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February 5th, 2010 
QuadsZilla “First they came …” is a popular poem attributed to Pastor Martin Niemöller (1892–1984) about the inactivity of German intellectuals following the Nazi rise to power and the purging of their chosen targets, group after group. In Niemöller’s first utterance of it, in a January 6, 1946 speech before representatives of the Confessing Church in Frankfurt, it went (in German):
First they came for the communists, and I did not speak out—because I was not a communist;
Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist;
Then they came for the Jews, and I did not speak out—because I was not a Jew;
Then they came for me—and there was no one left to speak out for me. – Wikipedia
Now “they” are coming for the bankers.
Is there Anything more anti-capitalist than executive salary caps and / or regulating the maximum that people can make? Well yes: those bailouts in the first place. But it actually appears that the US will recover almost all the TARP money that was not given out as a freebe to the unions (read the American Auto Industry). That money was thrown into a black hole. Many of the banks were really on sound financial footing, but were forced to take the money so as not to single out the ones that actually needed it.
Now there is all this talk about limiting the salaries of bankers. Over in the Police State of England, “Banks told to comply on bonuses or lose UK banking licences in shock FSA ultimatum“.
The shocker here is that the UK has said in effect that the banks must BREAK their existing contracts with employees in order to comply with regulations:
One pay executive in a major bank told The Daily Telegraph: “The message came back that while the FSA agreed that it does not have jurisdiction over contractual law, it does have jurisdiction over issuing bank licences in London, and that we should go away and unwind the contracts.”
Wow.
But that’s England. They’re accustomed to Big Brother. There are more public video cameras in London than their are American Made Cars (Hell, I think there were 15 public camera’s in that Brothel I visited . .. but I digress).
Here in America, it seems to be some kind of top priority to limit the pay of Banking executives. The line goes “That kind of outlandish blah blah blah is what got us into this recession.”
No.
The pay of executives is not what caused the recession. What caused the recession was people buying a payment, rather than house, getting in over their head, inflating housing prices and now defaulting in droves.
Someone needs to stand up for the bankers. Put aside that this is antisemitism wrapped in the cloak of populism. Jews have their roots in finance going back to when usury (then lending with interest) was considered a Sin by the Church.
The real issue here is that limiting the compensation of private industry will stifle innovation and growth. If we let it happen to the bankers, Internet Marketers can’t be far down that list. We’ll wake up one day and find that the best Gormet Chef is only allowed by law to make $100k per year. Then, before we know it, we’ll have a command economy where the only way to get your pay raised in any industry is through political influence rather than through merit.
Stand up for the Bankers. It’s not the popular thing to do. But it’s the right thing to do.
If you don’t speak out, you’ll have only yourself to blame when they come for you.
Update: Related.
Posted in 
Hellz to the yes. This isn’t about what executives should get paid, it’s about who should decide. Hint: not governments. It’s also about the fact that enforcing contracts is one of the few functions of government generally accepted as legitimate. There is nothing legit about a government breaking a legally binding compensation contract.
I think this is really interesting. In essence, you’re right, salary caps are not the way to stop the idiocy the bankers engaged in to bring us all down and make us all pay their bonuses for them. I think it depends on why and when you’re capping to make sense of it.
Here in the police state you refer to (the one that has had a health system for people who can’t afford private medicine for over 60 years but miraculously hasn’t turned into a communist country, rather than the “fuck you all, sort it out yourselves” gun loving religion-obsessed cultural black hole you live in), the outrage is not that bankers earn a lot of money, but that they are paying themselves bonuses when they still owe a huge debt (and many, their jobs full stop) to the taxpayer.
I completely agree that arbitrary salary caps are a slippery slope to communism (not socialism, I add, which according to much footage of your health debate most Americans are incapable of distinguishing). For the UK, the problem is the bankers living it up on our cash whilst the rest of us pay the price for their stupidity. Surely you don’t think it wrong that they should repay their debt before lavishing cash upon themselves? If they won’t show self-restraint for the few years it will take to regain private control, we will have to force them.
