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Mind The Gap- The Widening, Worsening Pay Gap Between the CEO and the American Worker

Travis's picture


According to the Institute for Policy Studies ( which has been tracking executive pay since 1994, there's a widening compensation gap between U.S. CEOs and American workers, and there's no end in sight.

In a brief article on the topic by Yahoo!'s Heesun Wee, the average ratio between salaries for CEOs and the American worker in 2007 was 344 to one.  This figure dipped slightly last year, 2008, to 319 to one.  But according to the Institute, this figure is set to rise, which, according to IPS's director John Cavanagh is "really worrisome."

"If nothing is done -- if the federal government does nothing this fall in terms of CEO pay, the ratio will likely go up this year and there will be huge stock option gains by the CEOs of some of the worst-run companies," Cavanagh proclaims. 

The topic of CEO pay in Washington may not currently be on the front burner, as the markets have rallied and political focus has shifted toward healthcare reform.

Cavanagh supports the pay chasm as a critical issue, the gap is "still very, very high" higher than most other countries "decent and in sync with democracy."  (His words, not mine).  He proclaims that if you go back a generation in America, on average, the CEO to worker pay gap was about 30 to one. 

According to another article published by the IPS- for various reasons, beyond the harsh statistics, a few bills in Congress (buried somewhere, for sure) may hold a hint for things to come. 

One such bill, sponsored by Rep. Jan Schakowsky of Illinois "would extend tax breaks and federal contracting preferences to companies that meet benchmarks for good corporate behavior."  Okay, so what?  But one of the said "benchmarks" is not paying any executive more than 100 times the wage that goes to the company's lowest-paid worker.  Legislations' message to Corporate America- if you overpay your CEO- you're not getting taxpayer dollars.

So if you aspire to become CEO one day.  You may only make 100-times your current salary and not 300. 

What can I say- climbing to the top is not what it used to be. 


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Fri, 09/04/2009 - 15:06 | 59126 Sqworl
Sqworl's picture

add to that John Mack's new 23M nyc townhouse with garage for 12 cars....12 fucking cars...

Fri, 09/04/2009 - 15:19 | 59141 Anonymous
Anonymous's picture

And now he also "owns" a resort hotel in Maui and more commercial real estate each week.
Also, all financial engineering CEOs deserve every penny because our ATMs work and we are not in a great depression (yet). Sure we have more unemployed and our country can't borrow much more, at least we saved the CEOs who might spend the taxpayer money to save the peasants.

Sun, 09/06/2009 - 05:49 | 60736 Anonymous
Anonymous's picture

Those CEO's are "adding liquidity to the market". Is that like "trickle down"?

Sat, 09/05/2009 - 10:00 | 59807 lynnybee
lynnybee's picture

Please don't swear.    This is one of my favorite websites & we owe our respect to Mr. Durden for creating this wonderful website.     It has really opened my eyes & given me the education that I needed in order to understand what is going on in this United States.     Sincerely..........

Fri, 09/04/2009 - 15:15 | 59135 Anonymous
Anonymous's picture

"Genius" CEO's like heralded Jack Welch of GE, GM Ford, Chrysler, AIG, Goldmans Blankfein, Rubin, etc etc would all be fired. ButObama gave GE/Jack Welch a 300 billion $ credit. please thank Obama for the free money program for failed CEO's. More money for incompetent CEO's; thank obama for that.

Fri, 09/04/2009 - 16:48 | 59263 digalert
digalert's picture

Uh 59135, Jack Welch is retired, has been. Jeffery Immelt is anti-America commie loving Oblama slobbering fool running GE into the ground now.

Fri, 09/04/2009 - 17:15 | 59293 Anonymous
Anonymous's picture

Jack Welch commenced the metamorphosis of GE from a manufacturing company into an investment bank during his tenure.

He's more responsible for beginning the wipe out of shareholder value than Immelt, who of course is not blameless.

But Welch has gotten away with billions while making shareholders wish they never heard of him.

Fri, 09/04/2009 - 15:16 | 59136 Sam Malone
Sam Malone's picture

Five years ago we would have called this the Brazilianization of the US workforce, except Brazil's middle class has reemerged in force of late. I'd suggest calling it the NorthAmericanization of the US labor force, but I doubt Canada shares in this unfortunate shift.

Fri, 09/04/2009 - 16:31 | 59247 ZerOhead
ZerOhead's picture

Ha ha ha ...

Ever hear of NAFTA? When the U.S. dollar tanks it will suck the remaining manufacturing jobs out of Canadian branch plants back to the good old USA or to China.

Remember that the Prime Minister, Steve Harper created subprime in 2006 upon assuming office... even opened the door to AIG to sell mortgage insurance backed by $200 billion in governmant gaurantees. Then he installed a career Goldmanite (Mark Carney) at the helm of the Bank of Canada.

SquidCo has already captured this country too... Good luck with that Canada!

Fri, 09/04/2009 - 16:41 | 59252 Sam Malone
Sam Malone's picture

At least the Canucks can keep their currency propped on the evenutal rising price of their energy reserves, which will occur during a period of crippling inflation in the US that will render the US dollar worthless. And with it the wages of US workers.

Fri, 09/04/2009 - 18:31 | 59337 ZerOhead
ZerOhead's picture

Ha ha ha again...

Seems Canada under Harper is trying to divest itself of ALL its natural resources to foreign interests. Oil production is around half foreign owned and now the Chinese want in. They will not be turned away.

As for those 'royalty windfalls'... the current royalty is 1% of gross revenues. Heck even the Kleptocrats in Nigeria have negotiated a sweeter deal! And even better is the fact that no taxes are payable untill all (inflated) capital costs are recovered. No wonder the cost 'over-runs' are so high.

The high energy prices will cause the Canuck-buck to rise for certain, which will only serve to gut the remaining manufacturing and service jobs faster...

