At his blog Politics Is a Blood Sport, Aneurin notices an idea put forth by locally well known Camas investor David Nierenberg, whose investing skills are frequently covered by Motley Fool, which last month referred to him as a “master small cap investor.” Aneurin excerpts comments Nierenberg made to The Oregonian in a Sept. 23 article:
David Nierenberg, a Camas, Wash., investor, went further, calling for “clawbacks” that would allow the government to recover compensation paid to former executives and directors who were in charge when companies moved into subprime mortgages and other high-risk securities that put them in harm’s way.
“It’s harsh, it’s blunt, it’s bloody,” Nierenberg said. “But that’s the way it should be.”
Nierenberg also urged the government to take equity positions in the companies receiving federal aid, as it did when it bailed out Chrysler in 1979. The government ended up making money on its investment in Chrysler.
“If the government is going to put all this money of ours at risk, it should get equity, warrants and options to get repaid first,” he said.
Aneurin goes on to write:
The notion of “clawbacks”, where CEO’s give up their golden parachutes, is exactly what’s needed to sway detractors of the bailout plan. No one wants to hear about CEOs making $20 million for 17 days worth of work. In order to sell this thing politically, taxpayers need to know that they’re not the only ones taking it in the shorts.
What doesn’t seem to be happening with the bailout is serious consultation with business and economic realists. While Nierenberg was a supporter of Mitt Romney and now John McCain, and once worked for Romney, Nierenberg is quite the heavy hitter in state political circles, contributing large sums to candidates and committees of both parties. He also serves on the Governor’s Economic Council and the Washington State Investment Board.
So if a tough-as-nails, realistic capitalist like Nierenberg thinks “clawbacks” are a good idea, then why isn’t that part of the discussion? The people know they’re getting ripped off big-time, and there’s no reason that executives who ran companies aground should escape with millions of golden parachute dollars.
Full Disclosure: I volunteered on a campaign committee headed by Nierenberg called Evergreen Citizens for Schools from about 1998 or to about 2001, so I know him. I haven’t had the pleasure of speaking with him for about a year, so the point is he’s not pushing his “clawback” idea with me. I just thought it was an interesting idea.