The real issue is how to stop this happening again. Salary caps are clearly not the way. Regulation of blatantly idiotic practices like buying and selling packages of debt when you have no idea of their contents would be a good start. Yet another pile of shit dumped on the world by the Yanks. Thanks for that.
Don’t mistake ethics and morality for far-left politics. That’s what got your country in the state it’s in today.
I think it depends on why and when you’re capping to make sense of it.
No. As Cathy correctly points out above, it’s about who gets to decide. Is it an government official? or is it the market and private contracts. In England, as in China, the decision is clear.
the one that has had a health system for people who can’t afford private medicine for over 60 years but miraculously hasn’t turned into a communist country.
Oh – you mean like medicare and medicade?
religion-obsessed
The reason religion is dead in England is precisely because the Government took it over. (Which is an Ironic benefit – if you want something done poorly and to fail, give it to the Government).
Cultural Black Hole
The US is the Center of the cultural world. Even in her hayday, that crown went to France, not England.
but that they are paying themselves bonuses when they still owe a huge debt (and many, their jobs full stop) to the taxpayer.
You mean like when a Government Has a huge debt but continues to spend and spend and spend?
Surely you don’t think it wrong that they should repay their debt before lavishing cash upon themselves?
What are the terms of the Contracts involved? That is the better arbitor of right and wrong than the whim of the Mob.
If they won’t show self-restraint for the few years it will take to regain private control, we will have to force them.
Go mob go!
Don’t mistake ethics and morality for far-left politics. That’s what got your country in the state it’s in today.
huh?
Compensations in the financial industry is kind of a gray area. If a bank’s contracts reward employees for making immediate profit without regard to risk, then maybe it’s better to limit those rewards. After all, the money to bail these banks out will have to come from people’s taxes. And I’m not sure if there’s much innovation to be made in London banks. With the current bonus systems the most common innovation in investment banks is some 25-year old MBA banker on coke tuning their Excel spreadsheet to project higher yield and lower risk. If this innovation is stifled, I’m all for it!
Ah but victor! You may not realize this, but 30 years ago (hell, it was probably 15 years ago) you needed to come up with 30-35% of the cost of a house in cash if you wanted to buy it.
That’s all well and good if you come from a rich family, but most people can’t come up with $70,000 cash to buy a $200k house.
There’s been other innovations as well including the ubiquity of ATMs and Online banking.
Imagine if there had been no online banking!
Maybe they don’t really need that $200k+ house in the first place. They would be OK with the $50k house and even don’t have to pay for the rooms they don’t use.
What about those of us who live in places where you can’t find a house for less than 200K? I would love to find a 50K house but they don’t exist in my neck of the woods. Where I live you are spending a minimum of 300K to get a decent house that’s not in middle of the ghetto.
Those increases in “innovation” were also nicely tied to accounting fraud which caused a $100,000 home to sell for over $200,000….take out the securities fraud and the liars loans and appraisal fraud and people wouldn’t have needed 30% of $200,000…less than half that amount.
The government had to backstop something crazy like $23.4 Trillion in assets of questionable value. Had they not backstopped those bogus trades most of the companies that they are trying to dictate pay limitations to would be bankrupt anyhow.
How can you give someone hundreds of billions or trillions of Dollars of leverage to save them from their own stupidity, and then not want to apply some forms of limitations to them?
This is just about the last thing I expected to read here, but I am so glad you said it.
The root of the problem is that the government has followed failed Keynesian economic theories (see video) because those theories let them think they can control an economy. Reality always sets in sooner or later, of course, and you get recession, crisis, or worse. Then you get stimulus and the cycle begins again, with most of us just a bit poorer.