As I said before... 'Good luck with that Canada'... you're coming along for the RIDE... ha ha ha!

Fri, 09/04/2009 - 15:17 | 59139 Veteran
Veteran's picture

Hey pal, no one has accused America of being "decent and in sync with democracy"  for quite some time 

Fri, 09/04/2009 - 15:19 | 59140 cougar_w
cougar_w's picture

How else can they suck up 98% of the planet's wealth? I mean sure they could just steal it at gun point down on the street, or knock over banks and empty the vaults, but that would be too obvious. It's also inefficient; automatic transfer straight into one's personal back account is so much easier. And every so often, get the Board to tack on another zero to the number in question. All those guys are doing the same thing, too.

Hey fellow Americans, it stopped being "the dream" a long time ago. Now it's just institutionalized rape. Then they'll inflate away even the crumbs they let fall. They've got all the control, all the power, and all the options. The rest of us got nothing. Will get nothing. Not a chance.

Buy those gold futures, oh yeah love that paper wealth. Wait to die. Wait for it...


Fri, 09/04/2009 - 15:22 | 59143 BobPaulson
BobPaulson's picture

No actually, they wouldn't rob a bank, because they would soil themselves if they had to.

One day, their downfall will be that the people in the street are far less afraid to die than them.

Fri, 09/04/2009 - 15:38 | 59165 koaj
koaj's picture


Fri, 09/04/2009 - 15:59 | 59211 VegasBD
VegasBD's picture

I believe that day is near.Good thing blackwater is getting well and trained over there in the middle east....americans should be way easier to handle. Dont need guns to fight americans, just a flat screen TV with american idol on should do it.

Fri, 09/04/2009 - 15:30 | 59152 lookma
lookma's picture

"If nothing is done -- if the federal government does nothing this fall in terms of CEO pay, the ratio will likely go up this year and there will be huge stock option gains by the CEOs of some of the worst-run companies," Cavanagh proclaims.

How about we stop the government from causing this growing divide?

Maybe we could turn off the funny money pump?  Pretty please?

Fri, 09/04/2009 - 15:55 | 59203 Gabriel Gray
Gabriel Gray's picture


But then they would have to admit they created it.. not a chance, but excellent observation.

Fri, 09/04/2009 - 15:33 | 59157 Cheeky Bastard
Cheeky Bastard's picture

off topic; Yo Marla, can we get some music ?

Fri, 09/04/2009 - 15:38 | 59166 TumblingDice
TumblingDice's picture


Fri, 09/04/2009 - 15:53 | 59199 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

pretty please? My alcohol is lonely. ;)


Hey Cheeky, good suggestion

Fri, 09/04/2009 - 16:55 | 59273 SWRichmond
SWRichmond's picture

It's five o'clock somewhere, I see....

Fri, 09/04/2009 - 17:03 | 59279 Miles Kendig
Miles Kendig's picture

Time for trance...

Fri, 09/04/2009 - 15:46 | 59164 TumblingDice
TumblingDice's picture

In my economics thesis I found a non-spurious correlation between debt and inequality (among other things). Deflation was a natural remedy to restore balance back during the GD. Inequality peaked in 1929, total debt peaked later in 1932 I think, then government debt peaked after WWII and was the signal for the beginning of a new cycle of debt and inequality. Those things need to happen if a start of a healthy new cycle is the goal. Unfortunately it isn't.

Fri, 09/04/2009 - 15:39 | 59171 Anonymous
Fri, 09/04/2009 - 15:43 | 59175 Anonymous
Anonymous's picture

Why start there? Let's just talk about the American caste-system: At the top, we have the blue bloods -- the financial workers. For whom "a million dollars is not a very high salary".

It wouldn't be so bad if it were a de facto system. But we *protect* this system and tax all other castes to do so.

Fri, 09/04/2009 - 15:47 | 59188 Bankster T Cubed
Bankster T Cubed's picture

Let them eat shares.  Let them eat their houses.  Oh yeah, they already ate them....tough shit, give that CEO a raise.

Fri, 09/04/2009 - 15:55 | 59204 ghostfaceinvestah
ghostfaceinvestah's picture

It is only fitting that a banana republic economy has banana republic wage disparity.

Also note that a constant wage disparity leads to a growing wealth disparity.

Fri, 09/04/2009 - 16:12 | 59222 Sam Malone
Sam Malone's picture

And lord knows we can't bank on wage growth to repair the losing end of the ratio with 9.7 percent unemployment...I wonder how many of those still employed had to digest a paycut.

Fri, 09/04/2009 - 16:59 | 59271 TumblingDice
TumblingDice's picture

If history is any indicator we should have US interests fleeing the country any time now after civil unrest gains momentum.

Fri, 09/04/2009 - 19:15 | 59405 cougar_w
cougar_w's picture

US interests fleeing the US. Helicopters pulling quants and hedge fund managers off the roofs of buildings in Manhattan. Flying them out to Brazilian-flagged cruise ships parked just outside US territorial waters, bound for The Cayman Islands.

Of course, they'll be taking our money with them. Still, might be worth it just to see them leave.


Fri, 09/04/2009 - 15:55 | 59205 Anonymous
Anonymous's picture

You guys are underestimating how hard it is to run a company into the ground!!!

Fri, 09/04/2009 - 16:27 | 59244 Anonymous
Anonymous's picture

And get rewared to boot.... It's nice being able to f_uck up royally, and still be overly compensated......

Fri, 09/04/2009 - 19:16 | 59408 cougar_w
cougar_w's picture

Who said they are f*cking up? That implies they made a mistake.

I believe the more correct term is "looting".


Fri, 09/04/2009 - 16:34 | 59248 Anonymous
Anonymous's picture

"not paying any executive more than 100 times the wage that goes to the company's lowest-paid worker"? Really?

