Free markets in excess

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The FT reports that:

Most US corporate leaders believe chief executives are overpaid and do not provide value for money for their companies, according to a study that will embolden critics of excessive compensation.

It adds:

Four out of six chief executives or company presidents polled by the NACD in July and August said the compensation of top executives was high relative to their performance.

Only 2.2 per cent of the nearly 70 chief executives and presidents involved in the survey said compensation was too low, while a third deemed it "just right".

So why are they paid so much? Simply because there is a cartel that operates between senior executives here and in the USA to ensure that they are paid sums way in excess of their worth.

If you don't believe in cartels then look at this report that's also in the FT:

Citigroup, Bank of America and JPMorgan are on Monday expected to announce plans for a fund to buy mortgage-linked securities in an attempt to allay fears of a downward price-spiral that would hit the balance sheets of big banks.

A person familiar with the discussions said that US banks collectively were expected to put up credit guarantees worth about $75bn for the fund, named the Single-Master Liquidity Enhancement Conduit (SMLEC).

So much for market competition.

Now I don't mind private funds being used to bail out failing banks. But, I do resent the claim that there is a free market when such things happen. There isn't. And that's precisely why we need intervention to ensure socially acceptable outcomes result from business activity.