blog maverick about the US banking crisis

Blog Maverick writes about the US banking and housing crisis. While writing my comments to his blog, I learn that Hewlett-Packard is going to decrease its workforce with 25 000 people. Half of them are from US. Blog Maverick explains why the CEOs are willing to take very high risks and various crisis at the Wall Street will come again and again.

blog maverick: "If you are the CEO of a major public company, once you qualify for your golden parachute there is absolutely no reason not to throw the Hail Mary pass, and do high risk deals every chance you get.

If you run a major hedge fund or fund of any kind, once you have put enough cash in the bank to get to your “F U Money Level” there is absolutely no reason not to throw the Hail Mary pass and make high risk investments every chance you get.

What is the down side ? Lets just say for example, you run Fannie May or Freddie Mac. You basically fuck up the entire housing economy. Your punishment ? You walk away with 9mm and 14mm dollars as severance. Would you take either of those jobs ?

Lets say you run Country Wide Insurance. You get the housing market plumped up, during which you sell $414mm dollars worth of stock, and then watch as it spirals out of control because you lent money to anyone with a pulse, and probably to some without. Your punishment ? A $110mm payday. Oh wait, he had to give some back. Sucks to be him doesn’t it.

Carly Fiorina got fired from HP and walked away with severance pay of $42mm in cash. Some people thought she was a good CEO. Some people thought she was horrible and her acquisition of Compaq was the final straw. Did she care what they thought ? Why should she ? She could do what she wanted, she had $42mm big ones waiting for her either way !

The list of CEOs who have walked away with huge severance packages is a long one. The problem however isnt how much they got paid.

There is zero downside to a CEO for taking chances beyond the embarassment of getting fired. Would you let someone fire and embarass you for a check for $20mm dollars ? So would CEOs."

Helge: Learn more from the Mark Cuban blog.


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