Hank Paulson's testimony yesterday was informative, if only because it illustrated that he himself still understands little about the origins and nature of the global crisis over which he presided. Perhaps his book, out this fall, will redeem his reputation. A fundamental principle in any emerging market crisis is that not all of the oligarchs can be saved. There is an adding up constraint - the state cannot access enough resources to bail out all the big players. The people who control the state can decide who is out of business and who stays in, but this is never an overnight decision written on a single piece of paper. Instead, there is a process - and a struggle by competing oligarchs - to influence, persuade, or in some way push the "policymakers" towards the view: 1. My private firm must be saved, for the good of the country. 2. It must remain private, otherwise this will prevent an economic recovery. 3. I should be allowed to acquire other assets, opportunities, or simply market share, as a way to speed recovery for the nation. Who won this argument in the US and on what basis? And have the winners perhaps done a bit too well - thinking just about their own political futures?(continues)
A fundamental principle in any emerging market crisis is that not all of the oligarchs can be saved. There is an adding up constraint - the state cannot access enough resources to bail out all the big players.
The people who control the state can decide who is out of business and who stays in, but this is never an overnight decision written on a single piece of paper. Instead, there is a process - and a struggle by competing oligarchs - to influence, persuade, or in some way push the "policymakers" towards the view:
1. My private firm must be saved, for the good of the country. 2. It must remain private, otherwise this will prevent an economic recovery. 3. I should be allowed to acquire other assets, opportunities, or simply market share, as a way to speed recovery for the nation.
Who won this argument in the US and on what basis? And have the winners perhaps done a bit too well - thinking just about their own political futures?(continues)
CIT Group Inc. Chief Executive Officer Jeffrey Peek, under whose leadership the lender's stock has plunged 98 percent, may be in line ahead of the U.S. government to be paid if CIT files for bankruptcy protection. Peek is owed $14.7 million if he's terminated or there's a change of control at CIT. A compensation claim would put him ahead of shareholders -- including the U.S. Treasury -- in the event of liquidation, Scott Peltz, managing director of the corporate restructuring group at RSM McGladrey, said in an interview. ... "He's an employee, and employees in bankruptcy have a priority," Peltz said. Peek's compensation claim "would be before the preferred and common and probably with some of the bondholders." ... "If you have contracts, the judge has to decide whether the obligations can be met, but keep in mind you've got agreements with bondholders and all kinds of agreements out there that have to be decided upon," said David Schmidt, a senior consultant at executive pay firm James F. Reda & Associates. "The only place you [who? whaaa?] don't have agreements is with shareholders."
Peek is owed $14.7 million if he's terminated or there's a change of control at CIT. A compensation claim would put him ahead of shareholders -- including the U.S. Treasury -- in the event of liquidation, Scott Peltz, managing director of the corporate restructuring group at RSM McGladrey, said in an interview. ...
"He's an employee, and employees in bankruptcy have a priority," Peltz said. Peek's compensation claim "would be before the preferred and common and probably with some of the bondholders." ...
"If you have contracts, the judge has to decide whether the obligations can be met, but keep in mind you've got agreements with bondholders and all kinds of agreements out there that have to be decided upon," said David Schmidt, a senior consultant at executive pay firm James F. Reda & Associates. "The only place you [who? whaaa?] don't have agreements is with shareholders."
a true paradox and all the more reason Treasury should never have advanced cash either directly or indirectly through insurance claims to IBs to preclude process.
Peek, 62, joined CIT in 2003. On his watch, the shares soared to a record $61.59 in February 2007, before plunging as CIT reported $3 billion of losses in the last eight quarters. The shares traded at 70 cents yesterday on the New York Stock Exchange.
just desserts and all... Diversity is the key to economic and political evolution.
