Ron Amundson’s Political Blog

Ben Bernanke brought this analogy up yet again as concerns bailing out AIG. However, it doesn’t hold water at all anymore, let me expand on it.

The situation:
The neighbors apartment complex is still burning after an extensive effort to put it out. So far, only minor fire damage has been occurred to the neighborhood. However, the reservoir is nearly empty, and the stress on the water table has resulted in homes in the city shifting, and drywall is cracking.

Only a few are noting the following:

1. The neighbor’s apartment complex if it was legit, would have either burned out, or water would have put it out long ago.

2. The council is concerned about the reservoir, but they think they can get neighboring towns to transport water, should it run dry. None have experienced in trucking, albeit there is some experience in firefighting, and significant experience in real estate.

3. The drywall cracks in town are getting worse, the council see’s this a bit, but takes a blind eye. Better to have cracks and a home, rather than none at all, not realizing if major sinkholes develop, the town will be worse off than had it been burned off the planet. A few on the council see this, but they are over powered.

4. Some think the neighbor had phosphorous and hazmat stored in his apartment complex. He was going to get rich in the fireworks business.

5. Why is the fire not out, something fishy is going on. Is the neighbor seeing the reservoir going empty, and diverting / stockpiling water for the future where they will make a killing selling it back to the town, even if his apartment complex finally ends up burning to the ground.

6. The neighbor sent a confidential message to the council, as he noted he was loosing support. Basically he said, keep up the water effort, or the town is gone, the residents will be hurt, the neighbors will be hurt. Your reputation will be ruined. Pretty much said, do this or else. The memo was leaked, and few if any were outraged.

7. While the neighbor knows he should move the contents of some apartments, and even put up a few barriers, just as good operating practice, he wont spend any money. Say’s its too hard to find good workers he can hire in this market for a song, and he would loose money. He did move a couple things, but its a slow process he says.

Some thoughts of an even smaller number of people early on:

1. We are sure their was hazmat in the apartment complex.

2. If we let if burn down, and loose half the town, we could rebuild pretty fast.

3. If we deplete the reservoir, trucking in water is not going to work. We may loose the town, and rebuilding after sink holes appear everywhere is a huge problem, it will take years to fill those in.

4. It would be a good idea to build barriers around the neighbors apartment complex, but to do so, we would need to dedicate much of the fire staff to barrier building, rather than water and hose work. Perhaps we would loose 50% of the complex, so we need to provide new housing for some of the residents. The towns residents will complain, why did those residents get help, their not getting any, plus we’d ask the neighbor to pay for the relocation. He is a good old boy, we owe too many favors too, we really can’t ask him.

5. It may be possible to bring in movers, and relocate the unburned parts of the neighbors apartment complex, as well as the adjoining neighborhood. Of course, that will require major council intervention in the apartment complex operations, as well as the adjoining neighborhood. The business community would have a bird, who gives the city the right to upend a business, irrespective of whether storing hazmat was ok or not. The city just doesn’t have the resources or skill to move houses, they best not touch this. Also if they outsource to the experts, the movers will make a fortune and it will cost the neighbor plenty both in cash and PR. We can’t do that to him.

6. Some guys on the council thought maybe they should put a watchman in place to make sure water is not diverted. Most of the council thought, no, if we do that, it will slow down our efforts to put out the fire, and to even suggest it could damage the neighbors reputation. Remember we owe him a lot already. Also, his friends will talk of this all over the county.

What should we do now? The neighbors house on fire analogy doesn’t hold water anymore…

To establish the Food Safety Administration within the Department of Health and Human Services to endanger the public health by encouraging food-borne illness, decreasing the safety of food, improving research on contaminants leading to food-borne illness, and decreasing the security of food from intentional contamination, and for other purposes.

1. It encourages food borne illness through consolidation of operations, through preferable treatment to large agribusiness.

Its interesting to note the major food borne illness outbreaks are the result of large consolidated ag practices, which are encouraged under this bill. Diversity of production is a national security concern. Imagine the consequences of Monsanto, or ADM screw up in a huge way, its not a matter of if, its a matter of when, biology can be messy that way. In part, this is why small producers are subsidized to encourage some level of diversity. Just as we found in banking, the too large to fail mantra, and the monopolistic practices granted to some firms are counter productive. Thousands of small banks did ok. The 18 or so super banks are in serious trouble.

2. It decreases the safety of food, by a massive influx of new and inexperienced inspectors, and focuses more on the administrative side than physical inspection and testing.

