Nominate Elizabeth Warren – Provide The Pecora Hearings We Need

By Simon Johnson

Ms. Warren is helping get the new Consumer Financial Protection Bureau (CFPB) off the ground and remains the leading contender to become its formal head (subject to Senate confirmation).  She summarizes her substantive agenda this way,

We’re trying to make these markets transparent, which makes it easier for community banks to compete both with large financial institutions and with their nonbank competitors.”

She should now be nominated to the CFPB position.  There will be strong Republican opposition and some Democrats who are close to the financial sector may be lukewarm.  But a public hearing on her case represents our best opportunity to experience a modern version of the Pecora Hearings – the Senate Banking Committee hearings in the 1930s that laid bare the inner (and rotten) workings of the biggest financial firms (see Michael Perino’s book on Pecora for details).

These hearings would represent a major step forward towards forging a new consensus regarding how to really establish markets (as opposed to the crazy government subsidy schemes that predominate).  In addition, the administration would win a big victory with Ms. Warren’s confirmation.

Elizabeth Warren has worked long and hard to build a working relationship with reasonable people in the banking community.  These investments now seem to be paying off, with the president of the American Banker Association saying this week that his organization would support Professor Warren if she is nominated (although he later backtracked and said he meant they would be supportive “if she is appointed”).  Community bankers have already expressed support in various ways.

Her arguments are very hard for Republicans on the Senate Banking Committee or more intransigent bankers to refute in any kind of public setting – because there is very little of the “market” in our currently predominant banking sector arrangements.

A proper Senate confirmation hearing would be the perfect platform for Ms. Warren to explain, (a) not only do “too big to fail” banks now constitute and hugely dangerous government subsidy scheme, but (b) based on these subsidies, they are becoming larger and acquiring more market power that can be – and has been – used to abuse consumers in a nontransparent fashion.

All attempts so far to construct some form of Pecora Hearings have failed – partly because the issues are complex and partly because of partisan fighting.  The Financial Crisis Inquiry Commission made some progress but could reach no consensus (or bring anyone to justice).  Senator Levin’s hearings into Goldman Sachs grabbed attention and were most helpful in the Dodd-Frank reform debate but again no one is going to jail – and few people even grasp what were the real issues at stake.  And the Department of Justice has preferred to pursue insider trading cases, perhaps taking the view that these are easier to explain to juries.

But Elizabeth Warren cuts through the complexity and offers a message that – outside of Washington – plays well across the political spectrum.

Her message is simple: the consumer “market” for financial products does not operate like a proper market because leading firms (bigger banks and also nonbanks, like some payday lenders) have figured out how to make a great deal of money by confusing their customers.

Of course, there are many honest players – mostly in credit unions and smaller banks.  But when the playing field has been unfairly tilted towards cheating, honest bank executives struggle to stay in business (or to keep their jobs).

If someone attempted to sell boxed cereal in the same fashion that many financial products are now sold, that person would be drummed out of the cereal business.  The norms of that sector (and many other nonfinancial sectors in the United States) would not stand for this degree of deception and malpractice.

Some parts of financial services have moved too far towards become unscrupulous and abusing customers.  This is bad for the people who are mistreated, it’s bad for the economy, and it’s bad for all honest people in the financial sector.

Elizabeth Warren is offering to allow proper markets to work again within at least part of finance.  She has convinced many community bankers that her intentions are sincere and that her principles-based approach can work.

It’s time for the president to stand up to abusive financial practices facilitated by cynical and nontransparent subsidies. 

If nominated, Elizabeth Warren’s confirmation hearing would become a defining moment for thinking about finance in America. 

And reform would win.  All the missed opportunities, botched bailouts, and kowtowing to megabanks would fade into the background.  Every attempt at change must face many setbacks – and financial reform has really struggled to have any impact.

But at the end of the day, if Elizabeth Warren wins, we all win.

44 thoughts on “Nominate Elizabeth Warren – Provide The Pecora Hearings We Need”

  1. It seems that there should be a great deal of anger over both the origins and causes of the crises, and the failure of our government, the president in particular, to adequately address these. The reluctance to prosecute, or otherwise hold accountable those responsible, even if it were just by public shaming is an indication that Washington has been captured by the oligarchs.
    For anyone who is not angry over this, I suggest you listen to the recent NPR Fresh Air interview with the guys from ProPublica who won the Pulitzer for their reporting on these issues, specifically Magnetar. Start there, then read their articles.
    How is it that these bankers have not yet been tarred and feathered? Are we all that complacent and uninformed? Why do we put up with right-wing BS about Fannie, Freddie, and Barney being the root cause of all this?

