Financial sector compensation
2 November
As the Financial Crisis Inquiry Commission cranks up and begins to look at substantive issues, you can expect me to begin commenting more frequently on financial policy issues. I expect that my thinking will evolve as I learn more over fourteen months in the Commission’s lifetime, so please don’t be surprised when you see that reflected in my posts. I may also test out some positions and ask for suggestions as I do below.
Senate Majority Leader Reid’s floor speech last Monday attracted my attention. Titled “Wall Street Narrowmindedness,” it is a broadside attack on the financial sector from the fourth most powerful person in Washington (Bernanke is #2.)
It is tempting to dismiss Leader Reid’s remarks as opportunistic demagoguery, but they forced me to think harder about my views on this important topic. I will follow each of his views with my comments. I am paraphrasing his arguments except where I use quotation marks.
Sen. Reid (paraphrased): People on Wall Street were and still are greedy.
Yes, many of them act that way. That shouldn’t surprise anyone. Our system assumes people will work in their own self-interest, on Wall Street and throughout the country. If doing so results in bad outcomes, then it’s the rules that are messed up, not people’s behavior. Any policy based on the presumption that people will say, “No, stop, you’re paying me too much” is naive and won’t work. Policies need to assume that in compensation decisions most people will generally act as if they are greedy, and channel those base instincts toward an ultimate good. That’s the whole invisible hand thing.
Sen. Reid: They are still paying themselves enormous compensation packages, but now in part with taxpayer dollars.
This is the hard one for me because it gets into multiple and conflicting roles of government. As a general rule I believe government should stay out of compensation negotiations between labor and management. I hate getting the government involved in anyone’s compensation, but there are conflicting policy goals when taxpayer funds are involved. There are countless examples of the government appropriately imposing restrictions on firms when it acts as a purchaser using taxpayer funds rather than as an impartial rule maker. The USG now acts as an investor in TARP banks, Fannie, Freddie, and AIG, and it seems reasonable for an investor to place requirements on the firms in which it invests. The same logic would apply to GM and Chrysler. Those requirements can, in my view, include reasonable compensation limits. This is easier when those investments are supposed to be temporary.
But this view leads me to two problems:
- an unwinding problem: Some (probably on the left) may be tempted to leave the taxpayer funds in the firm so they can continue the limitations. If we have to invest, as I believe we did with TARP, I want both the investments and the rules to be temporary, and to set up a system where the firms are encouraged to repay the taxpayer and remove the restrictions as quickly as possible. This is what we tried to do with TARP.
- two slippery slope problems: By crossing the line and saying I’m OK with compensation limits in this case, I have to differentiate it from other cases where some on the left will argue for compensation limits. Sen. Rockefeller, for instance, tried to limit the compensation of health insurers in a Finance Committee markup. In addition, I don’t think the government should be telling these firms how and to whom they should lend, but the line quickly gets fuzzy.
Sen. Reid: The structure of their compensation packages is encouraging them to jeopardize the financial system – “to swing for the fences and make deals that put their entire firms and the larger system at risk.”
This is the “excessive risk” argument, which I don’t feel I understand well enough. Some people argue that certain derivatives and trading contributes little economic value and therefore “should not” be rewarded. My instinct is that this is a decision for the firm’s managers – if they want to reward their employees for something that is non-economic, that’s their mistake to make. If instead this non-economic behavior is benefiting the firm owners and employees only by shifting risk to the taxpayer, then I want to know what policies allow or create incentives for this behavior, and then look at fixing those rules, instead of coming in on the back end and clumsily limiting compensation.
I wish someone could show me a specific compensation package which leads to firm-jeopardizing and system-jeopardizing behavior. And I don’t understand how the government should define “excessive.” I could use some help here if anyone has it.
Sen. Reid: Financial sector employees “should not” get compensation so much larger than that of an average American worker, especially when the economy is weak.
This is just scary. With “financial sector employees” he’s talking about an entire industry. Senator Reid is saying Washington should determine relative compensation levels among industries. I don’t think John Travolta should have been paid $10M for his role in “Battlefield Earth: A Saga of the Year 3000,” the same year the .com bubble was bursting, but I also don’t think it’s Washington’s role to make that call.
Sen. Reid: “We must put an end to the recklessness that got us into this mess.”