A Bangladeshi garment worker makes on average $0.22 per hour. The median annual income of male American full time workers in 2007 was $45K. So the median male full time worker at a multinational garment corporation already is paid more than the company's lowest-paid worker. We all, already, live like CEO's depending on your reference point. We are all equally guilty of squandering and hording wealth.

Fri, 09/04/2009 - 18:27 | 59351 Anonymous
Anonymous's picture

The reference point doesn't really exist as you can't buy stuff at Bangladeshi prices in the US. In Bangladesh, $45k will definately go a loooooooooong way.

Sat, 09/05/2009 - 01:20 | 59684 Anonymous
Anonymous's picture


Hell of a good point!

Fri, 09/04/2009 - 16:43 | 59255 Anonymous
Anonymous's picture

Democracy cannot survive the current level of inequality in the US whose gini coefficient is now in Gabon range. CEO pay is only a portion of that but the reason for the inequality runs through corporations.

Corporations will continue to garner an increasing share of all profits and cash flows and distribute income ever more inequitably. The alternative is Kunstler's new Middle Ages. After all that's what Paulson told congress and they agreed.

As for democracy let's face it, it wasn't really all that great after negros were allowed to vote.

Sat, 09/05/2009 - 20:10 | 60252 Cheeky Bastard
Cheeky Bastard's picture

Marla, Tyler, ZH; this kind of racist posts SHOULD NEVER PASS THE GODDAMN FILTER !!!!! remove this shit ...

Sun, 09/06/2009 - 20:31 | 61221 long-shorty
long-shorty's picture


Sun, 09/06/2009 - 20:31 | 61222 long-shorty
long-shorty's picture


Fri, 09/04/2009 - 19:46 | 59287 darkness (not verified)
darkness's picture

It's a disgrace how this is allowed to happen.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Fri, 09/04/2009 - 18:00 | 59330 Anonymous
Anonymous's picture

The more money rich people make, the more minimum wage proles they can then hire to mow their estates, wash down their yachts and squeeze their toothpaste. And, if you're an attractive young female, the better your prospects of finding employment with rich CEOs as a high-class call girl.

A little recognized benefit of wealth concentration in the smallest little sliver of America is that that sliver will then carry more of the tax burden. When the top 1% of us are earning 99% of the national income, the other 99% of us will only have to fund 1% of the taxes. 99% of us will thus be getting nearly a free tax ride.

Another benefit the wealthy CEO bequeaths us are regular pink slip vacations. Months of vacation for most of us following a layoff are only ours to be enjoyed while the CEO is hardly ever - no, make that never - the beneficiary of this generous time off from the job.

I only see a bunch of commies here, complaining about how much more than you other harder working CEO people are earning.

Fri, 09/04/2009 - 19:03 | 59376 TumblingDice
TumblingDice's picture

I just reread your post and realized it contained a subtle tone of sarcasm.

Sarcasm is not my strong point.

Fri, 09/04/2009 - 19:01 | 59386 Anonymous
Anonymous's picture


Fri, 09/04/2009 - 19:36 | 59424 Anonymous
Anonymous's picture

I was only repeating what I hear on FOX every evening. I'm pretty sure Cavuto has been all over the topic.

Why do the proles hate hard working CEOs so? Class envy? Don't you want to be rich someday too? Proles hire no one, the CEO is the only one creating jobs.

What's next? Pitchforks and torches? The CEO will only then be forced to build higher walls around his seaside estate and chopper into work each day instead of taking the limo.

Fri, 09/04/2009 - 18:14 | 59341 Anonymous
Anonymous's picture

CEOs claim their pay is so high because they have rare talent that is in short supply and that they must be compensated for it or else they'll jump ship to another company who will pay them more. Obviously there must be a shortage of CEOs.

That is why I'm writing my congressman to propose the creation of the HB-CEO visa. It will allow foreign executives to come and work here legally in the United States. We'll see how rare their talent is when American CEOs have to compete against Chinese CEOs on their own soil.

Heck, even European CEOs make far less than American CEOs. Something is out of whack here and the HB-CEO visas should help take care of that.

Sun, 09/06/2009 - 05:54 | 60737 Anonymous
Anonymous's picture


Fri, 09/04/2009 - 18:22 | 59346 Anonymous
Anonymous's picture

"Money for nothing and chicks for free." Doesn't translate well anymore.

Fri, 09/04/2009 - 18:25 | 59348 Anonymous
Anonymous's picture

Pretty sure this is a matter for shareholders (owners of the company) -- not us or government. They can vote out the board if they do not like how things (including comp) are going. So far most shareholders are not sufficiently unhappy about this.

Guess the big question is whether we want to legislate the "appropriate" level of income disparity. Begs the question why have any income disparity? Current administration would surely like to see a major leveling of outcomes via tax policy and otherwise -- tax the haves and give to the haves-less(who are actually among the wealthiest people in the world). Am in favor of helping others voluntarily (and do so), but confiscation of wealth by fiat beyond some minimum level creates incentives that really doesn't help the whole.

I know, I am so out of touch with collectivist thought and should shop for another country less inclined to get more people dependent on the government. Or just go short the US.

Fri, 09/04/2009 - 19:28 | 59415 cougar_w
cougar_w's picture

That's why TPTB have to keep share values up. Shareholders look at the value of their stocks, not the moral fiber of the companies they invest in.

This is a problem, but it's a problem with human nature.

On the other hand, if those shareholders ever try to extract any value from their shares at any price the down-tick would likely trigger a swarm of HF trades that blow their expected return into dust on the spot. You gotta stay in to live.

Shareholders are about as trapped as anyone else, hoping that the greed at the top doesn't destroy anything important. Though as we've seen, a lot can be destroyed in short order. We might learn that everything can be destroyed. Game over, the shareholders will have their just rewards.