  2. I’m not sure that this author even knows what a confirmation hearing is these days. It’s mostly a chance for Senators to bloviate in front of the cameras not make arguments. Then there’s the possibility that the GOP won’t even ALLOW a hearing (yes they can do this). Then AFTER the hearing, she could be waiting MONTHS and MONTHS before a nomination vote in the Senate (if she even gets one).

    So please explain to me, given all of this, HOW will there be a “pecora hearing”? I think this writing shows pure fantasy.

  3. Following SEAL Team 6 delivery in Pakistan, Pres Obama’s polling was 57% approval rating on his job performance. He could have killed a dozen Bin Laden types, a youtube video showing the President walking on water as did Jesus was said to have done in the bible, and Pres Obama conceding every political opportunity to the GOP, the Birthers would still be requesting forensics on Obama’s long-form birth certificate for authenticity. With Bin Laden now dead, Chief Deputy al-Zawahiri moves up as CEO terrorist-in-chief, others making their career moves inside the network; there could still be a ground floor opportunity for some enterprising American who can’t seem to find a job here in the states, get a new lease on life in Abbottabad.

  4. “But at the end of the day, if Elizabeth Warren wins, we all win.”

    No. Here is a partial list of people who lose big time if Elizabeth Warren wins:

    *Executives at the TBTF financial institutions.
    *Barak Obama’s campaign finance team.
    *Every Senator or Congressman who relies substantially on contributions from Wall Street–which includes almost everyone on the salient committees in Congress, and lots of the rest.

    It will never happen. Simon, you write as if the US were still a democracy and still based its economy on honest business practices. It is time to acknowledge that we now live in viciously corrupt kleptocracy where integrity and justice are quaint relics of a by-gone era.

  5. No problem with Liz but still confused to why Simon insists on lying in every single post: Johnson’s lie of the day, ” Of course, there are many honest players – mostly in credit unions and smaller banks”

    Simon has never worked in a bank because he never would qualify for an interview but i work in a large bank and everyone around me is very honest. So in short, Simon is a liar.

  6. @Rich S, you would need to tar and feather 4mm greedy americans who wanted to ‘live the dream’ by levering up, borrowing beyond their means and aggressively buying homes. Drug abuser and Drug dealer need to go to jail together. Is there room in jail for 4m americans who borrowed beyond their means?

  9. “i work in a large bank and everyone around me is very honest. So in short, Simon is a liar.”

    The words “epic logic fail” just about cover this nonsense.

    The facts are perfectly clear: the big banks and finance houses have been swindling their customers by acting both as brokers and competitors for the same transactions. This is true on the stock market, in currency trading, and in the mortgage market. Basically they’ve fleeced America, managed to screw up the biggest con in history, and been bailed out by our deluded politicians, without anything like adequate safeguards, re-regulation, or even trials for the fraudulent. It’s time we began dealing with these people the Chinese way: corruption and fraud get a bullet in the back of the head. No comfy cells, no nice little retirement funds. Game over, and a lot more incentive for the new bankers to be honest.

  12. Good question, Tippy, and I admire your focus on the facts…

    Didja catch the news ditty about the *honest* Duetsche Bank’s role in dancing with the bad bad people wanting to own a home in USA?

    Funny how the subprimers never had anything to lose and how the ones who had equity with their homes – nurses, teachers, cops, etc. – are the ones in the bin for the next round of foreclosures this summer (red alert red alert time)

    subprimers are LONG gone…

    hmmmm, and who were the bad bad mortgage holders in the Savings and Loan story?

    Men of Good Will don’t tell USA citizens that they don’t *deserve* to own a home while sucking up with a hose from the middle class trillions to build and maintain a mercenary force to protect a whole other country that *deserves* to exist…

    they deserve it – and we don’t

    And that’s according to the Prez…

    So one naturally asks, what’s so *special* about them…?

  14. Think about this: The Levin-Coburn report comes from the United States Senate PERMANENT SUBCOMMITTEE ON INVESTIGATIONS, Committee on Homeland Security and Governmental Affairs.