Look, you are going way too far to one extreme… which is a huge problem with this country right now. Both sides are right and both sides are wrong. You are right that people fucked up and bought homes they could not afford. But on the other hand, people are stupid, and we know that ahead of time. So we know that given the opportunity, they will again eventually start buying houses they can’t afford, if they are allowed to. We also know that lenders/brokers are greedy(don’t mean this in a completely bad way) so they will eventually begin to create ways to get people approved for homes they can’t afford so they can make more money(short term). So while you are arguing against regulation in the banking industry, regulation is the only thing that will prevent people from returning to buying homes they cannot afford, IMO. For example, make it so people must put at least 20% down to buy, as you seemed to be arguing. I’m all for that.
But, the housing mess was only half the problem. The bankers who packaged all that bad debt up and sold it over and over and leveraged it 50 to 1 are equally at fault. You can’t just ignore that. They took the housing crisis and amplified it greatly. I also think you are mixing clawbacks from the bankers with regulation of banking practices. What I mean, is that though you are correct that the “mob” wants to see the bankers punished for being overly greedy, I think that everyone would be happy enough if something were done so that these types of things were prevented from happening again in the future. Which means regulation of practices involving these secret derivatives the bankers are once again engaging in. I’m not talking about regulating the amount bankers are paid, but instead the methods by which they make money. You seemed to focus mostly on the regulation of the amount of money made, as opposed to the methods used to make the money so I don’t know where you fall on that. Would you not agree that one should have to provide some value in order to earn money and that these derivatives provide very little in actual value to anyone but themselves?
Both sides of the equation need to have some controls in place. Saying that all regulation is bad is overly simplistic and just wrong.
And can we all, both sides, agree to do away with the Nazi comparisons. Very old and just not in any way reasonable.
It’s funny: I didn’t know that the “First they Came For” poem had anything to do with the Nazis until after I had the idea for the post and Googled it. But actually, Hitler epitomized the ability to rouse the anger of Mob to single out a few groups of people blame them for the roots of the all of societies woes.
And i didn’t say that all regulation was bad. But I will say that Government has no place in deciding how much private citizens can make. But let’s take your other points:
>For example, make it so people must put at least 20% down to buy, as you seemed to be arguing. I’m all for that.
It is not the governments place to say that. Let’s say I start a Bank (The Bank of Black Hat). A working, married couple comes to me and says: “I want to buy that home over there for $500,000. We only have $30,0000 in cash, but we each make $100,0000 per year in different fields but have never been late on any payment ever.”
And I deem it a Good Enough risk to make the loan. What the hell business is it of the governments?
Yes it maybe your opinion that they shouldn’t get the loan. But it’s frankly none of your business, or the business of anyone except the lender and the lendee.
“It is not the governments place to say that. Let’s say I start a Bank (The Bank of Black Hat). A working, married couple comes to me and says: “I want to buy that home over there for $500,000. We only have $30,0000 in cash, but we each make $100,0000 per year in different fields but have never been late on any payment ever.”
-I was scanning the comments and thought when you said, “Ah but victor! You may not realize this, but 30 years ago (hell, it was probably 15 years ago) you needed to come up with 30-35% of the cost of a house in cash if you wanted to buy it.” that you were arguing for higher standards in lending, but now I see you were citing that as an example of an innovation. But still, to get back to your original post you say,
“The pay of executives is not what caused the recession. What caused the recession was people buying a payment, rather than house, getting in over their head, inflating housing prices and now defaulting in droves.”
-If we accept that that is what caused the shitstorm we are currently experiencing and you are against regulation of the practices that are involved in the lending/buying process, then how do we prevent this from happening again? Like I said before, people are not going to control themselves. There are many smart people out there who will not overextend themselves, but the majority of them will. You are right, the example of regulation I used was not a good one. Obviously there would need to be other things factored in, such as income, payment history, credit, etc. My point was not to produce the exact final form of the regulation, but just to give a quick example citing what I thought you were already saying. I see your point that the lending/buying process is only the business of the lender and buyer on a certain level, but if we are accepting that this activity can have such a great impact on the whole nation, then I feel that some regulation is called for.
