This morning on Bloomberg TV, U.S. Special Master on Executive Compensation Kenneth Feinberg had some interesting comments on John Thain’s new package at CIT and bonuses at Goldman Sachs:

Here are the key highlights from the full interview on Bloomberg TV:

Feinberg on whether he was consulted about CIT Group and John Thain’s pay package:

“Not at all. CIT is not part of my mandatory jurisdiction.The good news is that these private companies – CIT, Goldman, JP Morgan etc – they seem to be following the prescriptions I’ve laid out for the companies within my jurisdiction: relatively modest, base cash salaries and any upside is in the form of stock, not cash, so that the total value of compensation of an individual is tied to the overall performance of the company over the long term. That is all very, very good. The problem remains the high total compensation which is very much in excess of what we’re doing at the Treasury in keeping total compensation much more modest.”

Feinberg on whether Goldman CEO Blankfein’s $9M compensation is excessive:

“Yes I think it is [in excess]. If you look at the 700 people that are under my mandatory jurisdiction I do not believe there is more than one or two in the total of 700 that are making that type of total compensation. On the other hand, clearly Goldman is following the prescriptions I’ve laid out. Mr. Lloyd Blankfein is getting a very low base cash salary. His total comp is again tied up in long term stock, the value of which cannot be determined or transferred for about five years. That is the type of compensation we’re looking for, where value is tied to the total performance of the company itself.”

Feinberg on what would be a more reasonable scenario for Blankfein’s pay:

“I can’t speak to the culture and what is going on inside these companies. They are not really part of my jurisdiction. I like the mix of stock and low cash. The overall compensation again points out the necessity of doing something with the total compensation. The administration has proposed various approaches, the Volcker approach, a bank fee approach – I cannot really get to the total compensation but I am pleased at the prescription and that we’re not talking about guaranteed cash, which is something that is prohibited to those companies that are under my watch.”

Feinberg on whether Goldman and CEO Blankfein consulted with him on pay:

“Yes, [we] had a number of conversations. What the Treasury has recommended in terms of structuring, and size, I would like to think we had some influence on what Mr. Lloyd Blankfein finally decided.”

Feinberg on what influence he may have had over Goldman:

“Clearly, low cash base_I think Mr. Blankfein is getting under $600,000-Mr. Lloyd Blankfein is getting under that amount. His entire bonus, no cash, long-term stock, they cannot be transferred for I think five years. So that his ultimate package value will be determined by Goldman’s ultimate success over the long haul.”

Feinberg on the nature of his conversations with Blankfein:

“You will have to ask Mr. Blankfein. It was not about the package, but really about how Goldman as an institution should approach base salaries and compensation over time. He clearly was concerned, wanted to abide by what Treasury is doing and largely I think he has succeeded in adopting the prescriptions.”

Feinberg on whether these compensation changes are permanent:

“We will have to see. The Deputy Secretary of the Treasury pointed out a few months ago that these steps the banks are taking voluntarily is constructive – a small step. Whether or not it will be permanent, whether or not over a long period of time these prescriptions will stay in place [remains to be seen]. I know that Secretary Geithner is also looking to corporate governance reform, shareholder rights, regulatory reform, this is one part of a larger menu of prescriptions.”

Do you think Feinberg has had an effect on CIT and Goldman Sachs? Let us know what you think in the comment section below …

Former Treasury Secretary Henry Paulson is finally cashing in with his book. Below is an interview on Bloomberg in which Paulson discusses how he made his decisions when the economy was “on the brink”:

Do you agree with Paulson? How would you have quarterbacked the crisis? Is Paulson telling all in his new book, or has a lot been left out? Let us know what you think in the comment section below …

This is a guest post by Jordan Roy-Byrne CMT at The Daily Gold.

Because the US economy is much weaker, Americans are buying less foreign goods (especially Chinese made goods). And as a result, the Chinese are recycling less money back into US Treasuries. This is happening at a time when the US is increasing spending dramatically. Hence, the US has to monetize part of the debt because it can’t find enough Americans and foreigners to buy Treasuries.

All was pointed out by the deputy governor of the Peoples Bank of China:

In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.