    The threat the “banks” described in these reports pose to the U.S. and world economies is real. The wreckage arising from the criminal activity in which these newly minted government-sponsored entities engaged, are HOMELAND SECURITY issues. These GSEs are a clear and present danger. These institutions literally are responsible for trillions of $$ of destruction of economies, families, and communities. They are re-loading to visit this mayhem — i.e., needless and willful damage — upon the world once again.

    So, tippygolden press, we — citizens and taxpayers — are not dealing with subsidies per se in funding these institutions, and backstopping their reckless behavior. We have created bloated wards of the state, who, somehow or another, are now dictating terms to the people responsible for their very continuance. How did that happen?

  15. @Simon Johnson “because there is very little of the “market” in our currently predominant banking sector arrangements”

    I agree and I am glad to see that Professor Johnson, at last, since “little market” has less to do with de-regulation, coincides in that this crisis was mainly caused by bad regulations.

    My problem though is that for many years now, the regulators, with their capital requirements based on risk, have been odiously discriminating against the community banks and their clients the small businesses and entrepreneurs, and feeding growth hormones to the too-big-to-fail, and we have yet to hear Professor Warren, or Professor Johnson, to say a word against that, and so I am not really sure where we would end up if anyone of them were in charge.

  16. Ho,hum. One definition of a “reformist” is the political advocate who incessantly voices yet another meliorative scheme–within the systemic constraints of the status quo, of course–while being constrained by undeniable reality to admit that yesterday’s cargo cults have failed for all the usual and systemic reasons. Thus does Prof. Johnson tout an E. Warren nomination as deliverance prospective even as he concedes the failure of the Financial Crisis Inquiry Commission, the Levin panel, the Justice Dept., and so on. Tireless fellow, this Johnson, but I speak as a senior citizen who has long since found tiresome, and tiresomely predictable, the reformist syndrome.

  17. @soloduff: so are you recommending a total teardown? Or are you saying there’s no point? Total teardown and reconstruction is a reform of sorts…

  18. My problem though is that for many years now, the regulators, with their capital requirements based on risk, have been odiously discriminating against the community banks and their clients the small businesses and entrepreneurs, and feeding growth hormones to the too-big-to-fail, and we have yet to hear Professor Warren, or Professor Johnson, to say a word against that, and so I am not really sure where we would end up if anyone of them were in charge.

    This is where you are beat Per. When you talk about capital risk the only requirement is a collapsing economy, soon as an expanding economy arrives you suddenly retreat and say your not sure where we would end up. The answer is a bankruptcy in the form of a collapsing dollar.

    We currently have a collapsing dollar because what ever goes up against the dollar is hammered by your capital risk. One example is the price of gas, with no silver or gold being physcially traded there is no profit to be made. So the risk takers must up their margins on commodities that do sell, the price of gas kissed $4/gal when it was 150/bbl, now its @4 steady when the price is actually 109/bbl, the rest being absorbed by risk taking speculators such as yourself. The only question is how long you can juggle commodities and the dollar and not have price inflation to pay the risk takers of capital. I say not to long.

  20. The 2010 Census tells us that America’s population now stands at ~308 million – a slight decrease if you ask me from the 2000’s census. Why is that? Our children’s mortality rates are going up, and our “Reading, Writing, and Arithmetic” education scores are going south. Again, why is that?
    Every time the government gets involved, things get worse it seems (certainly not better, (eg. the war on drugs [?]). Creeps me out that it might be by design…or a well thought out plan twenty years ago, unfolding like clockwork today. Nothing surprises me today after hearing that they, “Buried the Evidence at Sea”, Whoa Nellie!!!
    Elizabeth Warren is a win-win person for America’s citizens, all 308 million, and the {approx} 50 million hiding below the radar. Obama, “must be pressured by the public”, to corner “Tiny Tim the Terrible, and his Siamese Twin “Brass in My Pocket [song by the Pretenders]” special helicopter Ben cohort, period!
    Simon, you are absolutely spot on…”Strike while the Iron is Hot”, or we blow another chance for really true change. Indeed, even though it will start out with a (the fix-ya is on [?]) cut budget for the CFPB, Ms. Warren is as frugal as all American consumers should be. She is one of us…Bravo! Isn’t that what we want? One of *OUR* own for a change (not an Obama change, or yes we can hyperbole mantra call of the wild, but an honest to goodness change) that kinda has become unheard of these days in “DC Fantasy Land”!