The FDA is tragically undefunded as it is. Adding a new overhead layer of govt, re-arranging all the chairs, increasing the paper work burden, and the inspection scope, will require a massive increase in human resources and training. As a result, experienced people are likely to be diverted to greater administrative functions, rather than being in the field. The end result, greater administrative functions, and a focus on paperwork inspections, combined with less actual testing, planning, and review by those skilled in the art.

3. It decreases the security of food from intentional contamination.

This comes back to the diversity issue once again. Ie, one person could now jeopardize security of food for millions of people, rather than just a local area. It would no longer be necessary to utilize massive terrorist cells for a ampaign, as the vulnerabilities are so concentrated. The lone errant individual would be a much greater concern as well. Introducing pathogens in the food supply chain is not rocket science, doing it over a large scale as existed 30 years ago would be impossible. Today, its possible but difficult. After passage of this bill, it would be rather simple.

In many ways large agribusiness using transgenic crops is in effect a bio lab on a large scale, and its open for business pretty much anytime day or night, with exceedingly limited security. Such crops pose a serious enough problem in the south that over 50% of biotech cotton land must be used as refuge acres, and even here in the north, the EPA requires 20%. The idea is to prevent transgenic crops from loosing their specific traits as concerns insect resistance. Its a similiar situation with volunteer corn having different gene expressions than off the shelf corn. In other words, if left unchecked its a disaster waitng to happen. Case in point, BT volunteer corn.

Wowzers, talk about a ton of spin on this deal, I wonder how many folks have actually read the proposed legislation, instead of the sound bites. Granted, its not super easy to follow, but the Committee on Education and Labor has a mythbusters page Its a must read to counter the sound bites.

One myth I’d like to look at is the following:

MYTH: Given the economic crisis, now is not the time to enact the Employee Free Choice Act.

FACT: The Employee Free Choice Act is needed to address underlying economic problems that helped create the current crisis and to ensure that the recovery is fair and sustainable. Dozens of prominent economists, including three Nobel Prize laureates, recently signed a statement in support of enacting the Employee Free Choice Act, as “a critically important step in rebuilding our economy.”

As a general rule, I am not pro union, having experienced a significant amount of the downsides over the years. Everything from paying $250 for a union guy to connect tradeshow gear, to friends who work at the big3 complaining about the inability to get rid of problematic employees, and other stories. Even in education there are problems. Many years back, when I did a lot of programs for school children, it was exceedingly demoralized to see all the union propaganda in some teachers lounges. I was like, how on earth can anyone work in such a toxic environment, even more so, should I be an employee, part of my check would be used for such… sad, very sad.

By the same token, I’ve worked in industrial and lab settings all around the world. One offshore steel mill I consulted at, they had a siren and warning strobes. Apparently it was such a common occurrence for things to go wrong, that drills were not needed. And yes, the week I was there, I did get to put in my exercise for the day, running out of the facility to avoid a shower of molten steel. It was accepted as normal operating practice. At another facility, they were processing volatile epoxies, and while they had a ventilation system, it turns out that when the wind blew a certain direction, the fans couldn’t keep up. The end result, explosive fumes built up in the ventilation system, and such that an explosion would result, thus creating a flame thrower on the plant floor. This happened frequently enough, they had used duct tape on the floor to mark off where the flames came out. No union would let that happen here in the US, but offshore is another matter entirely.

I’ve also spent a fair amount of time with US air traffic controllers over the years. In some facilities, things work quite well. In many others, the managers are anything but management material. If it were not for the union, the unchecked magnitude of distraction in the workplace would rise to such a point, I am sure serious accidents would result. Even with the union, a review of NTSB reports shows serious ATC management deficiencies impacting safety… its not good.

The end result, my views on unions have tempered a lot over the years. I still believe the traditional MBA mantra that unions are the result of failed management, but I moreso firmly believe far too many managers are failures. Even in a serious downturn, only a small percentage of employees are going to take issue with major benefits/salary cuts, contract rewrites, or even layoffs if it means stability for their jobs and their employer, provided the process is managed correctly.

Sadly, in too many cases its not. Communication failures and/or setting the wrong examples abound, such that the overall company mission is compromised in addition to the employees livelyhood. Ie, cutting employees pay, while taking a huge bonus shortly thereafter is not setting the right example. Another is overlooking safety hazards as they are too expensive, all the while getting new office furniture. Sure, that can be a perception issue, ie, it may take time to get the right specialist in for a safety retrofit, and a 2 cent on the dollar firesale on office furniture may be the deal of a lifetime. If such is communicated, people will understand, if not, expect trouble. Its management 101… and either business schools pass an idiot once in a while, or greed is the highest possible calling for a few.

