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BR_Parkway Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-16-10 08:03 AM
Original message
Here's an idea
The Baseline Scenario

What happened to the global economy and what we can do about it
Heres an Idea . . .

. . . since the Geithner-Summers team seems to be looking for them.

Why not say that all bank compensation above a baseline amount say, $150,000 in annual salary has to be paid in toxic assets off the banks balance sheet? Instead of getting a check for $10,000, the employee would get $10,000 in toxic assets, at their current book value. A federal regulator can decide which assets to pay compensation in; if they were all fairly valued, then it wouldnt matter which ones the regulator chose. That would get the assets off the banks balance sheet, and into the hands of the people responsible for putting them there at the value that they insist they are worth. Of course, the average employee does not get to set the balance sheet value of the assets, and may not have been involved in creating or buying those particular assets. But think about the incentives: talented people will flow to the companies that are valuing their assets the most realistically (since inflated valuations translate directly into lower compensation), which will give companies the incentive to be realistic in their valuations. (Banks could inflate their nominal compensation amounts to compensate for their overvalued assets, but then they would have to take larger losses on their income statements.)

We can dream, cant we?

http://baselinescenario.com/2009/02/08/heres-an-idea/
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damyank913 Donating Member (595 posts) Send PM | Profile | Ignore Tue Mar-16-10 08:14 AM
Response to Original message
1. I like it.
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BR_Parkway Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-16-10 08:51 AM
Response to Reply #1
2. If they're going to say it's got real value, then they should accept
it $ for $.

Turns out that Credit Suisse did this for their bonus program.
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damyank913 Donating Member (595 posts) Send PM | Profile | Ignore Tue Mar-16-10 08:54 AM
Response to Reply #2
3. And there would be more peer pressure on the ratings agencies to get it right.
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