Fri, 09/04/2009 - 18:30 | 59355 Anonymous
Anonymous's picture

Pretty sure the average CEO of a large company has at least 344 times the responsibility of the average worker (and likewise has at least that much value-add). This stuff makes for great populist outrage among the ignorant but is otherwise meaningless.

Fri, 09/04/2009 - 19:13 | 59403 TumblingDice
TumblingDice's picture

responsibility /= value added

thats a pretty dumb thing to say.

Fri, 09/04/2009 - 19:32 | 59417 cougar_w
cougar_w's picture

Does the CEO of an airline company have even 1/1000th the responsibility of a pilot?


Business is a collaboration. Every part is important, every part does something that needs to be done.

Anyone thinks otherwise is unfit for leadership.


Sun, 09/06/2009 - 13:54 | 60955 Anonymous
Anonymous's picture

Every part is not important even if it needs to be done. You can get trained monkies to do a number of jobs.

Am guessing you were raised to think all ideas are equally important and valid in the self esteem focused education system we have.

Fri, 09/04/2009 - 20:10 | 59435 ZerOhead
ZerOhead's picture

Ha ha ha ... good one!

The Captain of a nuclear armed 'Boomer' submarine probably has at least 1000 times the responsibility as your average CEO...

And if you were the Secretary of Defence what exactly would you pay him genius? Ha ha ha ha...

And since you used the 'ignorant' word you're a DORK! ... ask your wife... she'll tell ya!

Sat, 09/05/2009 - 00:56 | 59659 Hephasteus
Hephasteus's picture


Fri, 09/04/2009 - 19:09 | 59395 ReamUs
ReamUs's picture

I think it's time for the guy with the bat to leave his shed and bust some heads. Nah, the decrepit old CEO might hit him back - WAAAHHHHH! Ah well...

Fri, 09/04/2009 - 21:25 | 59498 Anonymous
Anonymous's picture

I tend to look at this situation as the Baby Boomers greed doing them (and probably the rest of us, unfortunately) in. The Boomers are a generational House of Usher. All we younger folk need to do is stay the hell out of the way of the massive implosion and we inherit the world because no matter how rick you are, you can't buy yourself much more time on this rock.

I'm a spectator for now because I still have a job. If I lose my job, I've decided to become a revolutionary. Fuck playing by the rules--the rules got me nowhere!

Sat, 09/05/2009 - 07:31 | 59757 Anonymous
Anonymous's picture


and count me among those happy that the downfall has begun while most boomers are still alive. They deserve to reap the destruction they sowed decades ago. Always taking the easy way out, voting for the politicians who told them they were special and shouldn't ever make any sacrifices; abandoning their children and spouses, first to discover themselves and later to get rich climbing corporate ladders; ignoring the termites in the basement until it was too late. Truly the worst generation in at least two centuries.

Sat, 09/05/2009 - 13:52 | 59960 ReamUs
ReamUs's picture

Hey, lay off Generation Dubya, aka The Dumbest Generation. It's not their fault that nothing has ever been their fault!

Fri, 09/04/2009 - 22:35 | 59553 Anonymous
Anonymous's picture

Which all goes to show that the guys with the strongest union get the best deal.

Sat, 09/05/2009 - 18:02 | 60053 greenbacks (not verified)
greenbacks's picture

Good stuff. You must be on to something if CNBC tales the time to belittle you.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Fri, 09/04/2009 - 22:36 | 59555 They steal from...
They steal from us everyday's picture

Obama's plan is to destroy the middle class forever and make us entirely dependent on democrat welfare so this gap is very comforting to him.

Next he will eliminate the rich through taxation and rules and regulations.

Sat, 09/05/2009 - 07:44 | 59760 Anonymous
Anonymous's picture

This makes absolutely no sense. Next time, try thinking things through before you type.

The goal of every President since Reagan has been to reduce or eliminate the social safety nets and instead funnel that money toward big business, creating a population that is almost entirely dependent on a few large multinational corporations. The corporate state usurped the welfare state long ago. At this point, most Americans could not survive and would not be able to function if just a couple dozen or so of these conglomerates shut down.

I don't know anyone who is entirely dependent on "democrat(sic) welfare", but I know hundreds who would be ruined if WalMart or DuPont or ConAgra or KBR shut down operations.

Fri, 09/04/2009 - 23:36 | 59592 Anonymous
Anonymous's picture

The income tax load on the rich is stunning...however the money they keep AFTER taxes is too.

The rich created the game to take the tax load off the lower and middle class...if BarriO succeeds in destroying the uber-rich, the tax load will even fall on minimum wage workers.

Make no mistake, it is not a myth...there IS an invisible hand. No amount of monkeying around with the system can stop financial truth...even the Soviets found that out. We, as a capitalist society, know this truth. So WHY do we have financial clowns as Presidents?

Sat, 09/05/2009 - 18:01 | 60052 greenbacks (not verified)
greenbacks's picture

Perhaps it's the freeloaders, petty criminals, deadbeats, healthcare advocates and socialists fucking everything

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

up . .

Mon, 09/07/2009 - 17:03 | 61702 dcb
dcb's picture

there are effectively two classes of wage earners in th eeUS. thise whose wages are related to nominal GDP, and those whose wages are determined by cheap leverage/Credit. The people whose wages are controlled by cheap leverage are the ones in power and policy and hence that's what you get. Even worse is that the tax payers via a private bank, the fed, support thje leveraged wage earners. Of course you get all the instabilities that go along with this policy, but since those people aren't interested in stability, the nominal GDP folks are, you end up in disaster


I have been making the case to the FT about this for months in a number of ways and I think they are starting to see the light.