    Thankyou Simon , and James :-)

    God Bless You Julian Assange wherever you are :-))

  21. @ tippygolden press

    Perhaps the soothing lyrics of artist Harry Nilsson (1971 – ?) “The Point” can pacify your angst? The Pointless Forest we all find ourselves navigating sometimes in life, and the questioning of our inner child like amnesia transposed into a metaphoric character called “Oblio”…all of us?
    http://en.wikipedia.org/wiki/The_Point!
    :-))

  22. @ Dr. Johnson

    “platform for Ms. Warren to explain, (a) not only do “too big to fail” banks now constitute and hugely dangerous government subsidy scheme, but (b) based on these subsidies, they are becoming larger and acquiring more market power that can be – and has been – used to abuse consumers in a nontransparent fashion.”

    The TBTF financial institution concept is a de facto subsidy. Subsidies result in excessive volume (market share) and excessive complexity (over-engineering products) that begets uncertainty. Unless and until Ms. Warren recognizes the underlying economic condition of uncertainty she is caught in a recursive non sequitur that results in larger and more frequent economic dislocations.

  23. Well said Owen Owens. It is not TBTF but TRTR (too-random-to-regulate) that needs to be addressed for SMEs. See: The Engine of Economic Growth http://t.co/f1bISzK .

  25. But how can a one size fits all, be to random to regulate? Espicially when its efficiency factor far out weighs the normal to big to fail ( or even to small to worry about for that matter). The American engine of economic growth has stalled, and is in constant costly need of repair. And therefore must use the dollar to bully anything it happens to currently need cheaper, and then resort to business as usual. It makes for messy politics and even messier business.

  26. @Owen Owen “must use the dollar to bully anything it happens to currently need cheaper”

    That might be, but a better place to start is to have the regulators stop bullying the small businesses and entrepreneurs with their odiously discriminatory capital requirements based on “officially perceived risk of default”, as if “officially perceived risk of default” was something that dangerous, and as if “officially perceived risk of default” had not already been considered by the banks when setting the amount they are willing to lend and at what rates.

  27. @ Owen Owens

    “But how can a one size fits all, be to random to regulate?”

    My apologies, I was pressed for time. Let me clarify.

    Randomness is the range of variability of a complex adaptive system. The primary concern is to determine how wide the tolerances may be without affecting the outcome of commercial activity by specifying the largest possible tolerance that preserves functionality. Tighter tolerances are more difficult to achieve but enhance the quality while looser tolerances are easier to achieve but may adversely affect the operation. In determining the degree of randomness the component parameters of predictability and risk can be bounded whereas the component of uncertainty cannot be bounded with any degree of precision. But uncertainty must be considered. Ignoring uncertainty (e.g., unknown cash flow and unknown market value where issues are marked-to-model. See Beyond Rumsfeld http://taffywilliams.blogspot.com/2011/04/beyond-rumsfeld-by-stephen-boyko-and.html ) is done at one’s own peril (no-money down, NINJA MBS rated as AAA). I argue that one-size-fits-all governance metrics are too loose an operational tolerance to be functional because they lack clarity and precision due to non-correlative information (Taleb’s “correlation is charlatanism”) such as Too-Big-To-Fail (TBTF) financial institutions that are, in reality, Too-Random-To-Regulate (TRTR).

  28. @ Per /Owen Owens

    Regulators “bully” owing to OSFA deterministic metrics that are mistakenly applied equally to GE (risk) and GE-whiz Technologies (uncertainty with unknown cash flow and unknown market valuations).

    Unfair regulatory asymmetries are created absent a Knightian segmentation of randomness into predictable, risky, and uncertain underlying economic domains.

  29. @Stephen A. Boyko “ Regulators “bully” owing to OSFA deterministic metrics that are mistakenly applied”

    No, again, it is much worse than that!

    The regulators are bullying the small businesses and entrepreneurs even though their “deterministic metrics” were perfect, because, on those perfect deterministic metric, the small businesses and entrepreneurs have already been bullied by the banks.