I agree in theory, but am concerned that his definition of “recklessness” is too broad. If it incorporates all the previous concepts, including generalized greed and his notion that government should set relative compensation levels, then I’m not onboard. If “recklessness” is only excess compensation that encourages system-jeopardizing risk-taking, then I’m open to a discussion if those concepts can be precisely defined.
Sen. Reid: He supports Treasury’s rules to limit compensation for TARP recipients. He also supports the Fed’s announcement that “it will rein in banks that reward the riskiest practices—gambles that endanger all of us.”
I have covered these above. I am uncomfortable but can live with compensation limits for TARP recipients. I need to study how the Fed proposes to “rein in banks that reward the riskiest practices.” I am open to the concept subject to understanding and being comfortable with the details, but I hope there’s a way we can do it other than through compensation limits.
Sen. Reid: In upcoming legislation, “We will make sure banks are compensating their employees in a prudent way. That means firms won’t be able to throw cash at a trader who closes a big, risky deal—one that puts the whole bank at risk and that threatens taxpayers and the greater financial system as well.”
It’s interesting that he says banks here, rather than “Wall Street” more generally. What is the policy interest in how a small non-TARP Midwestern community bank pays its CEO? Or would Sen. Reid’s limits apply only to large banks with trading desks that pose risks to the financial system, as suggested by his second sentence? And is he concerned with compensation of all bank employees, or only of big traders?
Sen. Reid: Wall Street “has to take responsibility for its own actions also.” “So these firms—whether or not they owe the government for their survival—should be careful about what their actions say about them because the American people are listening closely.”
This is a bald-faced threat to all of Wall Street: “whether or not they owe the government for their survival—should be careful” to “be careful about what their actions say about them.” This kind of vague but direct threat is highly inappropriate for a leading policymaker.
So here’s my DRAFT position:
- Government should generally not be involved in compensation decisions.
- When government has invested billions of taxpayer dollars in a firm, it is OK for government to set limits on compensation levels to protect the taxpayer. Ideally both the investment and limits are temporary.
- If it can be shown that certain compensation structures significantly exacerbate risk to the financial system, then it is OK for government to set limits on these compensation structures, but better to consider policies directed at the risky behaviors directly. Depending on the details I may be able to live with the former, but prefer the latter if possible.
I really don’t like #2, but I cannot find a principle that makes me less uncomfortable. Striking #2 would conflict with a gut common sense that taxpayer funds should not support huge compensation packages. It may be that the conflicting goals of noninterference and taxpayer protection cannot be cleanly reconciled.
A friend makes a convincing case that accounting rules and bank practices create a mismatch in which certain employees have been and are paid for shifting risks onto the taxpayer. If he’s right, then we should try to fix those mismatches directly. That’s the concept in #3. Leaving the mismatches in place and instead changing the compensation structures is a kludge.
I invite suggestions from readers for alternative positions, especially on #2. In firms in which the taxpayer has invested billions of dollars, what should be the government’s role in compensation structures and levels? (Rants and SHOUTING about greedy b******s will be ignored or deleted. I’m looking for reasoned logic, please, not table-pounding.)
I will close with a question and caution of my own for Wall Street: Why do boards structure compensation packages that appear to reward failed firm leaders with generous exit packages? I understand that some private equity firms include clawback provisions in their compensation to address this situation. Why don’t other financial firms do this?
Excepting the recent TARP situation, most policymakers I know (other than those on the far left) are quite comfortable when successful firm leaders get high financial compensation commensurate with their contribution to the firm’s success. But when they see a headline, “Fired CEO X leaves with $Y million,” it puts these elected officials in a really tough position if they are asked a question by a reporter. Yes, I understand that much of that $Y million is deferred compensation. It doesn’t have to be deferred. And when you (corporate board members) put free market officials in an indefensible position, you make it much harder for them to defend a hands-off approach to compensation policies.
A factory worker who is fired for poor performance generally doesn’t get a huge exit package. Why does the CEO?
(photo credit: I’m not hungry – I’m just greedy by CaptPiper)
Related Posts
(best matches are listed first)- 20 questions for the Financial Crisis Inquiry Commission
- The Financial Crisis Inquiry Commission
- My opening statement at today’s Financial Crisis Inquiry Commission meeting
- The FCIC needs to analyze the failure of Fannie & Freddie
- What caused this financial mess?