Mon, 09/07/2009 - 17:13 | 61708 dcb
dcb's picture

dear MS. Tett,
I know I have sent this before, but when attempting to make a point that I feel is deserving of merit I alwasy think further evidence is helpful so below is another article showing why some folks push and push for leverage, esp those on wall street. Please enjoy. Now imagine what these peoples pay would be like without the leverage and I think that given the incentive a person's motive should be suspect. By the way when speaking of whre the low would be in this market cycle I always told friends it would be below the 2002 lows because there had been essentially no growth in GDP other than leverage and because of the effect of Mortgage equity withdrawls. No brainer.
If it was up to me there would be no margin at all in the market, but if you have seen the data you will realize that the majority if the value in the market is margin money. That is another reason the industry screams for cheap liquidity. Add these things all together and of course you knw exactly what these people will say before they even say it.

Presenting The Liquidity Bubble
Submitted by Tyler Durden on 08/28/2009 13:00 -0400

Ben Bernanke Bernanke Bubble Credit Liquidity Money REAL S&P 500 SPX Zero Hedge

Ask anybody to chart the trajectory of the S&P500 over the past 10 years and you will get this chart.

And while the tech boom of the late 1990's was driven by some very real secular shifts caused by unique technological innovation which, aside from the exuberance associated with some of the dot com names, brought a marked benefit to the global economy, how does one explain the subsequent ramp up as the credit bubble was being inflated and subsequently imploded?

Simple - it was all liquidity driven.

The best way to visualize it is to take the SPX and to divide it by the sum of domestic reserves and foreign custodial holdings (a topic discussed on Zero Hedge previously here). The result is that represented on this relative basis, the underlying market did absolutely nothing for the duration of the entire credit bubble. This should come as no surprise to anyone who has been following the theme of the Fed's balance sheet expansion and why the market has been ramping up markedly even, or specifically because of, the Fed's balance sheet growing over the past decade and recently hitting unprecedented levels in the $2 trillion+ range. One can play with the denominator and add other money aggregates such as MZM, but the result would not change materially.

And the scariest part of the chart is the tail end: even with the unleashed dam of liquidity, the market still has a massive retracement ahead of it before it can recover the adjusted losses it has suffered since the last credit bubble. Ironically a 50% run up in the S&P has not been enough to offset on an apples-to-apples basis the unprecedented liquidity efforts let lose by Chairman Ben.

The bottom line is that when viewed from the perspective of liquidity fueling the market, the S&P 500 has never been in a worse situation. And alas, as the Fed's balance sheet climbs to $4 trillion +, absent a multi-year parabolic rise in stocks, liquidity will increasingly lose its power to sustain markets to historical overbloated levels. But Ben Bernanke will go down in flames, and take down America with him, trying to disprove this hypothesis.

