It’s CEO Season

There is much wailing and snarling in the news media and blogosphere right now about the estimated $21 billion in bonuses enjoyed by bailed out banking executives. Commentators have directed additional anger at the sports team sponsorships and executive jet purchases by these same billion-dollar welfare recipients. I join wholeheartedly in the snarling. The remedies for these offenses are obvious – ban bonuses, sponsorships, and frivolous purchases.

Nobel laureate Joseph Stiglitz recommends nationalizing the failing banks and thereby force them to behave in a manner consistent with our national interest. I am all for this. This would end the perks, fire the jerks, and also allow us to force a cramdown of troubled mortgages. In a previous post I noted that home prices, adjusted for inflation, were almost double historical levels in 2007, and way out of whack with median income levels. A cramdown would reduce the principle of all those troubled mortgages to a sustainable level and transform all those mortgages with time-bomb interest rate hikes into long term fixed interest loans. The banks would end up with 50% of something instead of 100% of nothing. Then that $400 billion of worthless mortgage backed securities would be worth perhaps $200 billion. Nationalization would wipe out bank stockholders, but that’s the risk one takes on Wall Street. Let’s face it, those stocks aren’t looking at a bright future right now anyway.

Another big issue is revenue. The U.S. government is about to borrow $800 billion to stimulate the economy and try to keep us from swirling down the economic drain. I have advocated stimulus with payback, but there is still a shortfall. There is a cheap way to stick another $100 billion a year in the national coffers, and I’d recommend that you contact your elected representatives in Washington about it.

Find and prosecute millionaire tax cheats. According to Senator Carl Levin (D, Michigan) the Treasury loses about $100 billion a year because millionaires (and billionaires) hide their money in illegal offshore accounts. The international banking firm UBS is under investigation for creating these accounts, and there are many others out there willing to stash money in shell companies for rich Americans. If the IRS could get an extra few million and the authorization to let loose the dogs on millionaire tax cheats the return on investment would be 10,000 to 1.

The outrage is fresh and hot, and the momentum is out there. This is an opportune time for kicking some ass and closing some loopholes for those in the income stratosphere. They made a killing getting us into this mess. Aside from merely obeying the law, it is only fair that they pay proportionately for getting us out of this mess.