Executive Salary Cap Is A Political Sound Bite

Barack Obama announced executive salary restrictions for institutions . It certainly sounded fair. Taxpayer money for failed banks will result in limits to failed executive compensation. However, a problem becomes apparent when we look at the actual details and beyond the political sound bite.

An overview of the executive salary cap from this article in Bloomberg:

Executives at Goldman Sachs Group Inc., JPMorgan Chase & Co. and hundreds of financial institutions receiving federal aid are not likely to be affected by pay restrictions announced yesterday by President Barack Obama. The rules, created in response to growing public anger about the record bonuses the financial industry doled out last year, will apply only to top executives at companies that need “exceptional” assistance in the future. The limits are not retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more.

So, all the tarp money already spend will be given without any restriction to executive pay. As a result, it won't apply to the executives of the hundreds of financial services firms that have already taken TARP money. It does not even apply to the worst offenders like AIG, Merrill Lynch and Citigroup that have already come back twice to take government capital.

The new financial services executive salary cap will only effect institutions in the future that need financial assistance. It will only serve to preclude some better run banks from getting government assistance.

Style over substance is the reality of this announcement. The Executive Salary Cap is really a political ad given to assuage an outraged voter base. It is a policy that currently has a lot more political bark than regulatory bite.

The Strange Case Of Bernie Madoff

The biggest financial fraud in history continues to slowly unravel in an unusual way. The strange case of Bernie Madoff becomes only more bizarre with each passing day.

This strange case actually started with Bernie Madoff outing himself. As a result, there is no sense in talking about the $50 billion dollar Madoff Ponzi scheme as an "alleged" fraud, when the main allegations about the crime actually come from the person who will eventually be the defendant in the case.

Soon after his arrest, Bernie Madoff's bail was set at $10 million dollars with the requirement of 4 co-signers on the bond but Madoff could not get four people in the entire world to sign his bail bond.

So, he did not meet the conditions of his bail. However, his punishment for not making bail has certainly been strange. Madoff was not sent to jail but only confined to his palatial apartment at 133 East 64th Street.

As a result, its very odd that while the U.S. Congress and prosecutors sort out the greatest financial hoax in history, the mastermind of the Ponzi Scheme continues to enjoy a life of luxury made possible by his fraud.

Its also strange that while the government searches for an accounting of $50 billion missing dollars, that Bernie Madoff has the ability to continue to access personal records and computers that may become important to the fraud investigation.

Madoff's Ponzi scheme ripped off widows and orphans, philanthropies, rich people, global banks and hedge funds. It is strange that one man managed to steal $50 billion dollars for decades from some of the most sophisticated financial people and institutions in the world within the confines of the regulated environment of financial investments.

Certainly, it is strange that starting in 1992, federal regulators on at least eight different occasions examined various aspects of Bernard Madoff's business operations and never turned up anything about the $50 billion Ponzi scheme that led to Madoff's arrest last month.

Bernie Madoff showed up last week at a bail hearing wearing a bullet proof vest. The bail hearing was called because Madoff was in violation of a condition of his bail agreement not to dispose of any of his assets.

Sadly, it was discovered that sixteen watches, including diamond-encrusted timepieces from Tiffany and Cartier, four diamond brooches, two sets of cuff links, and an emerald ring were sent to Madoff's sons and brother. The value of the jewelry was estimated to be more than one million dollars.

The result of the bail hearing once again did not send Bernie Madoff to jail. He was again ordered to return to the comfort of his $7 million dollar penthouse apartment. Even though it may be hard to believe, this story is not bad fiction. Unfortunately, the strange case of Bernie Madoff is reality TV.