The Race To Escape The TARP (JPM, AXP, MS, GS, C, BAC)

[Newbie]

JPMorgan Chase & Co. (NYSE:JPM) and some of its peers want out of the Troubled Asset Relief Program (TARP) in the worst way. Like a parent dropping an only child off at college for the freshman year, the Federal Reserve is apparently equally reluctant to let go.

The Race To Escape The TARP (JPM, AXP, MS, GS, C, BAC)  |  June 09, 2009  | By Billy Fisher - Investopedia Advisor

 

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[Russ H]

Has anyone heard *why* they want to pay off the TARP loans?

Word on the street (Wall St) is that they're doing it so that they can go back to paying mega-bonuses to the chief officers.

Thing is, I'm not opposed to unlimited bonuses. But there has to be a downside to balance things out. To make a greedy officer or executive *think* before risking his company and the welfare of the investors and employees.

Anyone have any ideas for disincentives?

Public hangings?

(I kid, I kid)

-Russ H.

 

[TaxGuy]

Public hangings?

(I kid, I kid)

-Russ H.

Listen to George Carlin's "Back in Town", he's got a great section about this, only it relates to how to stop Drug Trafficking while also balancing the federal budget using capital punishment as "entertainment"

 

[randallg99]

Has anyone heard *why* they want to pay off the TARP loans?

Word on the street (Wall St) is that they're doing it so that they can go back to paying mega-bonuses to the chief officers.

Thing is, I'm not opposed to unlimited bonuses. But there has to be a downside to balance things out. To make a greedy officer or executive *think* before risking his company and the welfare of the investors and employees.

Anyone have any ideas for disincentives?

Public hangings?

(I kid, I kid)

-Russ H.

Russ-

you're partially correct-

real reason is that to qualify for TARP, the institution had to convert to a banking charter and become regulated under banking and insurance regulations

as a result, leverage and cash requirements are much stricter.... back in the good ol days of Bear Sterns and Lehman, leverage ran as high as 50x1. Some investment brokerages have rumored to run higher....

banks would be immediately nationalized or shut down if leverage controls were violated, most likely above single digits

ps. public hangings for CEO's taking home 100mil after defuncting their company is exactly what this country needs.... rewarding failure is a pet peeve of mine, I'm just kinda funny like that I guess

 

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[Bilgefisher]

I'm not very versed on how public companies are run, so bear with the newb question.

Shouldn't the share holders be the ones holding the CEO responsible? Couldn't they have it written into the contract that the CEO's bonus and parachute are based on company performance?

This is seems obvious so I am guessing I am missing a few key elements to the equation.

 

[randallg99]

shareholders elect a group of people to a board (board members) whom typically are decision makers regarding executive compensation....

even if you have one share, you are allowed to vote for board elections... but the vote is proportionately counted.

the vast majority of shares are held very closely by INSIDERS/trusts/families for controlling interest thus the determination of board members is all but assured by those who want what they want.

companies listed in the thread title are older insitutions where many shares have remained in families for generations and can be closely run....