In addition, as the economy winds down, and boards of directors end up more and more distracted, the potential for corporate looting and other errant corporate behavior will increase. In some cases, it may go so far, such that no recovery will be possible, much less the ability to ramp up as the economy comes back to life. A third party audit may or may not catch such… but employees may well suspect something is up, and the union may give them a path to safely make it known.

However, the proposed legislation doesn’t address my initial issues at all. No one needs $250 guys to plug in a cord, nor a teachers union that kills off far too many good teachers with all the garbage, nor a union that protects bad employees, or even forces an employer to continue paying laid off employees at 90% rates. Those are very real concerns, but fortunately they are a minority of occurrences, and again are subject to bad management, Ie, what business in their right mind would agree to such terms.

I sort of doubt such insane agreements were intentional, but more so concessions under arbitration. Some legislative guidelines for arbitrators might have been useful additions to this bill, albeit difficult to do and not really directly within the scope either.

Overall, the potential positive outcomes of the proposed legislation far outweigh the downside. It makes a lot of sense to leave the decisions to unionize or not in the hands of the employee. It might even save some jobs, or even entire firms, whether they get unionized or not, ie just knowing an additional party is keeping watch during this time is a help. This legislation is well worth it.

demonstration is removed in the Omnibus spending bill. Yep, the Bush administrations program was costing the taxpayers $346,000 every time a recorded participating truck traveled beyond the border zone. Some stats from the inspector generals report based upon the first years result.

Only 1,443 of 12,516 (11.5 percent) trips that FMCSA recorded were identified as going beyond the commercial zone.

Only 29 of 100 projected Mexican carriers were admitted to the project and 2 of those carriers have since withdrawn. This level of participation is not adequate to yield statistically valid findings. Only 1188 of a projected 540 trucks have participated.

Granted, this was a demo program, so the costs will be quite high, and participation will be low… but egads, not that high. Then add in the participation was so low as to not create much for statistically relevant results… this is pork to the max and then some. I have no problem with trying out programs, and having them fail, that will happen, its expected… but this is far beyond that, and worse, not even the US Chamber of Commerce who sees pork to the max in the Omnibus bill seems to be suggesting this program be put down… it just doesn’t add up. Of course, its not pork if it benefits you or the firms paying you to lobby them. The Washington Post has an interesting article on this as well, as to who is for it, and who is not.

The inspector generals report states:
We are recommending that FMCSA determine the minimum number of Mexican carriers that must participate in the demonstration project to yield statistically valid results and develop a plan to meet this level of participation as needed, develop and implement a new quality control plan to provide assurance that all Mexican trucks are checked at the border, and conduct a cost/benefit analysis to evaluate the benefits of renewing GPS services.

Should that not have been done ahead of time? And as soon as it wasn’t matched, why were their not provisions in place to kill the project as non-viable? Granted the participants would take a loss if the program ended early, otoh a cost and risk sharing type of program could have mitigated much of that. Ie a surcharge on US businesses and brokers utilizing the trucks in the program, such that the Mexican carriers could be reimbursed if it ended early. Of course, ideology likely got in the way… and in fairness program risk sharing, might well have biased the results, but just in reading the reports, there is bias all over the place. It is a bear to sort through.

This is an interesting statement:
Far more Mexican carriers were operating legally beyond the border commercial zones than were in the demonstration project, including carriers operating within specific states or anywhere in the United States under pre-NAFTA provisions, and within border commercial zones. Vehicle out-of-service rates for these carriers were higher than the rate for demonstration project carriers. Only the project participants were subject to the pre-authorization safety audit.

At least the Omnibus bill puts an end to this porker…

Its probably old news by now, but a confidential memo from AIG likely to the treasury was leaked a few hours ago. What an absolute mess… For reference, the memo is located at:
http://www.scribd.com/doc/13112282/Aig-Systemic-090309

Apart from the obvious outrage the memo’s content will create, I’m wondering what on earth motivated someone to leak it. Granted, there is a semblance of justice, ie burning all of AIG’s political capital might be a form of payback from a disgruntled client, investor, or employee. And yes, I fully believe, this leak will serve to burn capital in such a way, that AIG will not exist in its present form, or perhaps at all. The average Joe is not versed in finance, global economics, or insurance such that virtually no argument could be presented which he would buy into. To further fund them at this point would be the end of a politicians career I’m afraid. By the same token, to let the market solve it is not really an answer either. No doubt this is the last thing the treasury needed, but it will force them to make decisive and difficult calls in a short time period. In that regard, its sort of a good thing, otherwise we could figure on AIG returning in another 30-60 days for the next few years asking for another $30 billion, until there was no political capital left, at least this way Washington will be forced to make a call.

