WHAT WILL CHUCKIE SAY?

I'm a bit surprised at the so far muted reaction to the latest plan being floated by Our Hero and The Leader regarding compensation at financial institutions. Seemingly not content with cutting the pay checks for the good folks who work at TARP aided institutions, the latest idea seems to be to in some way control compensation at ALL financial institutions or at least those which could pose a systemic threat (to be defined) whether in the TARP program or not. The scope of this idea, to use one of the New York Time's favorite words. is breathtaking. Maybe that's why the response has been so muted; no one has the breath to say, "SAY WHAT!!!!" You have to give these guys credit; they don't think little thoughts. Of course it is hardly a stretch to go from systemic (to be defined) financial institutions to systemic (to be defined) energy companies, to systemic (to be defined) software companies, to systemic...the list could be endless...and "to be defined." Apparently, as the theory goes, the compensation plans at financial institutions are set up to encourage individuals to take outrageous risks in long term bets where the true outcome is not known until many years after the compensation is paid out. In as much as neither Geitner or Obama ever worked in the private sector (or had a real job as some lesser admirers might say), they must be getting some really good guidance--perhaps from Rahm Emmanuel who worked for Bruce Wasserstein for about 15 minutes and was paid $18 million--but that was catty I suppose.

Now I have a buddy who is still in the business who couldn't be a bigger Obama fan. I am told he donated beaucoup bucks to see The Leader become The Leader. I called him yesterday to get his take (or spin) on the proposal

Me: So, waddaya think? (he's in New York)
Stu: "Communist bastard!"
Me: Come on, it's just another regulatory approach.
Stu: "Nobody signed on for this crap!"
Me: Yeah you did, he told you about wealth distribution. Elections count
Stu...(I'm not sure what the sputter was supposed to convey)
Me: Why don't you talk to Chuck?
Stu: I'll call you back

He hasn't called back yet so maybe he hasn't reached Chuck, but Stu and the Senator are pretty tight...at least as tight as about 500 LARGE gets you to be over the years. So I wonder what Chuckie will say having used the money of people in the business like my friend Stu to get a lot of Democrats elected over the years. Money, the mother's milk of politics. In Stu's case, momma may just have left town.

Moving right along, there was a most interesting duet of op eds in the Times today. Prof Roubini of NYU, he who saw last year his 25 year prediction come true, and V. Z Gao an exec. dir. of the Beijing Private Equity Asso. chatting about the dollar vs. renminbi and role of a reserve currency. Prof Roubini is precisely correct in asserting that it wouldn't be all that of a good thing if the dollar were to lose that role in the world, but totally fuzzy as to how to stop the slide "We must shift our priorities...investing in our crumbling infrastructure, alternative and renewable resources...rather than unnecessary housing and toxic financial innovation. This is the only way to slow down the decline of the dollar and sustain our influence in global affairs." The fact of projected deficits of 11 trillion dollars over the next few year appears to be of little importance.

Mr. Gao, on the other hand says the following: "The United States may want to consider offering inflation-protection measures for China's existing investments in America, and offer additional security or collateral for it's continued investments."..."We still call the dollar gold, but the United States should not assume that this will never change."

Readers of this space will remember that on two occasions we predicted that this would be--PRECISELY--the Chinese position. Prof Roubini makes a number of good points in his piece--both should be must reading--but the quoted portion is crap. The apparent unchecked--and uncheckable--fiscal policies of this administration will spell disaster and it is on these that he should focus. I continue to fear the worst.