tag:blogger.com,1999:blog-2077196287951441538.post9057056765189170088..comments2008-10-02T08:59:10.320-05:00Gary Allen Vollinkhttp://www.blogger.com/profile/06056347259811443583noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2077196287951441538.post-72064388806898123902008-10-02T08:59:00.000-05:002008-10-02T08:59:00.000-05:00Vahl,<BR/><BR/>I am not giving CEOs the benefit of the doubt at all. Actually, I refuse to give them credit for thinking outside of their private boxes to be able to cause this sort of mess.<BR/><BR/>The golden parachute is a personal contract between a corporate entity and a key employee, and it frees that employee up about having to personally worry about the outcome of his/her actions on a personal level.<BR/><BR/>Clearly, this does not protect a CEO from criminal investigation in the case of rampant wrong-doing. It does protect a CEO from being forced into retirement with no prospects for future employment on the heals of a miscalculated risk.<BR/><BR/>My greater point about the crisis has more to do with follow-through, though. The key when dealing with free financial markets is to deliver (within a margin) on what you say you will deliver. In the case of the bail-out, it had been widely reported that a bail-out deal that was palatable to both sides had been found. When that failed, the result was panic.<BR/><BR/>I'm still not 100% convinced that this is the right bail-out at the right time, and I find it deplorable that so many programs have been tacked onto it .. forcing anyone to votes against it to have to face future election ads that say " ... voted against parity for the mentally disabled ... "<BR/><BR/>I am 100% convinced that something needs to happen - and that something should come at the banking level, and that something should come at a cost.<BR/><BR/>Meanwhile, the markets are teetering on another panic because lawmakers have again said that the bail-out will still happen. I hope for all our sakes it either happens, or government learns to stop making promises that it doesn't intend to keep.Gary Allen Vollinkhttp://www.blogger.com/profile/06056347259811443583noreply@blogger.comtag:blogger.com,1999:blog-2077196287951441538.post-14345963167811360672008-10-02T06:00:00.000-05:002008-10-02T06:00:00.000-05:00Your point about a CEO getting fired if he didn't take risks in Real Estate:<BR/><BR/>WHY is that the case?<BR/><BR/>1. Zero Congressional Oversight -- I've heard clips from 2004 and 2005 on talk radio where Republicans were too weak to use their majority to reform Fannie Mae and Freddie Mac ... and Democrats were apologizing and defending the executives from those companies, and the regulator who was calling for reform was ripped to shreds on Capital Hill.<BR/><BR/>2. Moral Hazard -- Executives KNOW that the Federal Government will bail them out, and they have FAITH that the Federal Government will not fail financially. There's ethics, morality, and reality. If you teach execs that the Government will bail them out, they will take bigger risks.<BR/><BR/>3. Poor Communication: Being here in Florida, in the center of the financial storm, I can tell you that the mortgage crisis was starting two years ago, after all the Hurricanes. People wanted to get out of Florida ... too many homes went on the market all at once ... Real Estate agents were not realistic with sellers, telling them to wait until the buyers returned (I was shopping for a home at the time, looking for a bargain -- it was a mantra) ... ARMs started to reset at higher interest rates (The Fed never should have lowered rates to 1% -- another symptom of moral hazard) ... foreclosures ... buyers circling like vultures ... banks reacting slowly.<BR/><BR/>***<BR/><BR/>Anyway -- I would not give CEO's the benefit of the doubt on this issue. They made a CHOICE to take risks, while not keeping an ear to the ground to hear what was really happening in major markets like Florida.<BR/><BR/>This is why I am against the bailout -- I think we need an end to Moral Hazard -- CEO's need to understand that the Government will not bail them out ... the fear will eventually work itself out of the market, and things will stabilize -- it will be a little different, of course, but normal.<BR/><BR/>I have zero faith that my idea will happen ... or if it does happen, the consumer will be punished SEVERELY for insisting that Congress vote NO on a bailout. We the masses will suffer, one way or another, for this mess, with higher interest rates and scarcity of credit.Vahlhttp://dailyskew.comnoreply@blogger.com