- My questions for four bank CEOs tomorrow
- Address by President Bush on financial markets
- Intro to TARP — TARP II: Direct investment
ithink that the questions that you raise are valid. However, the reality is that what we are looking at is a current problem would require a timely solution. Expecting a well reasoned, rational and effective solution from the current powers that be in Washington is not rational. I truly believe that only through government gridlock will our economy be able to recover…on it own.
I appreciate your ability to take a step back and give meaningful thought to these different areas impacting economic policy.
I would encourage you to continue to go down the path of formal corporate governance, not government intervention. In the corporate world, investors get seats on the boards. Why can't the USG use corporate governance and apply best practices for compensation and risk/reward balance through board seats and corporate compensation committees?
If there are contracts in place with these CEOs which do not fit today's stakeholders, then rework the contract with the CEO. That will mean some give and take. But if the CEO is the right leader, then something should be able to get worked out. On the front end, the Company wants to take the new CEO out of the market becuase they are the best person for the role. In return, they get various forms of guaranteed compensation – usually upon some exit. On the back end, if they were the wrong CEO, then everything looks bad . . .
One tricky part of this results from the difficulty of restricting pay to TARP recipients, while leaving other financial firms alone. I suspect many of the "emormous compensation packages" Senator Reid refers to are simply the going market rate for those positions. Restricting pay only at TARP recipients leaves those firms vulnerable to poaching of their best talent by non-TARP firms, or companies outside the U.S. Therefore, the USG could end up severly limiting the prospects of the firms they have a stake in, while helping their competitors. Although paying "enormous" compensation is not a good use of taxpayer money, neither is destroying shareholder value when the shareholder is the taxpayer. I worry that Senator Reid and others realize this, and will use it to justify compensation limits across the entire industry.
Keith,
Interesting set of comments. Let me take you up on your request on number 2. My own view (as a management consultant but not a compensation one) is that it is the proper role of the board of directors to set limits on management compensation. While this brings us to a discussion about board governance, let me hold that for a different time. If you accept this, it leaves government as an owner with two options.
1. Replace the board — government could do this through proxy (as a minority shareholder as in CITI) or through direct action as a majority shareholder (as in GM). In either case, it would then be incumbent on the board to set compensation guidelines consistent with the vote of the shareholders. There are numerous precedents within public company history for this. This also, in my opinion, does not violate any principles about government action in compensation. Rather, it is the government acting as a shareholder rather than as the government using established practices for doing so and doing so in the open as any other shareholder would need to.
2. Agitate as a (large) shareholder. Government can also agitate with management as a large shareholder. CEOs are actually fairly attentive to their largest shareholders. This is also government acting in a way consistent with its share holdings. It makes me a bit more uncomfortable because government can be seen as not an equal shareholder but the proof would be in the pudding here.
Neither of these however is an over the top legislative action which I personally am uncomfortable with regardless of the size of the government's investment. A majority stake in a small company should command less rights versus a minority stake in a large one even if both are of the same size financially.
One more note on point 3 coming below
Small error in the second to last paragraph. It should say, "A majority stake in a small company should command more rights…"
Point 3 is pretty interesting to me, particularly in light of the recent actions of the "Pay Czar". His general action was to push compensation into deferred forms. This actually has an unclear impact on risk taking for reasons you can understand with an example. Let's say that you were given the choice between more cash now versus less now and more deferred. Your choice ultimately depends on what you think the future prospects of your company are. Where you are confident, you'll take deferred. It also depends on your need for cash currently. If you think you need X in cash, beyond X, you prefer deferred compensation because there is more upside.
Because a lot of this depends on individual circumstance, it's quite hard to imaging an argument that a certain compensation structure systematically encourages risk taking. At best, one might be able to argue that a structure encourages risk taking on average. You then have the question of what constitutes "unnecessary" risk taking. I must admit deep discomfort with a government determination of what constitutes necessary risk taking.
Like you Keith, I may be ignorant, but it is hard for me to imagine a compensation structure at a particular Firm or multiple Firms that consistently increases the chance of systemic risk that does not also increase the chance of systemic innovation and improvement. You'll need someone who does comp as a living to comment, but my sense is that risk taking is a two-edged sword.
