intervene when it involves companies that provide large political contributions and funds very effective and well connected lobbyist groups. For those financial companies that are still holding Government TARP funds the Government has restricted pay and bonus amounts; but I am sure that this will be duly corrected when these companies pay back the bailout funds.

In an effort to ameliorate public discontent, the Government is proposing lots of solution to the problem the public sees. One of the easiest solutions that also offers the most emotionally satisfying reaction is to tax such bonuses. Of course, if we all step back and think about this for a moment we can see the fundamental flaw in this plan. Just as we all Government funds come from taxes, and all taxes come from the public; all bonuses come from the public’s purse also. So when we take some of their bonuses away, we are still the ones who paid the original price. This tax bonuses approach has been adopted by the European Union, so this simultaneous discovery of how to help protect the public and our economies from financial institutions’ abuse and greed will unquestionably work out.

Other Government proposals are to require the bonuses to be in the form of stock awards that have to be held for five years before they can be redeemed. This is really going to protect us, because as everyone knows this financial crisis was the result of things that were done in less than a five year period. And we won’t have to worry about these guys fiddling with the numbers or devising processes that will let them game the system (which they define) all over again. I don’t want to make you feel stupid or anything; but you only have to be of average intelligence and possibly are reasonably proficient with Algebra-level mathematics.

Our real problem is that the Government is still only able to understand and react to economic and societal risks with the same tools and concepts that they have been using for and from the last century. And given the empirical data from the 1900’s we can clearly see how successful these means and methods have been at averting these problems. In fact, since we are going to tackle these problems in the same way as before, they must not have really happened.

And why are we depending on the Government to have the brains and know-how to ensure that we can protect ourselves? Isn’t this another case of the same tool that just failed being the tool that is being recommended to solve the problem this time around? The politicians always talk about it being time for change; and I don’t just mean the present administration. Both parties and every administration says that they are going to change how we do things and make it work this time. It’s not that I don’t believe that they think they are going to fix things; it’s that I don’t think they understand how to comprehend the problems they are trying to solve. A prerequisite to solve a problem is to know the space in which a solution (if you believe that there is one) can be found.

What evidence do we have that politicians have demonstrated even a random chance at getting things right? I would contend that in some non-Las Vegas manner they cannot even win half the time when the odds are fifty-fifty.