Its an interesting read for sure, albeit egads, if this is the best Wall Street can come up with, I think they need to get their MBA’s from a different school of thought. Both in the situation they are in, but also in its presentation. Its borderline extortion, and I think runs a pretty fine line towards whether the execs stay free or in jail. Someone must have been asleep at the wheel.

The other thing is, assuming the memo is correct, the linkages are not that strong, or should I say, no where near as strong as the automaker world. By the same token, the whole mess is just too intertwined to be viable anymore. Dis-assembly will be a tricky deal indeed, with an unlit path consisting of sheer drop-offs on either side. Yet, I think that really is the only option available, govt seizure, and chapter 11 reorg, and with it, significant collateral damage. Its too bad the proposed commodities laws had not yet been passed. The ability to stagger CDS redemptions would have been a great tool to have at hand. As it is, their will be a ton of juggling. I guess the one positive, is the govt will find they are ill-equipped to handle this dismantling, and as such may go a bit slow in the automaker domain, as they have their hands full. Unlike manufacturing, where once tooling is gone, the jig is up, finance and insurance can rebuild, its just a transfer of wealth, albeit the casino side of finance will evaporate, and I think that’s something which would have happened sooner or later anyhow.

The saddest part of this, is all the employees who will be affected, the human aspect is going to be the rough part, and sadly, the govt doesn’t have the ducks in a row to deal with the massive unemployment that will result, whether it be in the time it takes to file chapter 11, or during the actual unwinding process. That, and protection against executive pillage need to be where he focus lies…. Its going to be a rough road for sure.

The usual conservative argument is based upon trickle down economics, and while I believe a careful analysis shows that model doesn’t work out all that great, I don’t believe Keynes does either. Instead, I’ll focus on the practical in your face situation when it comes to business decisions.

First of all, very few people have been in the hot seat, of whether to expand ie invest or not, especially when significant sums are at issue, or even ones lively-hood. I’ve been in the bet the farm mode a number of times over the years, and those decisions are never easy. For the wealthy, its different in that they are not betting the whole farm, as is often the case for the founders of a start-up. However, the wealthy individuals I’ve worked with over the years, while not sweating bullets as to whether their fortune is won or lost, whether they will be able to eat or not, take the matter almost as seriously.

The deal is this… if you are in that spot where a call has to be made, you don’t make the jump, unless you are darned sure its the right call. In some cases, its easier, a line of customers at the door with purchase orders, and cash in hand, and an existing stable platform make it a no brainer. In others, many potential customers say, if you could add this, we’ll put you at the head of the chart when it comes to making a call, and research looks super great for ones market focus. Those are trickier. Then there is the case, where its a new market, and demand is really unknown (proformas are always a guess) :). The research shows it looks good, but research is far from a purchase order, and customers with cash are a huge unknown. Those are even harder to judge,

In today’s world, most research shows demand has crashed, or if it hasn’t crashed, its on life support. Unless one has customers beating down the door with purchase orders and cash in hand, no one will bet the whole farm. A few might speculate with a small amount. The thing is, with demand at zero, or very low, no one in their right mind will make substantial ie bet the farm investments. (Demand is not low in all areas, some niches, and niches in the pipeline are likely to do well, but thats an exceedingly small part of the economy for now). The end result, for most entities, tax increase or decreases are not going to pay a large role in investment decisions at this time.

However, when the economy is growing leaps and bounds, ie the real estate bubble, and the dot com bubble, by all means tax deductions can provide for more capital availability, and that can help. Not so much as to making an expansion, but more so the scope of such expansion can be larger, or with a better cushion, as more cash is available. Of course, this is also the time when hopefully govt spending drops off, such that deficits generated by the lean times can be made up, and reserves put in place for the next cycle.

The problem is, a bubble is not where we are. Granted no one wants higher taxes, but if they spur the economy as a whole, whether it be via infrastruture improvements, or even cost reductions in health care, its likely such spending will do a lot more for the economy than tax cuts which likely result in hoarding or offshore tax shelters, as internal investment/expansion is not prudent.

