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Let it be written that on the sixth day of October in the year 2008, the irrational exuberance that defined the 1990s came screeching to a halt.The Dow Jones Industrial Average fell below 10,000 this morning for the first time since 2004. Gosh, it seems like only yesterday that investors were as giddy as school girls when the leading stock market indicator crossed that once-unthinkable benchmark. Remember the Dow 10,000 hats? I bet the people who bought them along with other keepsakes of better times plan to unload them on eBay so they can fill up their tanks with gas. In fact, some people have already started selling bull market memorabilia. A Lehman Brothers coffee mug is available on eBay for $14.99, while the book Dow 36,000 is attracting no bidders for the bargain-basement price of $1.93.
These are lousy times. The real estate market continues to suck wind. Holiday retail sales are expected to be their worst in years. Hundreds of billions of dollars worth of federal bailouts have failed to unfreeze the credit market or provide any relief for homeowners hurt by the subprime crisis. A good part of the market's downturn can be blamed on lax corporate governance, including outrageous CEO pay.
According to the Corporate Library, former American International Group (NYSE: AIG) Chief Executive Martin Sullivan was paid $43.9 $15 million (corrected by Corporate Library) in 2007. His pay was at or above the 90th percentile for the S&P 500. Now, the insurance giant is owned by the federal government and is in the midst of selling off its assets. The Corporate Library's Nell Minow noted in testimony before Congress today about AIG that shareholders have nothing against paying executives well. "They just don't want them to get paid a lot of money without earning it," she said in a written testimony.
As the New York Times noted on Sunday, the rich also are suffering as Wall Street continues to bleed jobs by the tens of thousands. People are putting their multi-million dollar yachts up for sale and making agonizing decisions about whether to part with the estate in the country or the swanky New York apartment, the paper said. One industry that is not hurting is strip clubs.
"Men will never grow tired of the high-class strip-club experience," said Lonnie Hanover, a spokesman for Rick's Cabaret International in New York. Rick's, which is publicly traded on the Nasdaq and has 19 clubs across the country, even plans to expand. "When times are tough, there is no better form of escapism than a night at a gentlemen's club."
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Reader Comments (Page 1 of 1)
10-06-2008 @ 1:13PM
william lindblad said...
Put blame where you wish as there is plenty to go around.
Although excessive on a monumental basis, the CEO end has little to do with the root cause of our present economic woes. This is a symptom that is not going to stop until the stockholders are given a larger say in corporate operations. The CEO pay scales are directly related to corporate boards that are just as far out of line - both in thinking and pay.
If you wish to place blame for housing and the banking fiasco - start with Glass-Steagall and include no action against predatory lending by the Fed. That was granted to them in the mid 1990's. Include government policy to put low and middle income in homes starting around 1999. While this policy has been in place for over 50 years it was it this point that it was given a big push. This is a sound and fair policy - as long as it has OVERSIGHT.
OVERSIGHT a.) watchful and responsible care. b.) regulatory supervision (congressional)
So, if you wish to know why we have the present woes - I would suggest that you focus your attention on the House and Senate Finance and Banking committees.
They are comprised of members of both parties and all are presently chaired by Democrats as they have Congressional majority. I would also suggest that you wonder why, especially this date when the House finance committee is conducting hearings, that they choose to investigate the fall of Lehman? Beside the private bankers, the pseudo government Fannie and Freddie is a full 1/2 of our problem. It is under the agency called OFHEO. the office of federal housing enterprise OVERSIGHT. Since the heads of Fannie and Freddie have been removed, why is Mr. Lockhart, who runs the OFHEO immune.
HE seems to have a suit of armor, or perhaps a halo. I sure would like to hear him explain what he was doing while all of this insane lending was going on?
10-06-2008 @ 1:31PM
JCH said...
What was he doing? He was doing the President's bidding - doing his best to help create an Ownership Society just in time for the Neocons to trample the Democrats in the 2007 election with their ten million ever so grateful, brand-new homeowners.
10-06-2008 @ 7:25PM
John Maszka said...
Regarding today's crash: What did anyone expect? The investors have no confidence in these corrupt politicians. This bailout is just one more example of the indivisible handjob stroking irresponsible CEOs and CFOs with billions so that they can run the American economy even further into the ground. So much for Keynesian economics. If the goal is to stimulate the economy, why not give the money directly to the American taxpayers? The government could do twice as much good for the economy by returning half as much money (as the bailout requires) directly to the hardworking American taxpayers. A bird in the hand is worth two in the bush administration.
10-06-2008 @ 7:52PM
jpope said...
paulson puts his pal in to over see the 700 billion thats nice when will the greed end? and they wonder why main street is mad! i can almost hear the corks popping! can anyone else hear them?