h/t Philidor

> Subject: three summary articles all pointing to the same thing!!!
> Date: Sunday, August 16, 2009, 2:15 PM
> I have put together two articles and
> a letter I wrote to show you what is really happening in the
> big picture but that the traditional media is not going to
> put together for you. After all they make a living avoiding
> pointing out the ties between unpleasant realities so issues
> appear much more complex. Once more I want to add that
> remember goldman with a Var waiver borrows from the discount
> window at zero, and we the tax payer pay it back to foreign
> governments at about 4%. they don't loan out the money, but
> use it to manipulate the NYSE with their exclusive SLP,
> seeing the order flows (frontrunning), and trading well over
> double the next player in the market. So we have the most
> expensive market in 20 years based on percent over 50 day
> moving average. But of course such events can't be do to
> manipulation even if there is only one trader in the market,
> unlimited goverment money for free, and the american people
> not putting money into stocks (LOL)
>  Remember higher stocks, equals lower dollar, higher
> commodities, higher borrowing costs (for the tax payer not
> wall street banks), and future inflation. All fo which just
> happen to help out goldman, the other wall street banks, and
> their bonuses. It destroys the saving of hundreds of
> millions of americans.
> I hope these three points which I have sent out before will
> paint a clear picture of how things tie together and what is
> really happening and for who.
> We got rid of the british for less than what the american
> government is doing to its own people!!!!!!
> Fair Game
> Published: August 15, 2009
> WITH outsized and corrupting corporate pay packages under
> scrutiny, you might think that companies would be rushing to
> tamp down their compensation plans. Making sure that pay
> actually rewards long-term performance, for example, seems a
> fairly obvious way to allay shareholder fears that managers
> are lining their pockets rather than safeguarding their
> companies.
> Skip to next paragraph
> Related
> Times Topics: Gretchen Morgenson | Executive PayBut a study
> of changes made in pay practices by 191 of the nation’s
> largest companies this year shows that where pay is
> concerned, enlightenment remains a long way off. In other
> words, meet the new pay, same as the old.
> The study was conducted by James F. Reda & Associates,
> an independent compensation consultant in New York, and it
> looked at proxy filings issued by almost 200 companies in
> the first half of 2009. The firm analyzed changes these
> companies made to their pay plans that take effect this
> year.
> The biggest shock? Instead of seeing a greater reliance on
> long-term incentive programs, the Reda report found that
> changes in these companies’ plans made short-term
> incentive pay a bigger part of the compensation pie. Let me
> say that again: The plans — despite the calamities that
> short-term profiteering has visited on our economy — made
> short-term incentives a bigger component of compensation.
> Last Friday, troubled financial companies relying on the
> taxpayers’ dime had to deliver details of their top
> executives’ compensation packages to Kenneth Feinberg, the
> government’s so-called pay czar. It will be interesting to
> see whether Mr. Feinberg finds the same short-term incentive
> skew in those pay packages that Mr. Reda did in his study.
> “If you were going to encourage long-term thinking and
> behavior, you would reduce short-term pay, but companies
> have in fact reduced the long-term programs,” Mr. Reda
> said. “This is counter to the direction suggested by the
> United States Treasury, academics and other expert advisers
> regarding ways to mitigate risk.”
> Another troubling finding in the Reda study was an
> increased use of restricted stock awards that are not
> performance-based. The awards simply vest over time.
> Finally, the study found no significant decline in the use
> of so-called tax gross-up deals, a shareholder-unfriendly
> arrangement under which companies foot the bill on taxes
> that executives owe on their munificent pay packages.
> Changes to pay practices were common this year: about 70
> percent of the analyzed companies disclosed making some
> shift, Mr. Reda said. Almost 60 percent of the analyzed
> companies made what he considered to be major changes to
> their pay plans. But the nature of those changes surprised
> him.
> “I was expecting that a lot of companies would be
> changing the payouts from cash to stock and then restricting
> the stock for three to five years,” he said. “Or paying
> out half of the bonus in cash and half in stock that must be
> held for three years. Those would be helpful changes, but I
> didn’t see any of that.”
> Several pay policy changes showed some sensitivity to
> shareholder concerns about excessive compensation. For
> example, 43 percent of the companies making changes to their
> pay said they had eliminated merit increases, while 15
> percent said they had reduced retirement benefits or
> eliminated tax gross-up payments on perquisites like
> insurance policies or use of jets. Some 13 percent said they
> froze or reduced base salaries and 4 percent reduced the
> benefits that would accrue to a chief executive if the
> company he or she oversaw changed hands.
> Here is another plus: Some companies tightened up
> performance measures that must be met before incentive pay
> is dispensed. For example, 10 companies that changed their
> short-term incentive pay structures added profit or
> cash-flow requirements to performance pay hurdles. And in
> long-term performance programs, several companies added
> capital efficiency measures to their benchmarks. These
> included return on equity and return on invested capital.
> BUT the overall message from the study, Mr. Reda said, is
> that in executive payland, real change comes exceedingly
> slowly. And pay for performance remains more mantra than
> practice.
> Mr. Reda said he suspected that the increased reliance on
> short-term incentive pay that he found was a result of the
> precipitous declines in many of these companies’ share
> prices. Indeed, he found that the greater the drop in a
> company’s stock price, the more likely that its pay
> program was changed.
> There were a variety of changes made to incentive pay that
> wound up skewing companies’ total packages toward
> short-term performance. First were the adjustments made to
> long-term incentive grants, like decreasing the value of
> awards or dispensing the same number of shares regardless of
> a decline in their value.
> Skip to next paragraph
> Related
> Times Topics: Gretchen Morgenson | Executive PayAmong
> short-term incentive programs, some companies moved to
> discretionary plans, widened payout ranges or lowered
> performance hurdles.
> The end result was a greater reliance over all on
> short-term incentive pay. And that invites riskier behavior
> among executives, Mr. Reda said.
> With more than 20 years of executive pay analysis under his
> belt, Mr. Reda can offer a historical perspective on how the
> mix of compensation has changed over the years. In his view,
> leverage in compensation — where incentive pay far
> outweighs salary — has ballooned. And the opportunity for
> executives to tap into that leverage has vastly increased
> the risk in pay plans.
> “Corporate America needs to deflate their compensation
> packages because with higher leverage comes higher risk,”
> Mr. Reda said.
> Comparing today’s common practices with those of his
> early days in the business is revealing, he said.
> “When I first got in this business in 1987, a typical
> C.E.O. would have a short-term incentive opportunity of 60
> percent of salary, and for the long-term, a good one would
> get two times salary,” Mr. Reda said. “If you do the
> math, the salary was equal to about 30 percent of the total
> compensation package. Today, it’s about 10 percent. So
> over the last 20 years or so the leverage of these
> compensation packages has increased dramatically.”
> Compare these figures with those paid out in 2008. The
