Banker bonuses

[Darius871]

If I was part owner in a company and the company hurt someone, I'd be liable, up to everything I owned. Why should owning stock be different?

Why couldn't you get things done? Corporations would just have to be a lot more careful and ethical. The whole point of the joint stock corporation is to shield investors from the liabilities their investments cause. That's ****ed up.

You're talking about just tort liability then right, not liability in general, which would include debt? The former would only force corporations to be ethical (or at least legally compliant), whereas the latter would utterly decimate their ability to accumulate capital. Which is it?

[Ben Kenobi]

You made the wrong bet. Dude, that's how it works!

Losses are one thing. I never said anything about losses. Nationalization is quite another.

Hey, I've lost a decent chunk of change on Citi. Nothing backbreaking, but enough to be kinda annoyed. But hey, thems the breaks. Investing is not a risk-less endeavor.

Very true. I don't mind getting screwed over by the markets. Getting screwed over by the government deciding to nationalize a business? Right. Call me when the government decides to reward me for making good investment decisions by giving me more money.

[Agathon]

Under some select circumstances, shareholders are on the hook. However, we couldn't get any business done with widespread liability like this.

So much for personal responsibility, then.

Stephen Leacock was right. You're better off keeping your money in an old sock.

[Kuciwalker]

Guys, please just ignore Ben.

[Ben Kenobi]

whereas the latter would utterly decimate their ability to accumulate capital. Which is it?

The latter. He's a communist.

He's all about screwing over the common man, and not the nomenklatura which does just fine under a nationalization.

[Arrian]

If the bank is worth nothing (insolvent) your share is worth nothing. The end.

-Arrian

[Darius871]

When does that happen?

There's no bright-line rule, just discretionary non-dispositive factors:

Factors for courts to consider
Absence or inaccuracy of corporate records;
Concealment or misrepresentation of members;
Failure to maintain arm's length relationships with related entities;
Failure to observe corporate formalities in terms of behavior and documentation;
Failure to pay dividends;
Intermingling of assets of the corporation and of the shareholder;
Manipulation of assets or liabilities to concentrate the assets or liabilities;
Non-functioning corporate officers and/or directors;
Other factors the court finds relevant;
Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances);
Siphoning of corporate funds by the dominant shareholder(s);
Treatment by an individual of the assets of corporation as his/her own;
Was the corporation being used as a "façade" for dominant shareholder(s) personal dealings; Alter Ego Theory;
It is important to note that not all of these factors need to be met in order for the court to pierce the corporate veil. Further, some courts might find that one factor is so compelling in a particular case that it will find the shareholders personally liable.

http://en.wikipedia.org/wiki/Piercin...corporate_veil

[Agathon]

They're afraid of nationalization, so they're trying to come up with all sorts of convoluted ways to impose restrictions short of nationalization. Ultimately, they're going to need to nationalize or hand out free cash to the banks anyway. I'm really hoping they don't opt for the latter.

It's a fire sale.

They really have no idea what they are doing, but if they admitted that, then we'd be in even worse shape.

Our society is nuts, and has been for a long time. At least we still have enough to eat.

[Darius871]

The latter. He's a communist.

I know that, but he's at least purporting the goal of making tort victims whole, not destroying the system. Besides, I thought most honest Marxists would recognize that capitalism must reach its overproduction peak and collapse before successful revolution can occur, which would speak in favor of capital accumulation in our time.

[Ben Kenobi]

Fine, then let them fail.

If they are insolvent and cannot be saved, why are they being nationalized?

Besides, I thought most honest Marxists would recognize that capitalism must reach its overproduction peak and collapse before successful revolution can occur, which would speak in favor of capital accumulation in our time.

Not if the revolution is here.

[Darius871]

If the bank is worth nothing (insolvent) your share is worth nothing. The end.

-Arrian

Seriously, isn't it just that simple? If you're nationalized, it means you're insolvent. If you're insolvent, then without nationalization you'd go bankrupt anyway. Ergo, EITHER WAY YOUR SHARE IS WORTHLESS. WITH OR WITHOUT NATIONALIZATION. EITHER WAY. CAN YOU AT LEAST CONCEDE THAT MUCH BEN???

[Darius871]

Fine, then let them fail.

If they are insolvent and cannot be saved, why are they being nationalized?

IF THEY'RE INSOLVENT AND THEREFORE WOULD FAIL WITHOUT NATIONALIZATION ANYWAY, THEN WHY COMPENSATE IN THE EVENT OF NATIONALIZATION? THE SHARES WOULD HAVE BEEN WORTHLESS ANYWAY! REGARDLESS OF WHETHER THERE'S NATIONALIZATION OR NOT! DON'T YOU SEE THAT?

[Arrian]

Fine, then let them fail.

If they are insolvent and cannot be saved, why are they being nationalized?
here.

See: "too big to fail."

Which, of course, is too big to exist. So not only should they be nationalized temporarily, they should be broken up when they are re-privatized.

-Arrian

[Darius871]

There are voting and non-voting shares. Non-voting shares have no control whatsoever.

That totally depends on the unique charter and bylaws of each individual corporation. Though it's legally allowed to have some "non-voting" stock, it's extremely rare in practice for the obvious reason that few people would buy it. So rare as to be a red herring in fact.

Not if the government takes over the business. I completely understand the problem with risk. If the business goes bankrupt then I lose the value of the share. If the government wants to take over the business, then they have to compensate me for the value of my property. They just can't take it.

BS. First of all, any intelligent investor should have enough sense of systemic risk and history to know that temporary nationalization of at least some banks is a very real possibility in the event of severe financial crisis. Secondly, since only insolvent banks would be nationalized, and since insolvent banks would otherwise have to go bankrupt, the nationalization would only be in lieu of bankruptcy, meaning you lose nothing! That much should be obvious. If the bank's insolvent, your choices are either A) bankruptcy or B) nationalization, but in either case shareholders get hosed. I don't think anybody here is suggesting that solvent banks should be nationalized.

So what you are saying is anyone who owns shares in any bank that has TARP funds should immediately sell to avoid the risk of nationalisation? Oh, that's really helpful. I'm sure that's what the government wants, to have struggling banks go completely broke.

I didn't say that, you did. I said that those who retain shares despite a policy they oppose are as responsible for their own losses as those who supported said policy. That doesn't mean "OMG SELL EVERYTHING NOW!!!1" but rather the past tense "you should have sold off in an orderly and gradual fashion years ago when the writing was on the wall, but you didn't, so here's the result."

or at least have the choice of selling before the government takes over.

A) Aren't you the one who just said a selloff panic should be avoided? B) Who would be stupid enough to buy shares that are 100% sure to be torched?

[Arrian]

Darius, I'm with you man. You may want to add bold to the block caps for your next stating of the blatantly obvious...

-Arrian