“But I will say that Government has no place in deciding how much private citizens can make.”
-I agree with you on that, but my comment/question to you was,
“I also think you are mixing clawbacks from the bankers with regulation of banking practices. What I mean, is that though you are correct that the “mob” wants to see the bankers punished for being overly greedy, I think that everyone would be happy enough if something were done so that these types of things were prevented from happening again in the future. Which means regulation of practices involving these secret derivatives the bankers are once again engaging in. I’m not talking about regulating the amount bankers are paid, but instead the methods by which they make money. You seemed to focus mostly on the regulation of the amount of money made, as opposed to the methods used to make the money so I don’t know where you fall on that. Would you not agree that one should have to provide some value in order to earn money and that these derivatives provide very little in actual value to anyone but themselves?”
Great discussion man.
I hope Your Black Hat Bank won’t come begging to the government and your risk will be your risk. no the taxpayers’ risk. no bail out for the banks. let them fall – if they did stupid decisions – those were THEIR decisions, not those of taxpayers’.
I’m sure we will be begging for money. But that’s because we’ve given the power to the government to give out handouts based on lobbying efforts. If we stuck to the constitution:
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
Then I could beg all I wanted but it wouldn’t make a difference.
OK, I don’t think that salaries should be capped, but I do think there should be strict regulations on how banks can operate.
There should be strict rules on whether loans are approved to people, based on whether they can repay the loan within the term.
So 7% down, but you can repay it on less than (say) 30% of your income in 7 years? here’s your money. (per your bank of black hat eg above)
40% down, but your income doesn’t allow you to repay this loan ever if the rates go up even 1% on your current income? no money for you.
Doesn’t matter that the loan approver gets a percentage.
Doesn’t matter that the bank might make some money before they sell it off as part of some schlub deal.
and that is the sort of behavior that we need to stop.
Capping salaries won’t do that.
Agree on pay, 110%, and the fine quote from Niemöller as well.
But in fairness, there were problems in a system that bankrolled the debt to begin with. The fault lies more with Government though; a Government in the United States that didn’t limit that sort of bad borrowing to begin with. Here in Australia, it couldn’t happen, and didn’t. It’s why 2 Australian banks are in the top 10 globally now, and our system didn’t need bailing out. And it’s also the fault of Government who bailed out the banks who were stupid enough to make the high risk loans to begin with.
The whole point of free enterprise is that you’re exposed to the risk as well as the reward. What the US Government has done here is rewarded the bad lending practices; in a free market economy, those stupid enough to make those loans would have died off, and those who didn’t would prosper. Instead the US economy rewards failure now.
Government should limit lending to those who can’t afford it on a social basis; that’s not about protecting business, but the consumer. And if they don’t, they shouldn’t reward those who make the loans to begin.
My dear fellow,
I know you colonials are always slightly behind with happenings in the mother country, but you rather missed the point.
What got our dander up was that it was the banks we taxpayers bailed out that wanted to pay the massive bonuses.
Now we did politely suggest this really wasn’t cricket, but they bally well went ahead and did it anyway. Only a cad would do that sort of thing. They should have remembered Harold Wilson’s famous maxim of “You don’t kick your creditors in the balls”, because we kicked back.
And as for your comment that religion is dead in England – that’s absolute tosh, we have mosques springing up everywhere! And anyway, everyone knows that God is an Englishman.
regards
Marchamont
I forgot about the mosques. They need to start a state sponsored Church of Allah. That will surely kill em off.
I would have to agree with Aaron. In fact, government regulation is a core of modern capitalism economics (remember Samuelson anyone?). Otherwise if there would be no government regulations, things would go bad like in 30’s.
And innovation in banking does not exist.
It only serves the purpose of making more money for stakeholders while 99% if population goes into debt-slavery.