Bankers and hedge fund managers were furious yesterday at attempts by the G20 to cap their pay and regulate them for the first time, calling it a "witch hunt" by world leaders.Actually, I think that the biggest Hollywood stars should be paid less. But the fact remains that neither the actors nor the studios have asked the taxpayers to fork over one dime in bailout cash, even though times are tough in the dream factory.
"Regulation is generally bad. You should let the market decide what the people will get paid," said Matthew Prest, managing director at Close Brothers investment bank. "Sometimes regulation has the opposite effect of what you want and I think bankers' salaries regulation would fall under that category. I don't hear anybody calling for Hollywood star salary caps. This is a trendy, fashionable thing to do, it will have bad consequences."
If strict laissez faire ruled the day, then TARP would not exist.
Laisez faire does rule Hollywood. Star salaries go down when their films do poorly and go up when their films do well. By contrast, the big bankers expect to be rewarded for trading in financial instruments based on crap mortgages.
One of my pet theories holds that the film Lawrence of Arabia contains a quote germane to any situation. At one point in the movie, Anthony Quinn (playing Auda Abu Tayi, a chieftain being paid off by the Turks) asks: "Does Auda serve?" To which Peter O'Toole (as Lawrence) answers:
"The servant is the one who takes the money."
That's the simple lesson which the big bankers must now understand: The servant is the one who takes the money. If you run Goldman and you want the bailout money, you are now a servant. Get used to the idea. The taxpayers are your funders and therefore your betters. If we want to flick cigar ash onto your tongue, then you must kneel, open wide and say "Ah." If pride forbids you from playing the servant's role -- fuck you. No cash for you.
It's that simple.
By the way: Have you noticed that the phrase "moral hazard" doesn't see much usage these days? Was that a Bush thing?
3 comments:
I just used it again. This is basically the lemons problem in spades. If we don't have a less opaque process we'll never figure out things. It'll be all guessing on weird distorted signals. Not exactly what Adam Smith had in mind when he spoke of the Invisible Hand. The Hand should be invisible and should slap the market into discipline when it acts badly. As far as I can tell, they put the hand in cuffs awhile ago.
If Joe Bagodonuts uses his life savings to open a business and it goes belly-up the government says tough shit. They don't bail out people that lose their shirts in Vegas either.
So why does Joe Moneybags get bailed out?
"The servant is the one who takes the money". Perfect. This has so many meanings on so many levels. You can be bought, you made a deal and now must live up to it, I am your master, you just got swindled, a contract is a contract, and I own your ass (Tony Soprano). I am sure there can be many more.
The problem is their rather limited societal view. They have been trained to be aggressive crooks (ex. Cassano is Milken's creature), told their entire pathetic little lives how clever they are, discouraged from looking beyond the cesspool of greed they swim in, unable to comprehend that intelligence does not equate wisdom. We own their ass and enormous hunks are going to be removed irregardless of the buying of pols and moronic rationalizations. The public wants them in leg irons and the current government will be flipped out as was the last one.
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