You can’t have your TARP and eat it too
Compensation consultants say that limiting executive pay at TARP-recipient banks will make the banks less competitive. They argue that nobody worth their (market) weight in gold wants to work for a bank where the only bonus beyond a half-million-dollar salary is restricted stock options that can’t be cashed in until taxpayers get their due. They may be right, though the market for pricey financial whiz kids and rocket scientists is hardly a rich one these days.
Whenever Uncle Sam steps in as lender of last resort, taxpayers had better concern themselves with the concept of Moral Hazard: that banks can invest recklessly because they know they will get bailed out in the end. The $500,000 pay cap is, in effect, a Moral Hazard roadblock, raising the cost of a bailout for would-be Wall Street gamblers.
But neither side in this argument should get too excited. With nearly $300 billion of TARP funds already out of the bag, and the new compensation rules applying only to future TARP tappings, most of the best executives (such as John Thain’s crew at TARP-funded takeover disaster Merrill Lynch) have already been paid off.
At this point, perhaps the best that free marketers and taxpayers alike can hope for is that executives of submerged financial institutions opt for the failure they have earned rather than a taxpayer lifeline.
Other Deals News:
* China Investment Corp, a $200 billion sovereign wealth fund, and state-owned China Development Bank are both in talks to buy into CITIC Capital Holdings Ltd, an official newspaper said.
* Vodafone has picked U.S. software firm Azingo to develop Linux-based applications, the latest sign the world’s largest wireless operator by sales is keeping Linux operating system LiMo as one of its key choices.
* Spanish construction and energy group Acciona said it will slow the pace of its energy investments if it does not sell its 25 percent of power utility Endesa to Italy’s Enel before 2010.
* Procter & Gamble Co is working with Goldman Sachs to identify potential buyers for its pharmaceuticals brands or find other ways to exit the business, people close to the matter said, the Financial Times reported.
* Shenzhen Zhongjin Lingnan Nonfemet, China’s third-largest zinc producer, said it had won Australian government approval to acquire a controlling stake in zinc miner Perilya.
* General Motors is holding discussions with major Chinese automaker FAW Group to form a partnership for light commercial vehicles, banking on government policy support to drive demand for pick-up trucks and vans.
* Chinese car manufacturer Geely Automobile Holdings Ltd has no plans to buy the Volvo car brand from Ford Motor, a Geely spokesman said.
* Mobile phone technology company 2 ergo said it will buy back former unit SMS specialist Broca in a 4.9 million pounds ($7.06 million) all-share deal.
* Charles Ergen’s EchoStar Corp has quietly accumulated a substantial portion of Sirius XM Satellite Radio Inc’s maturing debt in what could be the first salvo in an attempt to take control of the company, the Wall Street Journal said, citing people familiar with the matter.
* Russian gold producer Peter Hambro Mining will issue shares to raise 55 million pounds ($79 million) and is also close to an all-share takeover offer for iron ore company Aricom, the firm said.
(The 2008 White House Christmas Gingerbread house is seen in the State Dining Room in Washington, December 3, 2008. REUTERS/Larry Downing )