  30. http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis?page=0,0

    How Goldman Sachs Created the Food Crisis
    Don’t blame American appetites, rising oil prices, or genetically modified crops for rising food prices. Wall Street’s at fault for the spiraling cost of food.
    BY FREDERICK KAUFMAN | APRIL 27, 2011

    “Demand and supply certainly matter. But there’s another reason why food across the world has become so expensive: Wall Street greed.
    It took the brilliant minds of Goldman Sachs to realize the simple truth that nothing is more valuable than our daily bread. And where there’s value, there’s money to be made….” read more:

    http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis?page=0,0

  32. That might be, but a better place to start is to have the regulators stop bullying the small businesses and entrepreneurs with their odiously discriminatory capital requirements based on “officially perceived risk of default”, as if “officially perceived risk of default” was something that dangerous, and as if “officially perceived risk of default” had not already been considered by the banks when setting the amount they are willing to lend and at what rates.

    I totaly see your point. But why is no one complaining about the elimination of usury fees during the Carter years. You want perfection but the best example we have (Jesus) gets plunged 6 feet under in a water polo match and then its skys the limit for profit takers. @ Steve: It will take a day of reckoning to even the odds, and the kids still need to grow up so put no more on your plate than you can handle I guess.

  33. @rc whalen,

    So what’s with these 44 Republicans. Any hope of getting some to break ranks?

  34. “Too big to fail” also means “big enough to buy plenty of influence” via campaign contributions and lobbying. The finance sector alone spends more money on Congress than all the unions combined can muster.

    Elizabeth Warren brings refreshing candor and a bright light to areas that the banking industry executives would prefer not be exposed. It’s a shame that Republicans have made this a partisan issue; it shouldn’t be.

    My assumption is that most bankers are honest and follow the rules. It’s at the top where the rules are made that allow honest bankers to do harm by following the rules that should worry us.

  35. @oregano: I recommend nothing. I am saying that, given the current and prospective balance of political forces, nothing of any substantial worth will issue from Washington, D.C. I am objecting to Prof. Johnson’s cultivation of false hopes–the lie that is at the heart of his political reformism, namely, the lie that “we” can have our corporate capitalist cake and eat it too (with reforms), courtesy of Prof. Johnson’s latest great right hope, the nice granny lady who speaks up for consumers, and whom Commander Obama has already declined to nominate to the very position that Prof. Johnson seeks for her. Johnson is a nice fellow, not stupid; just a personification of a tiresome political tendency that is as predictable as any other political apology for the system that is running this world to hell, at a profit.

  36. “Strike, while that stoked-fire on the Feats’, is still Flaming Hot!”
    The US Senate (111th Congress) has 33 seats up for election in 2012 – of the total 2 are Independents (Sanders and Lieberman – it is Lieberman that is a turncoat and could harm Ms. Elizabeth (CFPB) Warren [JMHO]), with 21 Democrats total, where one ,two, or even three or more could (possibly) be poached by the Wall Street crowds. The remaining entourage of 10 Republicans are a vile, and repugnant collection of Wall Street parasites…but what’s important this time around is that it is definitely different (yea really [?]}? Here’s the lowdown…4 of the 10 Republican Gopster’s are on the Senate Finance Committee with Senator Orrin Hatch (R-Ut) the most senior member since 1991, and the people in Utah aren’t in the happiest moods of late. The second guy is the smite weasel wordsmyth, US Sen. Jon Kyl (R-Az), who happens to reside in a “hole-lot-of-trouble’d-state-of-affairs” where he could go down in flames for change! Next we have the hapless US Sen. John Ensign (R-Nv) who will resign, and have his Gopster’ replacement appointment assigned by the Governor? Good luck with that…I could offer some rope, but I’d rather a slow simmering stew? Lastly, we the neo-damsel in distress, US Sen Olympia J. Snowe (R-Me), who could “snow-ya-too-death-with-BS”, but the “Maine`iac’s want change, and their gonna get it, come rain or shine, without the “Snow’e`”! The ole gal could pull a (Joe[?]) Lieberman, and split for “Independent Land”, but the “Down Easterners” aren’t in the mood for any more “FlatLander’s” snow’e` jobs, period!
    That’s about it. The captured Rand Paul via “TeaParty” Part`e (masked, deceptive mystique) of “Wacko’s for Gopster’s” subtle mandates. How sanctimoniously quaint?
    That’s it in a nutshell. If the Gop votes down the people’s choice, Ms. Elizabeth Warren, or a few renegade Dem’s cross the line their political futures are terminated. The public has spoken loud and clear with a “Giant NutCracker” at the ready for Thanksgiving, and Christmas/New Year’s.
    Ref:
    http://www.senate.gov/general/search/search_cfm.cfm?q=cfpb+2011&x=O&y=0&site=default_collection&10&filter=0
    http://www.senate.gov/general/committee_assignments/assignment.htm

  39. @ soloduff: “have our corporate capitalist cake and eat it too (with reforms).”