Honestly, I'd rather simply get rid of the moral hazard problem created by bailouts and leave compensation alone but I'm sure that's not acceptable in the current political climate.
Last thought Keith on your questions. I would guess it's a combination of supply and demand and group think. I rather imagine the market for CEOs is a bit like the market for professional athletes. Let's say we are deciding how much money to pay Tom Brady or Peyton Manning. How do we decide? We tend to look at comparable contracts except that there are relatively few comparables. Of course, Tom and Peyton's agents are looking at the same comparables and reaching the same conclusions about what's "fair".
Most boards are not risk taking by nature in picking a CEO. They tend to favor the "tried and true". The reason is you don't get in trouble for picking the tried and true. Maybe this will change but it would require the company to take what is seen as a bigger risk. A board could get a lower priced CEO if it were willing to not look to the CEO equivalent of Brady or Manning(Peyton that is). But then the board would have to take the risk of being obviously wrong and at fault for making the wrong choice. They don't really have much incentive to do that.
Said differently, the CEO gets a payout on retirement usually as a consequence of a contract negotiated up front. That contract is benchmarked to others in a very thin market (meaning pricing is pretty volatile with a lot of upward pressure). To me that accounts for most of the difference, although not all. Trouble is, changing any of that, in a world where boards have governance authority on pay is pretty challenging unless there is a real market reset.
"Why do boards structure compensation packages that appear to reward failed firm leaders with generous exit packages? "
One reason is that firms use golden parachutes as a Merger & Acquisition defense strategy. It raises the cost of a merger for the firm that wants to do the acquiring. Of course from the shareholders perspective this is a double edged sword. Giving the CEO a golden parachute is like giving him a powerful weapon. If he's an effective CEO and works in the shareholders interests you would want to keep him in there, and make sure any firm looking at doing a M&A is serious and willing to play ball. But if the CEO doesn't work in the interests of shareholders a golden parachute makes him more entrenched and more expensive to throw out.
Here's the issue that makes financial sector compensation so tricky — from Wikipedia:
"The notion that banks privatize profits and socialize losses dates at least to the 19th century, as in this 1834 quote of Andrew Jackson:
I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out."
—Andrew Jackson, 1834, on closing the Second Bank of the United States; From the original minutes of the Philadelphia committee of citizens sent to meet with President Jackson, February 1834, according to Stan V. Henkels, Andrew Jackson and the Bank of the United States, 1928
When regulators and legislators permitted excessive leverage to build up in the system, they essentially let Wall Street make huge profits from bets that had a "heads I win, tails the taxpayer loses" structure. Huge pay packages were made on Wall Street from trades that were so risky in aggregate that they eventually threatened to bring down the system. The result is that taxpayers around the country have been forced to pony up $700 billion of TARP money that by all rights should be clawed back from the risk takers. But of course that is never going to happen, so John Q. Public now feels the same way about the financial sector that Andrew Jackson felt about the "den of vipers and thieves" of his day.
One possible implication is that money and credit may be too important to be left to the bankers under a free market system, and that instead the financial sector should be a boring, regulated utility. Other quite successful countries have taken this approach. For some very interesting perspective on this topic from a former Australian Treasury official check out the following two blog posts:
http://brontecapital.blogspot.com/2009/03/watch-t...
http://brontecapital.blogspot.com/2009/03/case-fo...
Here are some observations from the first of those posts about how a "regulated utility" approach to the financial sector would work:
"And – as a backstop there should be regulation – and the regulation should be stiffling. It should limit competition and increase bank profitability. Captured by the interests of shareholders (but maybe not management) is not a bad place for the regulator to be.
In the end I want this to look like a regulated utility. Highly profitable and dull as dishwater. The salaries should also look like a regulated utility (above average – but nothing special)."
Mr. Hennessey,
You're hands-down the best mainstream conservative commentator on the economy, and I wish your views were exoteric as I think it would greatly benefit the voting public.
I have not read a convincing case, or been given a convincing reason, for TARP. Why was it necessary to prop-up these bunglers? The slippery-slope argument for TARP seems to rest on inductive reasoning which could not be proved. If you, or anyone other commenters, could cite a source as to why TARP was necessary, particularly without strings that would prevent a future bailout being attached, I'd be delighted to read it.