He then addressed where demand for that debt would come from.

“The United States cannot force foreign governments to increase their holdings of Treasuries,” Zhu said, according to an audio recording of his remarks. “Double the holdings? It is definitely impossible.”

“The US current account deficit is falling as residents’ savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world,” he added. “The world does not have so much money to buy more US Treasuries.”

China continues to see its foreign exchange reserves grow, albeit at a slower pace than in past years, due to a large trade surplus and inflows of foreign investment. They stood at US$2.3 trillion at the end of September.

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This is a guest post by Jordan Roy-Byrne CMT at The Daily Gold.

Before I had the chance to address a recent Gold-bashing piece (Gold isn’t the best protection against inflation), Bloomberg is out with another anti-Gold piece (Gold Buying By CB’s May Send Sell Signal). The amount of misinformation in regards to Gold is bothering me and so too is this disinformation campaign, courtesy of Bloomberg.

First let’s talk about Gold as protection against inflation. Gold is the best protection against inflation over very long periods of time. We are talking about decades and centuries. An ounce of gold today would buy the same amount of goods in 1900 and 1500- and probably in 100 years time. It is very volatile over shorter-term periods but over multiple decades and centuries, it keeps its value.

Over such shorter periods, things like land and commodities usually perform better. In a reflationary period, such as what we had in the mid 1930s and mid 2000s, commodities and stocks perform better than Gold. So I agree with the general point, however the author makes some crucial mistakes. First he utters some typical anti-Gold nonsense:

In reality, gold has a mixed record. Nor should you be surprised about that. A few industrial uses, and jewelry, aside, gold is valuable only insofar as other investors think it is valuable. By itself it isn’t necessarily worth anything. Nor does it generate interest or dividends. If the price doesn’t rise, you don’t get anything.

If it isn’t worth anything then why has it kept its value, over time, unlike every other currency? Gold rises for a reason. It rises when people are concerned about paper money or the financial system. And what can bring about such concerns? Too much debt, funding problems, credit problems and easy monetary policy. This anti-gold argument would have you believe that it only rises randomly or based on human emotion. It is just drivel and nonsense.

The second point is that the author is assuming we are going to have your typical inflation.

As we move into the early stages of an inflationary era, those five assets should do at least as well as gold, if not better.

We already have inflation. The distinction is if we are going to have reflation or hyperinflation. As stated previously, reflation is better for stocks and commodities than for Gold. Hyperinflation occurs, not because of printing too much money and overstimulating the economy. It occurs when there is monetization of debt. We are going through a slow motion hyperinflation, where the Fed has to monetize not constantly but somewhat consistently. The same for the UK and perhaps for the European Central Bank. That environment is best for Gold and Silver and not for commodities. We may get a reflation eventually, but for now we are in a slow motion hyperinflation.

In regards to Central Banks, most of the CB’s that are buying are from emerging market countries. Nations such as China, India and Russia have such a small percentage of their reserves in Gold and a large percentage of their reserves in US Dollars. Their buying of Gold is prudent and hardly does anything to imply a top in the market.

My favorite quote is this one:

“This is late in the game to be buying gold,” said Peter Morici, a professor of business at the University of Maryland in College Park and former economic adviser to the U.S. government. “Central banks are not known for their investment acumen. What it reflects is a lack of confidence in the U.S. economy and the long-term durability of the dollar as a store of value.”

If it reflects a lack of confidence about the dollar as a store of value, then why is it late in the game? And Central Banks are not investors, they are a backstop. Whether their timing is good or bad, they aren’t going to sell anytime soon. Bloomberg just found another anti-Gold fellow to spout an anti-Gold comment.

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Sam Zell, chairperson of the board for Equity Group Investments, did an interesting interview with Bloomberg Television about the outlook for the commercial real-estate market, the recession, the Tribune bankruptcy, and the Cubs.

Here are some highlights from the interview:

On government intervention in the financial system:

“The government intervention in the financial system has effectively slowed the liquidation of distressed assets and the result is that with government funding, the desire and the need to liquidate the assets is dramatically different.”

