« Previous | Main Page | Next »

The recrimination wave is breaking right where it should be given the financial realms bear market leadership. The Congressional hearings like these are the kind of things we were talking about last year when we put out our warning to corporate America.  This will probably be a large-scale version of what happened in 2002 when Enron and various bull market accounting standards become the focal point of Congressional investigations. At that time, EWFF stated that one of the best ways to “keep a tally on the size” of the bear market was “keep an eye on Congress and other venues of recrimination.” Ultimately, the decline into 2002 produced legislative changes like Sarbanes-Oxely, which is now the bane of chief financial officers everywhere. This a stronger signal as it comes just six months from the Dow’s all-time high, and, Congress is getting right to the heart of the matter by hauling in the CEOs who were ran the show as the largest brokerage firm, bank and mortgage originator toward the end of the greatest financial euphoria of all time. Was it really only yesterday that getting rich and being a powerful man of finance was a good thing? Far more hearings will no doubt and, ultimately, dramatic new restrictions and regulations will be enacted.

The story quotes an August study from The Institute for Policy Studies and United for a Fair Economy that shows “over the past decade, the growth in executive compensation has drastically outpaced the pay gains experienced by the average American worker. Between 1996 and 2006, CEO pay rose 45%, at a time when the average pay for an American worker grew just 7%.”  Of course, there’s nothing new here. In January 2007, EWFF showed a chart that shows the ratio of CEO to the average worker has actually been growing since 1971. As EWFF noted at that time, “Even though these ratios have been climbing almost every year for this entire span, the issue is now being described as ‘unfair, unjustifiable and harmful.’ Why? Because the focus of social psychology is shifting from the harmony of the bull market years to a bear market focus on conflict.”