As far as #2 is concerned, as a hardcore liberal and I hope a fairly level-headed and rational person, I don't think there's any way around that position, because as you noted, the funding mechanism was democratized, and public money should never enrich private interests unless it can be rationally justified.
PMA,
I think your last paragraph isn't an argument about compensation, it's a restatement of your first point, that government should not invest in private companies. I personally agree. From my perspective, once government makes the investment, it has enriched private interests regardless of what it might subsequently do on compensation. My point is that if you take an absolutist perspective on public money not enriching private interests, you have not choice but to not make the investment in the first place.
By the way, if that is your point, there's a whole host of other things government should not do, starting with subsidies of various sorts (farm bills as an example) and including tax breaks to companies for setting up shop in one place or another. Unfortunately a substantial portion of what government does will in fact enrich private interests and, depending on how far one wants to go on private interests, you could even lump transfer payments under that heading.
Keith:
I think the problems here are twofold, without considering the principle involved in government intervention in salary determination.
1) Like David Scatino found out when he suddenly had Anthony Soprano as a partner, some partners do not have the best interests of the shareholders at heart. If the US government is primarily interested in preservation of shareholder value, employee retention would be a primary interest. Goldman Sachs has poached a significant amount of talent from competitors because they of the compensation issues at BAC, C, and AIG. However, the U.S. government has other broader policy goals that are, in some ways, contrary to the interests of other shareholders. One can't expect the government to behave as a rational actor as a shareholder or equity partner.
2) The current administration is undertaking some ambitious policy goals that require the taxes that these people pay. The people with the largest incomes also have the greatest discretion in realizing that income. Our progressive tax system is such that limiting pay on even a small segment of the very rich will have a disproportionate impact on taxes received.
"I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank."
No to be a smart ass but isn't that how it's suppose to work? Banks take highly liquid low risk assets, and loan them out thereby converting them into non-liquid high risk assets. They take the difference between the interest they pay depositors and the interest they receive from debtors as profits. If they realize a net gain they distribute it to the shareholders, but; if they incur a net loss they write it off against bank capital.
In fact every corporation ultimately splits the profits among shareholders if they "win" [make money], and charges losses to the corporation [writes losses off against capital] if they "lose". That's how you run a business.
I agree. Andrew Jackson was generally a mediocre capitalist who kept his personal wealth maintained using slave labor. Though he probably had better personal qualificatiions to make economic judgements than some of thos ein Congress today.
Forgive me if I am wrong here, but Mike I believe you are missing the point. The "Bank" that Andrew Jackson refers to in the quotation is not just any privately-owned bank. He is referring to is the Second National Bank of the United States, which held the federal government's revenues in deposit. What President Jackson is arguing is that when there were profits or gains, the shareholders and the executives divided these gains among themselves. When there were losses, they would be "charged to the Bank"–they wrote off losses against bank capital as you say, but this bank capital consisted of, among other things, federal government revenues that were in deposit in the bank (i.e. TAXPAYER money).
The problem is not "charging losses to the corporation" ("privatized" losses), which as you point out is part of how the market system works with its ups and downs. The problem is when banks charge losses to the American taxpayer ("socialized" losses, a.k.a. a "bailout"). In this case there is no downside risk to the corporation–the downside risk is taken on entirely by taxpayers–and this massively distorts the incentives in place which are supposed to lead to sound risk management.
Think about it this way. You are considering investing $1000 in an extremely risky project. The potential returns are enormous, and you stand to gain a lot of money if the project succeeds, but probability that the project will fail is also very high. You don't want to lose your $1000, and you aren't feeling lucky (as economists would say you are "risk-averse") so you decide not to make the investment. This is sound risk management–projects like this probably should not go forward.
However, consider the same situation in which you knew any losses on the project would be "socialized," i.e. the government would step in and spend taxpayer money so that investors don't lose everything they invested in the company. The threat of losing your $1000 has been entirely eliminated–the cost of any losses the project incurs will be spread out among a number of taxpayers rather than being concentrated on the investors who funded the project. You still only have a small chance of "winning" (making a lot of money when the project succeeds), but no chance of "losing" (losing your investment when the project fails). Who wouldn't want to take this bet? It's all upside and no downside! The problem of course is that this leads to extremely distorted incentives in the market. Investors put their money behind lots of ill-conceived projects that end up failing and it is the taxpayers, not the investors, who pick up the tab. This is a big waste of money and extremely inefficient!