> typical short-term incentive pay for a chief executive was
> 200 percent of salary, while long-term incentives accounted
> for eight times salary.
> “In both cases the incentive pay more than tripled,”
> Mr. Reda said. “Have people changed that much in 20 years
> that you need to throw these huge outsized incentive bonuses
> at them to get them to work?”
> Come hell, high water, financial crisis or stock market
> collapse, the executive pay grab goes on. Clearly, if
> shareholders thought the economic downturn would result in
> more sensible pay packages, they’ve got another think
> coming.
> Dear Sir,
> > Miss Tett has written extensively about the credit
> > crisis
> > but once more fails to elucidate salient points
> > regarding
> > the issue of securitisation.
> >
> > She correctly points out that research from Pimco
> > states
> > that "Until the 1980's
> > the expansion of nominal gross
> > domestic product tracked the volume of outstanding
> > private
> > credit closely. But since then credit has
> > dramatically
> > outstripped economic growth as securitisation took
> > hold".
> > Meaning credit growth beyond nominal growth rate does
> > not
> > lead to economic growth.
> >
> > According to Prof. Aswath Damadaran (NYU Stern), one
> > of
> > the
> > foremost experts of valuation today, the most
> > significant
> > input into a discounted cash flow model is the stable
> > growth
> > rate. This growth rate can be sustained in perpetuity
> > allowing us to estimate the value of all the cash
> > flows.
> > No
> > firm can grow forever at a rate higher that the
> > growth
> > rate
> > of the economy. So, the value all things can't
> > grow faster
> > than the economy (Damaodaran, Investment valuation,
> > Chapter
> > 12, 2002)
> >
> > Therefore, at a certain point the growth of credit
> > must
> > become unstable when it
> > is rises faster that the rate of
> > growth in the economy. This is essentially the nature
> > of
> > our
> > financial crisis. Valuations based on the growth of
> > credit
> > (leverage) were not able to be supported by the
> > nominal
> > growth rate of the economy.
> >
> > There are additional features to our economy that
> > have
> > happened since securitisation has taken off. The
> > stock
> > market has grown faster than the economy, CEO pay has
> > gone
> > from 30X to 300X of the average American worker, real
> > wages
> > have fallen, and wealth disparity has reached heights
> > not
> > seen since the great depression. All of these issues
> > are
> > in
> > fact related.
> >
> > Securitisation has allowed those whose pay is based
> > upon
> > leverage (credit)to increase many times faster than
> > the
> > growth of the real economy and the vast majority of
> > workers.
> > Securitisation has allowed the experts on credit risk
> > and
> > valuation (bankers) to
> > off load these risks onto the
> > public.
> > This has created instability (highly distorted
> > valuations)and a moral hazard where society bears the
> > brunt
> > of costs, while bankers and CEOs reap the benefits.
> >
> > When Ms. Tett reports that respected figures such as
> > William Dudley of the NY Fed consider it paramount
> > that
> > securitisation markets get jump started if we are to
> > recover
> > she fails to mention that Mr. Dudley, as a former
> > managing
> > director of Goldman Sachs, and the majority of people
> > who
> > are calling for this to happen are the very people
> > who
> > have
> > benefited the most from securitisatiion.
> >
> > I hope the American people will wake up and see that
> > efforts to jump start securitisation are nothing more
> > than
> > an attempt by those who caused the crisis to restart
> > the
> > system that allowed them to reap the rewards and off
> > load
> > the risks of that system onto others.
> >
> >
> > With these facts in mind one must wonder what the
> > point of
> > the Feds easy credit (money)policy are. Are they
> > benefiting
> > society? Not very much. Are the benefiting wall
> street
> > and
> > the banking class? Well, Goldman Sachs profits answer
> > that
> > along with a stock market that does not reflect
> > economic
> > realities.
> >
> > It also answers the inflation issue. Growth in money
> > supply
> > faster than the ability of society to use it (nominal
> > growth
> > rate) has to result in inflation or asset price
> > bubbles.
> >
> > >
> > The Federal Reserve Is Immoral 49 comments
> by: Tim Iacono August 13, 2009     
> >
> During the first few days of each month comes a task that
> is increasingly approached with dread around here and,
> unfortunately, that condition is likely to persist for some
> time.
> Shortly after banks make their month-end update to various
> short-term savings accounts that we hold, these balances are
> queried, only to find that, almost without exception,
> interest credited is less than it was in prior months and
> far less than it was eight or ten months ago.
> Why?
> Largely as a result of the Federal Reserve keeping
> short-term interest rates pegged to zero.
> You see, aside from some Certificates of Deposit that were
> locked up late last year which, today, provide the strangest
> of locked up late last year which, today, provide the
> strangest of feelings during a very strange period in
> history (i.e., feeling lucky to get about 2.5 percent
> interest for a one-year CD), it's nearly impossible to get
> more than a two percent return these days on any kind of an
> FDIC-insured account and, more likely than not, you'll get
> less than one percent.
> Speaking as one who knows from experience, there's a big
> difference between one or two percent and five or six
> percent, what used to be the "minimum" rate of return for a
> super-safe savings account backed by the government.
> More importantly, if this is causing us angst every month,
> I can only imagine what it's doing to the budgets of other
> savers whose finances are far less comfortable than ours.
> Put simply, the freakishly low short-term interest rates
> that the Federal Reserve is jamming down everyone's throat
> are immoral and, maybe, just maybe, a lot more people are
> beginning to see this, along with other practices of our
> central bank that are just not right.
> Maybe, just maybe, something will finally be done about
> reforming (or, as suggested by Rep. Ron Paul, abolishing)
> this banking cartel - hopefully before the Fed celebrates
> its 100-year anniversary in a few years.
> Just to be clear on the terminology here, Merriam-Webster
> offers the following:
> immoral
> adjective
> not moral; broadly : conflicting with generally or
> traditionally held moral principles
> moral
> adjective
> 1a: of or relating to principles of right and wrong in
> behavior
> Setting aside questions about the dark veil of secrecy
> surrounding who and how much the central bank has been
> helping with their problem loans, problem assets, and
> problems staying solvent, there are at least three ways that
> the organization David Wessel calls "the fourth branch of
> government" is acting badly these days - by punishing
> savers, by enriching the banks, and by fleecing the poor.
> Of course, none of this is really new - it all just seems a
> whole lot more relevant today than ever before given the
> current state of affairs in this country and around the
> world.
> Punish the Savers
> As noted above, it used to be that you could always count
> on getting five or six percent interest in a "no-risk"
> savings account backed by the FDIC. In fact, going all the
> way back to 1955 (when the interest rate data at the Fed's
> website stops), the average short-term lending rate is right
> between those two marks - 5.66 percent.
> Ever since I was a teenager, I can remember thinking, "If I
> could somehow amass a million dollars, that would surely
> generate enough money to live on for the rest of my life".
> Well, welcome to the 21st century, where the asset bubbles
> keep a-poppin' and the interest rates keep a-droppin'.
> Over most of the last hundred years, aside from the dollar
> losing more than 90 percent power (versus a loss of zero
> during the prior ten decades), there hasn't been too much to
> complain about in the Fed's management of money and interest
