Monday, October 27, 2008

The World Doesn't Work

The famed $700-billion bailout plan, Largely as a throw to taxpayers having trouble swallowing a plan using hundreds of billions of dollars of their money to prop up banks run by executives who make more in a year than most people earn in a lifetime, contained restrictions on the compensation that could be offered to executives of companies that accepted the money.  It was more a punitive measure than a constructive means of solving the credit crisis.  Lavish as they are, executive compensation figures still pale in comparison to the shear scale of the problems facing the global economy.

That being said,  when Alan Greenspan made his little admission last week that the world doesn't work quite the way he thought it did.  He said he'd been working under the assumption that institutions would act in their own self-interest in a way that protects their shareholders. 

Could it be that, as compensation packages became more and more larded with extravagant bonuses and golden parachutes, the interests of managing executives became dangerously decoupled from those of the shareholders?

Conservatives have often pushed to grant corporations the legal rights and protections the constitution affords people but it's important to remember that they're not actually people.   They're large groups of people and it's entirely possible for some of them to act against the best interests of the rest.  The consequences of this are worst when those people happen to be in charge.

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