More Krugman Bullshit
Krugman links to Lambert, who channels him admirably. The only problem is that Lambert's post is drivel. Has it come to this?
But the moment when my head cleared, and I realized that Krugman was wrong and Obama (mostly) right, was when Krugman cited Elizabeth Warren ("the Harvard bankruptcy expert") approvingly.
I'll just give you a taste of Warren's work. Here's (part of) 11 USC 503(c), which Warren inserted into the Code during the BAPCPA mess (and yes, a liberal can oppose BAPCPA for intelligent reasons - not the least of which is 11 USC 503(c)):
(c) Notwithstanding subsection (b), there shall neither be allowed, nor paid-
(1) a transfer made to, or an obligation incurred for the benefit of, an insider of the debtor for the purpose of inducing such person to remain with the debtor's business, absent a finding by the court based on evidence in the record that-
(A) the transfer or obligation is essential to retention of the person because the individual has a bona fide job offer from another business at the same or greater rate of compensation;
(B) the services provided by the person are essential to the survival of the business; and
(C) either-
(i) the amount of the transfer made to, or obligation incurred for the benefit of, the person is not greater than an amount equal to 10 times the amount of the mean transfer or obligation of a similar kind given to nonmanagement employees for any purpose during the calendar year in which the transfer is made or the obligation is incurred; or
(ii) if no such similar transfers were made to, or obligations were incurred for the benefit of, such nonmanagement employees during such calendar year, the amount of the transfer or obligation is not greater than an amount equal to 25 percent of the amount of any similar transfer or obligation made to or incurred for the benefit of such insider for any purpose during the calendar year before the year in which such transfer is made or obligation is incurred.
But the moment when my head cleared, and I realized that Krugman was wrong and Obama (mostly) right, was when Krugman cited Elizabeth Warren ("the Harvard bankruptcy expert") approvingly.
I'll just give you a taste of Warren's work. Here's (part of) 11 USC 503(c), which Warren inserted into the Code during the BAPCPA mess (and yes, a liberal can oppose BAPCPA for intelligent reasons - not the least of which is 11 USC 503(c)):
(c) Notwithstanding subsection (b), there shall neither be allowed, nor paid-
(1) a transfer made to, or an obligation incurred for the benefit of, an insider of the debtor for the purpose of inducing such person to remain with the debtor's business, absent a finding by the court based on evidence in the record that-
(A) the transfer or obligation is essential to retention of the person because the individual has a bona fide job offer from another business at the same or greater rate of compensation;
(B) the services provided by the person are essential to the survival of the business; and
(C) either-
(i) the amount of the transfer made to, or obligation incurred for the benefit of, the person is not greater than an amount equal to 10 times the amount of the mean transfer or obligation of a similar kind given to nonmanagement employees for any purpose during the calendar year in which the transfer is made or the obligation is incurred; or
(ii) if no such similar transfers were made to, or obligations were incurred for the benefit of, such nonmanagement employees during such calendar year, the amount of the transfer or obligation is not greater than an amount equal to 25 percent of the amount of any similar transfer or obligation made to or incurred for the benefit of such insider for any purpose during the calendar year before the year in which such transfer is made or obligation is incurred.
posted by James | 4:38 PM
3 Comments:
So let me see if I understand Warren's bankruptcy code amendment: retention payments made to management during bankruptcy are subject to strong judicial review and limited in amount. And that's bad because it diminishes the likelihood that the enterprise's going-concern value will survive bankrupty? Increases frictional costs? Something else?
I don't know much about this stuff, but I'm curious.
Well, there are several things wrong here.
Most notably, the way you establish your value is to go out and get a job offer from another firm. Your own firm is only allowed to match that offer, not beat it. Meanwhile, your employer is in bankruptcy, so there are lots of reasons that, if you have another job offer, particularly one that by definition is at least as good as the one you can get from your own company, you'll take it.
It's also important to understand that there are a variety of ways you could end up as the CEO of a bankrupt company. One way - the way that tends to enrage people like Warren - is that you run a business into the ground, and then you continue to extract money as your company goes through bankruptcy.
Another way to be the CEO of a bankrupt company, though, is to be a turnaround specialist who was hired before the company entered bankruptcy. Essentially, what 503(c) does is make this a bad position to be in - so turnaround specialists have to be careful to get hired after the company files for bankruptcy (I'm fairly sure 503(c) would not apply in that situation, though I'm not positive). This is pointless, though, and in some situations it will make things needlessly difficult.
Finally, the 10x number is arbitrary. We would all like to live in a world in which management wasn't compensated so much more highly than labor, but if that's how supply and demand work out, then that's what you have to pay. People aren't exactly lining up to run companies that might liquidate at any moment, so you need to be able to pay a market wage that will attract talent.
My friend and I were recently discussing about the ubiquitousness of technology in our daily lives. Reading this post makes me think back to that discussion we had, and just how inseparable from electronics we have all become.
I don't mean this in a bad way, of course! Ethical concerns aside... I just hope that as memory becomes less expensive, the possibility of uploading our brains onto a digital medium becomes a true reality. It's one of the things I really wish I could see in my lifetime.
(Posted on Nintendo DS running [url=http://cryst4lxbands.sosblog.com/-b/Will-the-R4-or-R4i-work-b1-p2.htm]R4 SDHC[/url] DS S3)
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