The first was from the Planet Money blog and pointed me to Joe Nocera’s NY Times column. He talks about the AIG mess and how the company has to be kept alive:

And yet — and this is the part that should make your blood boil — the company is being kept alive precisely because it behaved so badly.

Then in today’s New York Times I read that the the former execs of Countrywide, a failed company synoyms with the mortgage crisis, have formed a company to profit on the toxic assets they created. They’ve been buying up mortgages from the government for pennies on the dollar.

I guess because of the insider knowledge of the crisis they’re doing well.  According to a report from the head of loan servicing when reporting to CountryWide’s former president:

“In fact, it’s off-the-charts good,” he told Mr. Kurland, who was leaning back comfortably in his white leather boardroom chair, even as the financial markets in New York were plunging.

Unfortunately they haven’t been convicted of a crime so there’s no way to keep them from starting a business. But with all the rules being put in place over executive pay, can’t we limit the selling of loans to the people who contributed to the crisis?

It’s also been said that the executives suffer because the compensation is in stock which is down. Well, in this case the stock may have been diluted, but it was saved and they aren’t the reason it’s not at zero.

How can such a massive failure be anything other than the failure of upper management and the CEO Vikram Pandit? I don’t see the economic meltdown as an escuse in this case. Citigroup helped cause the meltdown through lax oversight. Yet they remain in place and despite announcing massive layoffs they might still receive their bonuses. From the article announcing the layoffs:

Mr. Pandit, however, has not decided on whether to share the pain by turning down an annual bonus. “Citi’s board of directors will make the decisions about the structure and level of compensation after the end of the year,” the bank said in a statement.

Sure, let the board decide. Hopefully the board will decide to make Mr. Pandit’s compensation zero and make the latest job reduction total 52,001. How can the board live up to their fiduciary responisbility and give that guy even a dime?

In theory the board is supposed to represent shareholders and act in their interests. Perhaps if the Citigroup rescue plan wipes out shareholder value shareholders in other companies will take more interest in the way their business is run. Citigroup may be too big to fail (open to debate) but even if it is, that doesn’t mean bad management shouldn’t have consequences. Especially for the managers.

“Almost no one expected what was coming. It’s not fair to blame us for not predicting the unthinkable.“— Daniel H. Mudd, former chief executive, Fannie Mae

This seems to be a common refrain from or government these days.No one could have predicted 9/11. No one could have predicted the Iraqi insurgency. No one could have foreseen the levies failing during Katrina. Unless there’s someone named “No One” that these people are referring to there are people who could see the potential for all of them. It’s just they were ignored because they were considered idiots.

In the case of the mortgage crisis, the short term profits blinded people to the long term impact. From the article:

Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives.

Sounds like there were people there who saw the problem, but they were ignored because Mr. Mudd was afraid of losing business. The only thing that can be said in his defense is he wasn’y the only one blinded by short term profits.

Rather than rising above the rhetoric the republican’s feelings were hurt and they considered that more important than the country. Now, there are reasons to vote against the bill, and I wanted them to, but one reason the republican’s themselves used for voting “no” was Nancy Pelosi’s speech.

And then they took a couple days off. The Senate put together their own version of the bill. What was different? A better plan that strikes at the root cause? More details on what actions will be taken? No and no. They added $149 billion dollars in tax breaks. So not only are they allocating $700 Billion for the bailout, they’re reducing revenue. Despite their best intentions I doubt McCain’s tax breaks or Obama’s health plan will see the light of day no matter who wins. We won’t be able to afford it.

So, it’s questionable whether or not the bailout will help the economy enough or exactly what the cost will be. But as Barney Frank said:

We will be back next year…

I suspect a bad economy will be right there waiting for him.