The end result, tax policy can affect business investment both pro and con, but external factors like demand, cash flow, and market niche likely play a much more significant role than specific tax policy within a given time frame. Granted, there are specific deductions which can make a difference, but they are few and far between.

The program was killed off in the house yesterday as part of the budget vote. There are some detailed studies out, and there is a ton of spin. I decided to take a look at the academic part of the studies to see if I could sift through things a bit.

From National Review Online:

Academic researchers evaluating the program have found that parents of voucher students are more satisfied with their children’s schools. Initial evidence suggests that children who were offered vouchers are performing better academically than their peers who were not, though the results so far aren’t statistically significant.

More satisfied parents and test scores that appear to be rising — not bad for a government program. Why, then, are congressional leaders so intent on terminating this relatively tiny expenditure?

The results of the first couple years dont seem to indicate much of a difference in academic performance.

After 2 years, there was no statistically significant difference in test scores in general between students who were offered an OSP scholarship and students who were not offered a scholarship. Overall, those in the treatment and control groups were performing at comparable levels in mathematics and reading.

The main difference is that after 1 year, the non-SINI and higher performing groups of students appeared to experience statistically significant positive impacts on math achievement, while in the second year the impacts were on reading achievement. Adjustments for multiple comparisons suggest that both sets of results may be false discoveries.

Now, whats goofy, is that in some cases, some research shows that private schools do provide a better education than public schools. Certainly in other areas of the country, voucher programs have shown significant success. Then add in the description of the public schools in Washington DC…

Despite the system’s spending more than $14,000 each year per student, barely half of all students ever graduate high school. One out of every eight D.C. students reported being assaulted or injured with a deadly weapon during a recent school year. That’s equal to the percentage of D.C. eighth-graders who scored “proficient” in reading on the National Assessment of Educational Progress.

I went whoa on this, so I had to look it up, and the are correct… scary.

And if all the facts are on the table, something doesnt add up at all, thus there has to be something seriously skewed here. Any private school that has such a low performance in reading would loose all their students in a flash. However, the NAEP is likely a drastically different evaluation, than what was used in the study.

Some possible explanations (its my guesses, no data to back them up, just my thoughts:)
1. The public schools taught to the tests used in the study, where as the private schools focused on a well rounded education.
2. Standardized testing in K-12 edu is pretty worthless as a sole metric of comparison.
3. Involved parents traditionally have more to do with education than funding, Scholarship students parents would be involved, so performance should be better. Why doesnt the study show this, ie parental approval is very high, but student performance is comparable.
4. Two years of data is too little to make a call.
5. The transition in schools may have caused a temporary drop in achievement.

I think it was a bad call to end this program at this time. It was supposed to run through 2012, and then there would hopefully be enough solid data to make the call. Granted preliminary data is not very good, but that could be due to other factors. In fact the next eval will be out this summer, at least they could have moved forward with this for another year. By then, the reports could have been looked at with a fine tooth comb. If it was indeed not effective, perhaps they could find out why, ie what are the other factors contributing to this. As a anti standardized test guy, obviously I blame the measurement methodology, but I really would like to understand what the real deal is. Also, to upend kids education over ideology, which does appear to be the case, is way uncool. I dont care which party does it… kids education has to be a priority, not the parents, not the unions, not the school district, nor Washington ideology.

Last night, volcano monitoring was portrayed in a negative light as part of the stimulus bill. In some ways, I must admit a good point was made, ie, its a long term investment, and short of preventing brain drain at USGS, it doesn’t immediately stimulate the economy. Same with hurricane monitoring, tornado research, or even rebuilding the levi system in Louisiana.

Ie, one could make the argument not to spend, and let the insurance companies and the free market take care of it on their own. While it might mean that the vast majority of individuals and companies in such areas would be unable to procure affordable insurance, or perhaps not at all, that is their problem, they chose to establish where to set roots. Or perhaps it would mean insurance companies would fail left and right, as investors would freak if policies could not be immediately canceled. What if their was a massive exodus of people and companies from the affected areas? Would that affect the economy over all as a boost or a drain? Is allowing them to stay a stimulus or a moral hazard? From an overall financial pov only, its not such an easy call. From a moral pov, I think the answer is pretty easy, which makes me wonder why Gov Jindahl chose it as a topic, when so many others, which are not related to his state are available.