    Question, is the system:

    (1) Inefficient? Capable of being solved by reforms? If so, what is it that we have to do better or more of to correct the troublesome trend of larger and more frequent economic dislocations?

    (2) or, Ineffective? Broke requiring structural change to do thing differently?

    I argue in favor of structural reform for better transparency by segmenting the OSFA deterministic regime in to predictable, risky, and uncertain regimes. If there is complexity, there is uncertainty. How do you govern uncertainty with deterministic metrics?

    Professor Johnson’s logical legerdemain of expanding legality to morality (call for Percora Commission) has created activity without much achievement—good for publishing, not so much for policy.

  40. Since there has always been complexity from the beginning, it stands to reason that there would always be uncertainty to the end. You govern uncertainty the same way as the phrase goes, “Give the devil his due, just make certain there is not much due him” That comes from the land of the penny wise and pound foolish folks, who also were not much on achievement or policy, unless the war machine favored their side.

  41. @ Owen Owens

    If you advocate change, are you trying to correct inefficiency or ineffectiveness? One of these has to be the indepent variable re timing and sequence of implementing corrective action (Stiglitz).

    Managing risk and managing uncertainty are conceptually different and require different approaches (Boyko, 2009 http://readingthemarkets.blogspot.com/2009/10/boyko-were-all-screwed.html). With risk, one can insure (i.e. buying put options for portfolio insurance) and one can hedge (i.e., Ford and Exxon stocks in a portfolio). With uncertainty, one can insure against natural disasters, but cannot hedge (Ford and commodities). Uncertainty is unbounded.

  42. Steve, the days of trickery and tom foolery are over. Once the pound crashes and all the fiat currencies chase themselves silly over commodities, the truth will have been told, not soon enough for me, although I have plenty of patience. Keep up the juggling though, it may springboard you to success one day.

  43. MERS is a technological advance – actually it has reached prophetic status…

    Banksters had their bin list organized for quite a while – even now the lawyers are preparing the case against people who are not under-water yet with their mortgage – and this round is the real juicy meat – drilled down to those with less than a year left and all that fat equity…

    so how is that not *fraud* – to create the case ahead of time?

    and how is not the FRB begging to be annihilated since they are using their *legal* powers to manage employment to take over the equity?

    And so what is Elizabeth gonna do with all this insider information…?

  44. You gotta love some of the internet stuff – we can finally talk back to the TV – from PBS News Hour blog, a viewer talks back :-):

    “I can’t make any sense of Deborah Wince-Smith’s arguments for the disparity between CEO and the average worker’s pay. If, as she says, we’re eliminating the lower-skilled workers, that means the American workers remaining are higher skilled and more productive. That should lead to a narrowing rather than a widening in pay. Also, if an American worker is 10 times more productive than a worker in China, then automation should replace one American worker or 10 Chinese workers, or some combination of the two. Instead, we see the American worker being replaced by automation and Chinese (or other foreign) workers. The productivity of American workers is touted but not, apparently, considered when sending jobs off-shore. Wince-Smitth implies that the off-shoring of jobs is due to international markets, but many of the products and services are produced off-shore for the U.S. market. Analysis of x-rays, for example, is being done off-shore specifically for U.S. patients. She blames tax policy for…something, I’m not sure what, but the taxation she’s referring to is on profits earned overseas. In the x-ray example, the profits are U.S. generated but the wages are gong overseas and companies are deducting those foreign wage expenses from domestic revenues. The tax policy should not allow foreign-paid wages to be deducted.

    It has been shown many times that CEO pay has little to do with value to shareholders. Given what CEOs actually produce, there is no good reason for the disparity between their wages and those of the average worker other than the fact that CEOs and boards can get away with it. Tax policy should also prevent excessive pay from being deducted. If CEOs are dissatisfied with their pay, we should consider replacing them with less expensive off-shore talent.”

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