Chris Dwan

Tag: finance

  • Bonuses

    You know what rankles me? The financial houses just don’t get it.

    Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.

    Actually, they do get it. Until we change the rules – they can do exactly what they’re doing. There is no morality or decency – there is only “take what you can, when you can.” So, even as the companies go under – supported briefly by a surge of taxpayer largesse – greedy individuals continue to write themselves checks for double and triple their annual salaries.

    Mr. DiNapoli said the average Wall Street bonus declined 36.7 percent, to $112,000. That is smaller than the overall 44 percent decline because the money was spread among a smaller pool following thousands of job losses.

    Every argument that I’ve heard in favor of these practices focuses on the letters and specifics of the contracts and rules. It almost reminds me of those idiots in online games who make a career out of exploiting glitches and bugs in the games. “It’s a legitimate strategy,” they cry, as they ruin the game for everyone.

    Here’s the thing – individuals are making these choices. Individuals talk it over and decide to declare bankruptcy; ask for a government bailout; or go ahead with bonuses. We were willing to roll with it as long as we all got flatscreen TVs. Now that we see that it was all a lie – we want them to be a bit more circumspect. I understand that for these managers it’s not unreasonable to take the last couple of $mil on the way out the door. I mean, otherwise someone else would get it – right?

    I’ve thought a lot about incentive plans recently. My company has written a couple of them. We’ve had long conversations about why you have such a plan at all. Here’s the thing: You don’t want to give bonuses for working long hours, for traveling a lot, or more generally – bonuses for suffering. As a business, you use incentives to motivate certain behaviors that are in the best interests of the company. The core axiom ought to be “incentives are linked to making us profitable.” That’s the corporate side, as an individual, I want to be rewarded for doing things within my control, and at which I succeed.

    More generally: Salary is for behavior. Bonus is for results.

    The financial houses have utterly failed on the “results” side. Unfettered greed, short sighted planning, and outright lies have put the nation in a massive economic slump. Real people, lots of them, are losing real and tangible quality of life because of these idiots. Management from the lowest to the top has put their company and the nation in this awful position.

    To write themselves bonuses under these circumstances isn’t criminal, and it’s probably impossible to stop them by either legislation or regulation. We’ve made banking the best paid industry – so our very smartest people go there. We’re not going to outsmart them or out-play the players.

    We can, however, be irate and shame them in public. I want these people raked over the coals on CSPAN. It’s quite likely the only satisfaction I’ll ever get on this one.

  • Brooding

    I found myself sitting up late last night wondering how it is that the whole world (relatively speaking) can be working on the problem of our imminent financial collapse and yet not find any good solutions.

    I think that one of the core problems is that the people most directly involved in the situation (the finance industry) are not interested in an equitable solution that involves addressing the core issue. They’re interested in minimizing their own losses, and even squeezing a profit out of these lean times. Everyone is still trying to hide and shuffle around bad debts rather than addressing the reality of a new economy that contains considerably less equity. As we dither, the economy is stalling out and consumers are going into hiding, no matter what the Fed does. Laws and incentive packages are being written to “keep people in their homes,” but also to give the banks a path other than foreclosure and holding on to homes that nobody will be able to buy. This acts to prop up the banks and their wealthy owners, not to address the core imbalances in the economy.

    The finance industry does not, on the face of it, produce anything. It acts as a catalyst for other production, and thus enables the growth of the “real” economy. The finance industry is fundamentally a leech. Any profits in the financial sector really need to be read as “losses” for the real economy. If their catalyzing effect overcomes their leeching, then all is right with the world. When the finance industry is perceived as the primary driver of economic growth, then of course it’s not real and of course the house of cards will eventually fall.

  • Housing

    I’m trying to figure out the dynamics of the housing market, in preparation for looking at houses.

    First of all, yes, I’m well aware that the market is still massively overpriced. Yes, I’m aware that the rent:own ratio is over 2, where it should be less than 1. Yes, I’m also aware that the credit contraction and plummeting interest rates mean that housing values will continue to drop, since people won’t be able to get as much credit. The only things fighting this trend are the faint hope (ha!) of massive inflation in the dollar, and the idea that foreigners with stronger currencies might want to keep our realty expensive for a while by purchasing vacation homes.

    I’m also painfully aware that I feel like a transient in this apartment. I can’t set up a little shop, nor install raised beds. Yes yes, I could drive half an hour to a community garden … but history says that I don’t do that. Also, I can hear my neighbors flush. I desire to own a house again.

    Anyway, thinking on these things this morning: The rule of thumb on a mortgage is that a family can pretty easily manage a mortgage between 2 and 3 times their annual (gross) income. This means (by and large) that houses in a neighborhood should cost 2 to 3 times the average salary in that neighborhood. Except that in the past 20 years or so, the majority of households have become dual income. If there was nothing else in play, that *ought* to increase the price of houses in that neighborhood by a corresponding amount. Same families, more money, more expensive houses. That’s how it works.

    Mostly, I’m trying to figure out how savagely to underbid on this gorgeous house we saw this weekend.

  • I love finance…

    Exciting weekend looking for houses in Providence, RI and the surrounding hamlets. My initial impression is very positive. This will be a fine place to live, the community is certainly thriving. My second impression is that, for the money, we can get a house about equal in size to the one we currently own. To everyone who warned of massive sticker shock on the East Coast: you were wrong. The difference is that what is available are older equal sized houses on smaller lots, with less amenities. Air conditioning is a rare thing, heat comes from heating oil (ick), etc.

    We narrowed to two houses, one in Cranston and one in West Providence. We’ve made an offer on the one in Providence, based mostly on the fact that the neighborhood looks like a good investment. The house will require a little work, but I feel emotionally prepared to dive into some serious home hacking now that I’ve got three years of experience sort of messing around at the fringes.

    Then, of course, we got to talk to the Mortgage lady. That was about as close as I like to come to “no fun at all.” So many variables…so many technical terms flying around. Looks like it costs about $5,000 to get a mortgage. Wheeee. Do you want to buy down the rate? What about ARM, API, NPACI, … We’ll be talking to other options, but this one seemed competent enough that I doubt we’ll find vast differences. I hate this stuff.

    In other news, Newport is very cool. We did the cliff walk, ogled the mansions, and gorged ourselves on seafood. Overall, a deeply satisfying weekend. Let’s hope that the owner accepts our offer.

    Anyone want to hire a programmer? I’m clever and useful!

  • Balls in the air…

    Too many balls in the air, that is. Old juggling metaphor.

    In which I snivel…