Project for Philosophical Evaluations of the Economy |
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On Meredith Whitney and the bonus system
Bullet Point comments on the US economy in calendar week No. 6, published on Feb. 7, 2009
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Bullet Point comments on the US economy in calendar week No. 6, published on Feb. 7, 2009
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- Noah denkt™ is a fan of Oppenheimer’s Meredith Whitney. It disagrees with her though when she claims
that it would be preferable for the US banking system to return to the old savings and loan based structure.
(See her appearance on Bloomberg Television, Feb. 4, 2009) Unfortunately, such a lending system calculated on
deposits only would not generate the investment and growth that could bring the emerging economies out
of their doldrums soon enough.
- Noah denkt™ agrees with Megan Whitman though, on the notion that it would be better to force companies
like Citibank or Bank of America to sell of some of their valuable assets (SmithBarney etc..), rather than
aliviating their financial problems by creating a so-called “bad bank”.
- Advocates of the Wall Street bonus system usually justify their stance by pointing out that an incentive
system is indispensable in order to attract the best and the brightest in the industry and retain them in the
company. In this context Noah denkt™ would like to ask the proponents of this logic to, please, point out to
us some of those who in their mind belong to the best and brightest talent pool. Would that list, previously,
have included such famed visionaries as Richard Fuld, Charles Prince, Ken Thompson or Stanley O’Neal?
What about or Bernard Madoff, - would he have made the cut? And what about Alan Greenspan, Josef
Ackermann or Boaz Weinstein? And last not least, what proponents of this logic see any chancy for the
mastermind of this web project to be included in that list? And if not, why is that so?
- Generally speaking, it seems to Noah denkt™ that someone who is primarily motivated by quick short-term
perosnal gains, can by definition not belong to the best and brightest. After all, he is a likely victim of greed,
and greed almost always turns into a rather unprofitable undertaking sooner or later. Ask Lehman Bros,
BearStearns, Citibank and others if you have doubts on this.
- Noah denkt™ agrees with some pundits who describe the current situation in the stock market as a
bottoming process. After all, the number of companies who report better than expected earnings is, albeit
slowly, rising. And do not forget the better than expected pending US home sales in December and the
better than expected ISM-Index too.
- Re: Stimulating the economy: Whatever the government does, - whether it is a spending or a tax cut
package -, nothing will be perfect; every approach will have its pros and cons, and all too often the only
positive effect of such government intervention will be a psychological and soothing one only. Because of
this, Noah denkt™ favors an approach that lets markets sort out their messes on their own. For as painful
and devastating as this self-healing process would be in the short-term, it would at least provide a solid
basis for a sustainable recovery later. The current painkilling exercise however will only postpone the
necessary correction and thereby make the destructive forces more powerful that eventually will unleash
itself. In other words, it may be possible to avoid depressions but only for the price of allowing interim
recessions to develop freely.
- Obviously Noah denkt™ is aware of the fact that it is currently impossible for any politician to adopt a
hands-off approach when dealing with a recession. Given therefore that it is inevitable for politicians to get
involved in the current crisis, Noah denkt™ endorses the latest US senate proposal, which includes a mix of
spending and tax cut initiatives. In any case, it was important to cut some of the pork-barrel spending that
was quite prominent in the prior proposal.
- On General Electric: Noah denkt™ is quite disappointed by Mr. Immelt’s comment according to which he
would also be prepared to run GE with AA rating. After all, it is only a week or so ago that he declared
himself to be committed to preserving GE’s AAA rating. In this respect, there can be no doubt in Noah
denkt™’s mind, that it would be better to cut the company’s dividend than loosing its triple A rating.
| © Landei Selbstverlag, owned by Wilhelm ("Wil") Leonards, Gerolstein, Germany. All rights reserved. Reminder: Noah denkt™ is a project of Wilhelm ("Wil") Leonards and his Landei Selbstverlag (WL & his LSV). Consequently, all rights to the texts that have been published under the Noah denkt™brand name are reserved by WL & his LSV. The commentary and the reasoning that was provided on this page is for informational and/or educational purposes only and it is not intended to provide tax, legal or investment advice. It should therefore not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or any issuer by WL & his LSV or its Noah denkt™ Project. In fact, WL & his LSV encourage the user to understand that he alone is responsible for determining whether any investment, security or strategy is appropriate or suitable for him. And to leave no doubt as to what this means we urge our user to also note our extended Legal Notice. |
| Conflict of Interest Statement with respect to the General Electric Q: Does Wil Leonards hold shares of GE? A: No Q: Has Wil Leonards done consulting work for GE? A: No Q: Does he intend to develop a commercial relationship with GE? A: No Q: Do members of Wil Leonards' family hold shares of GE? A: No Q: Have members of Wil Leonards' family done consulting work for GE? A: No Q: Does a member of his family intend to develop a commercial relationship with GE? A: No |
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| Addition to this comment, published on June 26, 2009: Have you followed yesterday´s review of Mr. Bernanke's handling of the Bank of America and Merrill Lynch merger? Did you notice that it became clear in the cause of that hearing that the FED leadership had "serious doubts" about the quality of "judgement" that the CEO of BofA, Mr. Lewis, could bring to the table when contemplating the aforementioned merger? And if so, would you then agree that it is quite disconcerting to learn that someone who is considered to be among the best and the brightest (at least as far as his remuneration is concerned) has his sense of judgment put into doubt in such a stark manner, as has been the case with Mr. Lewis? |