You correctly identify the problem, Mr. Hennessey, that there is no way to reconcile your discomforts from your Question Number 2 above. You are uncomfortable with the government setting compensation limits because you believe in the principle of freedom of contract in a free market system–people should be free to expend their resources and enter into economic relationships as they wish. But you are also uncomfortable with the government not working to prevent taxpayer money from being transferred to an already wealthy executive because you would believe that would violate the principle of protection of private property–in this case, this would be akin to government-enforced theft!
The problem cannot be resolved because (as PMA points out above) the government should not have waded into the private sector in the first place. In this case especially, government intervention creates so many distorted incentives, creates too many obligations to meddle where they shouldn't be meddling, and really just screws up the proper relationship between government and the private sector.
I'm not trying to put words in your mouth because I'm just guessing here, but I bet ultimately your real discomfort resides in the government getting involved in something you believe it had no business in.
Vincent Reinhart of the American Enterprise Institute has a not to dissimilar line of thinking when he says:
"Our fundamental problem is not that institutions deemed too big to fail do not get sufficient scrutiny. Our problem is that some institutions are deemed too big to fail."
http://www.american.com/archive/2009/october/the-...
Keith –
First, I wish you and the Financial Crisis Inquiry Commission well in taking on this task. Our entire economy requires an effective and efficient financial services industry to continue to allow capital to move to the right enterprise. I am concerned that we are letting this crisis pass without thoughtful reform. Key is to make sure it’s thoughtful…
Here are some points to consider:
1. There will always be greed as it’s simply human nature. Let’s not allow anyone to believe that the FCIC can change human nature.
2. The issue that you should focus on involves whether or not and to what degree should the USG control financial services firms, especially by managing overall compensation.
3. But if you are willing to consider direct control, I think that you are not complete in your assessment of USG support. Clearly TARP funds are direct investments. But the USG provides significant benefits to financial services firms (especially commercial banks) that should also be included in “taxpayer support”. If you let the camel’s nose under the tent for TARP funds, why not for anyone who can borrow from the Fed or who has FDIC support?
4. No where do I see the discussion about mortgages and our USG policy around everyone owning a house. The USG has for too long put too much focus on home ownership and Fannie/Freddie got carried away – especially with their “special” status. The FCIC must address how to get the USG out of home mortgage market. While we can’t prevent every bubble, why not at least try and prevent families from being duped into gambling on housing?
Keith,
I'm an equity analyst that has followed the financial industry since the end of last systemic crisis (in 1992), andspent the middle part of this decade at a hedge fund that also had a large structured finance business, so you could say I've had a front row seat as much of the current problems have developed and come to fruition, if that's the right term.
Anyway, with your second principle, I think you are falling victim to the evidently common fallacy that market-based compensation above some level arbitrarily deemed "excessive" is contrary to the interests of shareholders (or other non-equity investors). In fact, artificially limiting comp in a free and reasonably efficient labor market is likely to penalize investors, by ensuring that their senior executive staff is adversely selected. Indeed, this is just what is happening – already one quarter of the execs under Feinberg's purview have left their firms for new positions not subject to government comp controls.
It is one thing to advocate that firms take steps – such as clawback clauses – to help ensure they get value for their compensation dollar. It is quite another to artificially limit comp levels. The former creates shareholder value, while the former destroys it.
you say "if they want to reward their employees for something that is non-economic, that’s their mistake to make. " That stopped being true the day George Bush bailed out these banks and declared they were 'too big too fail'. They are now wards of the state. Until they are broken up in such a way that it is convincingly demonstrated to all parties that they are no longer 'too big to fail' , 'too interconnected to fail', 'too important to fail', or 'too generous a campaign contributor to fail', their business decisions are the business of the state. We, the taxpayers are on the hook for all of their bad decisions now, so we, the taxpayers, have the right to regulate closely any business decision they engage in.
When these 'too big to fail' institutions have been broken up, when ALL of the MANY guarantees and backstops have been withdrawn, THEN they are welcome to engage in business with the rights of private companies again.