> rates but, since asset bubbles and the attendant "mopping
> up" process have become a way of life, the rate of return on
> savings has been abysmal.
> With the exception of the "baby-steps" rate raising
> campaign a few years ago, the Fed funds rate has been below
> two percent since 2002 - after the decade's first asset
> bubble met its pin.
> Now, if there was a good reason for keeping rates so low,
> this might all make some sense to senior citizens who have
> looked disappointingly at their bank statements for years,
> but given the fact that the low-rates in 2002-2004 led to
> the housing and credit bubbles forming and then bursting a
> few years later, and here we are with even lower rates
> today, all of this should make anyone with half a brain
> realize that there is something seriously wrong with the
> system as it currently operates.
> In a nation in dire need of internal savings, the fact that
> savers are being punished as never before is just plain
> wrong - immoral - and the idea that we live in an era of
> "low inflation" is just salt rubbed in the wounds of senior
> citizens who, year after year, watch prices for health care
> and energy rise by some multiple of the one or two percent
> they can earn on their savings.
> Twenty years from now (perhaps sooner), they'll look back
> on today's monetary policy and say to themselves, "What were
> they thinking, punishing the savers like that when the U.S.
> desperately needed savings?"
> Enrich the Banks
> As if it weren't bad enough that savers are cheated every
> time the Federal Reserve lowers interest rates, the worst
> part is that banks are the beneficiaries.
> You see, in addition to buying up many of the bad assets
> previously held on banks' books over the last year or so -
> the result of waves of imprudent bank lending - when the Fed
> lowers interest rates it helps to make the business of
> banking much more profitable and, conventional wisdom has it
> that our finance-based economy will then begin to recover.
> And when the banks can borrow at these super-low rates,
> that means that savers can't earn much more in interest.
> Banks come first and savers are far down on the list.
> Why does the system work this way?
> Well, most people haven't got a clue what the Federal
> Reserve is or what it does (though, understandably, there is
> growing interest in this topic, ever since the wheels fell
> off of the global economy last fall), but the crucial bit of
> information that the now-slightly-more-curious public should
> learn quickly is that the central bank was not set up to
> help the people or the government, but, rather, to help the
> big banks.
> In fact, according to G. Edward Griffin, who happened to
> write a whole book on the subject, the very reason that the
> Federal Reserve was formed back in 1913 was so that big
> banks could wrest back control of the banking system from
> the many small, fledgling, independent banks all around the
> country that were taking away their business.
> Look around you today. You might see lots of little banks
> failing, but only a few large ones ever go under and none of
> the country's biggest banks ever fail.
> The Fed was created by the big banks, for the big banks,
> and its unwritten "mission statement" is to do whatever it
> takes to ensure the survival and profitability of those big
> banks, getting the government to step in with public money
> when necessary for "the greater good", effectively
> socializing the losses while keeping the gains in private
> hands.
> That's why what we have today - a wholly unsustainable
> system of ever-expanding credit and debt dominated by a
> handful of "too big to fail" banks - keeps getting propped
> up.
> The masses are led to believe that credit is the "lifeblood
> of the economy" when, in fact, credit is the lifeblood of a
> banking system that has, over time, sucked the life out of
> the economy.
> It's hard to imagine anything that is more immoral than the
> Federal Reserve's role in this process, now almost a hundred
> years in the making.
> Fleece the Poor
> In arriving at the third and final way that the Federal
> Reserve is immoral, clearly, that last thought in the
> previous section was premature.
> In fact, there is one very good example of something being
> done today by the central bank that is even more immoral
> than a nearly century long wealth transfer from the public
> sector to the private banking system - the ongoing
> assistance being provided by the Fed in helping the banking
> system reach out and find new customers so that every
> possible dollar can be extracted from them.
> You see, the country's big banks (along with the central
> bank that serves their interests) would much prefer that
> poor people all across the country not go to a place like
> you see to the right and, for a small fee, convert their
> paycheck into cash and forever live within their means.
> Bankers would much rather see the nation's poor open up
> checking accounts and then venture further into the world of
> modern day banking, quickly learning to spend well beyond
> their means.
> Left unsaid in the Fed's many efforts to reach out to the
> "unbanked" is that checking accounts are a sort of "gateway
> drug" for many people - a road to debt serfdom where, in
> addition to paying interest on money borrowed to buy stuff
> that they don't need, these "newly banked" poor will also be
> fleeced by a bewildering array of fees and charges in a
> system that is set up to systematically suck as much money
> out of as many people as possible.
> Over the years, the Federal Reserve has made great efforts
> to attract new customers for banks, in some cases providing
> cartoon characters to make the whole idea of debt serfdom
> seem like a friendly sort of condition, much in the same way
> that Joe Camel once attracted new smokers.
> Under the guise of "education" and with "consumer
> protection" as its goal, the Federal Reserve might seem to
> be "looking out for the little guy", but they're not.
> They've had the power to do this for many years now but, for
> obvious reasons, have exercised their "power to protect" the
> consumer only sparingly, allowing millions of subprime
> borrowers to give the housing bubble one last giant hurrah
> before it finally burst.
> Fortunately, it appears that the Obama administration would
> like to see the American consumers' interests watched over
> by some other group and for good reason. A report earlier in
> the week in the Financial Times detailed how big banks in
> the U.S. plan to extract almost $40 billion in overdraft
> fees from American consumers whose balance sheets haven't
> been bolstered by government bailouts.
> It seems that, with the collapse of the mortgage finance
> bubble, big banks are now reverting to a profit model that
> is driven more by extracting fees from their customers
> wherever possible and overdraft fees from the cash-strapped
> are "the mother lode".
> A full 90 percent of overdraft fees come from just 10
> percent of all checking accounts and most of this 10 percent
> have low credit scores and/or are recent entrants to the
> world of mainstream banking.
> Not surprisingly, the highest overdraft fees come from the
> biggest banks - Citigroup, Bank of America, JP Morgan Chase,
> Wells Fargo, SunTrust, and Citizens Bank.
> For banks, overdraft fees are a low risk, high profit part
> of their business, not something that is usually mentioned
> as part of the Fed's outreach programs. It is a
> sophisticated, large scale sort of "payday loan" system that
> many Americans fall prey to and, as long as customers have
> their payroll checks automatically deposited, the bank will
> always have first crack at the money and people will
> continue to spend more than they make because, when you get
> down to the very basics here, most people aren't very good
> at math.
> But, banks are.
> Maybe Ron Paul is right - the Fed should be abolished.
> Then markets could set interest rates, banks would have to
> fend for themselves, and there would be one less group
> helping to extract what little money the poor have left.

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