Bankers of the world, unite!

Today was a tempestuous day on Wall Street, to put it mildly. Public and market reaction to the plan being put forward by the administration was less than unanimously enthusiastic. Perhaps it has something to do with finding this kind of language in it(in all cases, boldface added by me):

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

(New York Times)

Then there's the specter of Wall Street fat cats profiting off the bailout…or trying to:

Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

(New York Times)

With attitudes like that, it's no wonder that John McCain's suggestionresonates:

"We can't have taxpayers footing the bill for bloated golden parachutes like we see in the Lehman Brothers" bankruptcy filing, Sen. McCain said at a town-hall meeting to applause. "My friends, the top executives are asking for $2.5 billion in bonuses after they ran the company into the ground."

Sen. McCain called for the pay of senior executives who would benefit from the bailout to be limited to that of the highest-paid government official.

(Wall Street Journal)

In other words, the chairman of Morgan Stanley couldn't make any more than the President of the United States. Since we're bailing his sorry butt out, it sounds fair to me. Unfortunately, our future Wirtschaftsfuehrer doesn't agree:

Mr. Paulson has argued that pay limits shouldn't be part of this plan because they could discourage firms from participating. Treasury is also arguing that it isn't feasible to expect thousands of companies to change their executive compensation structurejust to participate in the program…

Oh, the poor finance companies. It just wouldn't be fair. Hey, if they'd rather go under due to bad debt than reduce their executive compensation packages, fine.

…and says such a move would discourage small banks and credit unions from participating.

(Wall Street Journal)

Hmmm. It couldn't possibly be because his last job was as Chairman and CEO of Goldman Sachs, one of the firms expected to benefit most, could it? Nah…

Looking at it in retrospect, the following passage, written at the beginning of the year, seems prophetic:

The massive build-up of toxic debt is threatening the functioning of the international financial system. The banks have been forced in the last two months to write down $80 billion of bad mortgage debt. Conservative estimates are that they will have to take losses of $300-400 billion in the next year-if the economy doesn't go into recession.

You'll never believe where that passage comes from. When these folks start sounding sensible, it really is time to worry.