On the recession:

“This is a demand recession and I suggest to you that as the economy improves, it’s very likely that these buildings that are currently suffering vacancies will be full. That’s the good news. The bad is, they’ll be full at thirty percent lower rates.”

On the Tribune Company bankruptcy:

“I think that with some reasonable luck I think it’ll be out sometime by the end of the first quarter. I’ve been involved in a lot of bankruptcies in my life. Most of the time as the buyer of the debt, as opposed to the debtor in possession. Bankruptcies, by definition, are very frustrating. And they will continue to be.”

On looking back at the purchase of the Tribune Company:

DEIRDRE BOLTON: Can we ask you if you regret this decision? Is this the worst business decision you ever made?

SAM ZELL: It’s certainly the most amount of money I’ve ever loss in a single deal. But the answer is -

BOLTON: So if you could turn back time….

ZELL: If you could. It’s like maybe I should have married somebody else.

On the Cubs

BOLTON: Don’t know if we can go from motorcycles to baseball, but what happens to the Cubs?

ZELL: Well, on the 27 of this month, which is tomorrow, yesterday, it closed? I did not even know. Ten days ago it went into kind of an automatic mode, and then it just followed a series of events. The answer is, I’m very happy for the Ricketts family. I think the team should be owned by somebody who is local, somebody who is really passionate about baseball. I happen to be local. I’m not passionate about baseball, so I wish them all of the best of luck. And maybe we’ll break the 101 year curse.

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This morning, financial services firm UBS CEO Robert J. McCann gave his first public interview to Margaret Brennan on Bloomberg TV. Here are the more interesting comments:

On the future of the financial industry:

“What had worked in the past wasn’t going to work in the future. I think our industry has to admit. We made big mistakes. The impact was felt in economy, by institutional investors but most directly on individual investors. The majority of individual investors don’t trust the companies. You have to be willing to admit that mistake.”

On Merrill Lynch:

“The company that I worked for doesn’t exist. Merrill Lynch doesn’t exist as a company and I would say it doesn’t exist culturally.”

On pay packages:

“The days of UBS being the high bid in the market are over. I don’t want people working there because we’re the hi bid in the market… As my mother would have said If you wanted to work for the little sisters of charity you could have… I want to pay people but I won’t’ be the high bid in the market.”

On why UBS:

“I had different alternatives.. if you had asked me in April or June..I would have said doing something different. I had been talking to P.E. firms about starting my own business.. but I got to know Ozzie Grubel… This is the challenge that I want at this time in my life in an industry I believe in and a segment of the industry that I see in a transformative stage right now.”

On restoring reputation of UBS:

“Nothing about Bob McCann showing up that’s going to instantaneous restore UBS rep with time the right focus the right team. Good work we can more than restore rep we can enhance it.”

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Matthew Winkler

Congressmen Grayson and Paul are not the only parties fighting for transparency of the Federal Reserve. Bloomberg is currently engaged in a legal battle to identify companies that got loans from the central bank. (Bloomberg LP v. Board of Governors of the Federal Reserve System)

Although the Fed lost their case to exclude their information from the Freedom of Information Act (FOIA), a judge granted the Fed the right to keep the information confidential until the ruling can be reviewed on appeal.

I recently asked Bloomberg Editor-in-Chief Matthew Winker why his firm has taken strong legal action to break open the Fed’s books:

While the Federal Reserve and the banks that have joined the Fed’s appeal assert that disclosure of tax dollars secretly used to rescue financial institutions will stigmatize banks, Americans have the right to know how they became involuntary investors in an unprecedented bailout in the greatest financial crisis of our time.

Although I agree with Winkler, the Fed is correct that banks on welfare will be stigmatized. Who on welfare is not stigmatized? Further, if we are running a capitalist system around here, then banks that screw up should go belly up. Then, the banks who are superior will succeed to the benefit of consumers.

I do not think we should encourage runs on banks. But if we establish simple, sound rules for how banks must operate, then there should be no panic about a bank having no money. And, in the rare instance one does run dry, the FDIC will have the resources to handle such a small and rare event. The Fed says we need to worry about proper remedies when preplanned prevention is the only solution.

It appears we’ll have to wait until January for the next chapter in this drama. Maybe Santa will bring us some Truth this year …

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