Comments on: Revamping traders’ pay http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: dWj http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/comment-page-1/#comment-4725 Tue, 28 Jul 2009 20:44:58 +0000 http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/#comment-4725 The first comment rather hits on the head that we have a legal system set up to break contracts. It’s been decided, though, that the bankruptcy system isn’t well suited to large financial firms, and perhaps for some good reasons; it does seem, though, that we need something bankruptcy-like for financial firms. Zingales was pushing some good ideas last fall, when he was told there was no time to get them through Congress; maybe there’s time now.

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By: RobJ http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/comment-page-1/#comment-4686 Tue, 28 Jul 2009 05:18:18 +0000 http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/#comment-4686 I didn’t hear anyone posting screaming about the sanctity of contracts for the rework of GM and Chrysler union workers. Just the investment banks. If the government has to intervene to save the Titanic from going down, yes, contracts can be reworked.
That would seem obvious, but apparently not to the Rush-Goldman-Wall Street crowd. But we can go back and restore the GM/Chrysler crowd salaries and, hey, rework the California public worker furloughs if the posters here really want to get on their high horses.
Or the govt. can just fire this trader and a whole host of AIG management, as we should have done 8 months ago when we bailed them. What happens to his salary then?

I’m just laughing about the sanctity of contract meme here, at least for companies that suck of the teat of government backstops and, oh, 250 billion or more of direct aid. Sanctity of contract means that they go contact and their workers get, say zero dollars. That sounds pretty sacred to me, how about you?

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By: Dave http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/comment-page-1/#comment-4631 Mon, 27 Jul 2009 15:47:12 +0000 http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/#comment-4631 If you don’t believe in the sanctity of contracts as it pertains to a bank and a trader, do you believe in the sanctity of the contractthat you’ve signed with, say, your landlord or mortgage company?

The conceit that contracts ought not be heeded because of political circumstance suggests that no contract ought to be treated as the word of its signatories.

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By: Roger http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/comment-page-1/#comment-4627 Mon, 27 Jul 2009 11:45:40 +0000 http://blogs.reuters.com/felix-salmon/2009/07/27/revamping-traders-pay/#comment-4627 Felix, this is a comment I penned in response to a friend who shares a view similar to yours on contracts:

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[Name], i have written about this and agree with you, but you are mixing two important concepts: (1) bonuses that are existing contractual obligations of the rescued institutions; and (2) prospective bonus policy. the trader in question has a long-standing contract with the firm; the fact that the US Government chose to bail it out as a going concern means it made the conscious choice not to break contracts in the context of Chapter 11 bankruptcy. It could have done things differently, for which I argued strenuously over 9 months, but it didn’t. Therefore, it does not have the right as a matter of law to say “We’re unhappy with these deals, therefore we are declaring them null and void.” As noxious as some deals may seem, the necessity of following the rule of law overwhelms any financial implications, in my opinion.

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Regarding the “fluidity of capital” argument, the same flexibility would apply in the fund structures. It just means that a trader whose strategies are not in vogue would be trading a proportionately larger amount of their personal capital than firm capital. Nothing wrong with this, is there? The fund mechanism is simply that, a mechanism. It doesn’t need to change governance.

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