Now, one could make the argument that such spending, being it is a long term investment doesn’t belong in the stimulus bill, just as with many other programs. The thing is with disasters, they are unpredictable, the experts are few, and brain drain is a valid concern. Lets say it was left out to be dealt with later… with appropriations, who knows, perhaps it could be many months. Then throw in political budget shifting, funding might be available, or might have so many political ramifications added in, the whole program gets watered down. Then add in the potential USGS staff reductions, and its indeed possible, the US would get a lot less bang for the buck than doing it now. Or worst case, the delay results in a gap where a disaster occurs, and much loss of life and property occurs, thus costing a ton more, both financially, as well as politically and morally. In the perfect world, by all means such would be in appropriations, but the world is not perfect, and govt far less so.

I think the right call was made to include such funding. Stimulus needs to be part short term, and part long term. Disaster planning actually does quite well in both sectors.

From the Star Tribune:

If another budget cut of 5 percent or more comes down, Magnuson will recommend dramatic action — shutting down conciliation court, cutting hours and suspending prosecution of 21 types of cases, including property damage, harassment, probate, and more than 1 million traffic and parking cases a year.

Magnuson said that shutting down traffic cases is no small move, “but we’re running out of choices here, and I will not compromise the prosecution of criminal cases.”

Another 5% would bring us back closer to the 1970’s as a percentage of the state budget, and I’m not sure that’s such a bad thing. Criminal cases must be a priority, and if there is no money for the others, there isn’t. Obviously some of this is real, and some is political spin for more money. There has to be a cost/benefit analysis done, granted criminal prosecution costs are much higher than they were years ago. Now, this may mean limited court access or alternative means of resolution for other matters, and in some cases, laws would need to be repealed or changed. When it comes down to prosecuting, and keeping a non violent individual in prison, or hiring/retaining a few teacher(s), or getting medical care to those in need, I would error on the later two over the first one. That’s how things worked years ago, that’s how they can work again. The exception of course is if the citizens want to spend a lot more on taxes, and if they do, fine, but be open as to what the tradeoffs would be.

I do however agree with Chief Justice Magnuson as well as concerns the erosion of the rule of law and its impact on society, but with a different spin on it. If the govt cannot afford the rule of law they created, than the rule of law needs to be changed to make it affordable.

No matter what, once efficiency is wrung out, then no more cuts can be made… and wringing efficiency out of the legal system is a very slow process with tons of unintended consequences. Changing the rule of law would be less expensive, faster and likely less prone to counterproductive consequences.

Neither change of course is politically friendly, but the days of Cadillac rules of law for cheap must end. Either pay through the nose while carefully going after efficiency gains, or change the law, I’d go with change the law as I’m cheap, its faster, and I fully believe history shows it works. Others will view this differently.

Paying retention bonuses greater than employee production with taxpayer money.

Brokers at Morgan Stanley and Citigroup’s Smith Barney unit who produce at least $1.75 million of revenue may be eligible for a payment equal to 105 percent of their annual production, according to a person familiar with the plan.

About 6,500 of the combined entity’s 20,000 brokers are expected to be eligible for the retention package, with the first payment in January 2010 and the second in 2012, the person said. Overall retention bonuses could total $2 billion to $3 billion, the person said.

First of all… I know brokers are a rather odd employee class. Ie, they don’t use traditional non-compete agreements and other things like most employees are exposed to. In fact if a broker switches from one employer to another, most get to freely take their clients with them!!!! Imagine the mess if that occurred in the technology realm. Work for Intel, and then go to work for AMD, and take the IP with you with no consequences…. It would not fly, but Wall Street is different.

Granted, $MS and $C are a business, they can do what they want, and maybe these somewhat oddball employee practices have value… but as soon as they take taxpayer money, now I have a real interest, and will fuss about it.

So, onto retention bonuses… I take it no one can do basic math anymore.

6500 employees eligible
As it reads, to be eligible you must produce at least $1.75 million
The bonuses are 105% of their production, or $1.8275 million, assuming all eligible employees only produce the minimum of $1.75 million each

for a total of $11.944 billion

So how on earth does this total $2-$3 billion!!!! who ate the other $8.944 billion

With this kind of accounting, no wonder Wall Street is in trouble.

In all seriousness, my guess is either the spokesman or the reporter didn’t quite get all the facts straight. Its likely out of the 6500 broker eligibility pool, only small percentage fall into the $1.75 million or more productivity realm. At least that’s what I hope the case is.

Either way… who are they going to go work for? Why pay to retain them at all at this point? Its not like they will take their client base and go to work in Antarctica or something. And if they did, and can make that kind of money starting a new firm from scratch, by all means they should do so. Remember if one renounces citizenship, they really get hammered tax wise, thus tax payers would get their due anyhow.