Mentor Capital, Inc., Proposes $120
Billion Claw-back Plan
By Chet Billingsley, CEO of Mentor Capital, Inc.
Wall Street, real estate and certain lending
professionals should disgorge $120 billion in bonuses and fees
fraudulently earned. These funds should be given to Americans on a
dollar-for-dollar matching basis for citizens that are willing to
make fresh investments to be held for one-year. This would stimulate
savings, investment and the economy, and provide lubrication for the
banking sector. It would appropriately punish greed and reward
prudent, frugal American families.
The average Goldman Sachs, Morgan Stanley,
Merrill Lynch, Lehman, and Bear Sterns bonus has been $250,000 per
year for their combined 175,000 employees, in addition to very
generous salaries. Together with other firms, the total annual bonus
is estimated at $90 billion. Each year, virtually all company cash
is swept into salaries leaving none for a reserve. These
self-avowed, world-class experts knew or should have known the
sub-prime or other real estate financings and their firms were
subject to risk and did nothing to provide for it. Their bonus
compensation was transferred under a condition of fraud and should
be disgorged.
Like-wise, real estate professionals earned an
increasingly enriching 7% on growing transactions that ended up
being unsupportable. Fees from any transaction that went into
foreclosure or default should be disgorged. The look-back period
should be for four years, starting off at 100% giveback and falling
off at 25% per year. This give-back should apply to future defaults
and similarly apply to loan brokers or others down the chain that
derived a fee from the transactions. These fiduciaries knew or
should have known the risk and not allowed the transactions to
proceed. Other private recovery or lawsuits should not be allowed.
The fees earned on fraudulently represented transactions are
estimated at $30 billion.
The $120 billion should be returned on a
dollar-for-dollar investment matching basis to provide liquidity
that will jump start our economy. Any American citizen (not
corporations, partnerships, investment firms or foreign citizens)
will be able to receive a matching contribution (like many employer
matching retirement programs) when they designate that status and
buy a (i) One-year or longer CD, (ii) IRA investment that is new or
in excess of any regular contributions, (iii) Public Company IPO,
option or warrant exercise with a side agreement to hold for
one-year.
The $120 billion will be awarded on a
first-come basis $100,000 maximum per person, and not exceed the
total claw-back. For banks to qualify to accept twelve month CD
matching funds they must extend payments for 50% of the matched
federal funds in an equal mix of months of mortgage extensions or
future forgiveness.
Looking forward, to promote greater
transparency and prevent similar problems of today in the future, it
is suggested that companies will report on all public communications
the following:
Mentor Rating: XYZ Corporation
D F C A A-
1.9 x
Earnings Debt Growth Size Reporting Executive
Compensation
(3%) (97%)
Portraying the key measures of a corporation in
understandable terms, people can choose for themselves where to
invest. Just as it helps us eat healthy food and avoid cigarettes, a
common investor label will improve financial decision making,
without government interference in the market. Mentor Capital has a
proprietary algorithm for comparing salaries of large to small
company executives and would be happy to make that available and/or
maintain the Mentor Ratings on a non-profit basis. We would suggest,
further, that any company with executive compensation greater than
1.0x would have to allow shareholders to appoint directors.
In a somewhat technical area, mark-to-market
accounting should be suspended immediately. For banks, it is the
equivalent of forcing a homeowner to cough up the decrease in value
of his house immediately rather than waiting out the downturn. Banks
should have that common sense option, also. Finally, and this is
just life, Secretary Henry Paulson should offer his resignation,
because he failed.
The above proposal, would create no new taxes,
have broad support in the American public, provide $240 billion in
liquidity, loosen up banking and investment, eliminate reactive
banking rules, keep teetering owners in their homes, promote healthy
saving, change out management at the top, and call the culprits in
our current crisis to the task of �paying the piper.�
The additional Mentor Ratings (we, of course,
like that name) are more easily understood than voluminous fine
print and reports that obfuscate true risk and reward. In addition
to clear disclosure, which we are confident the public would
support, and Congress, in their currently creative state, can surely
find a way to legally recover the fraudulent transfers by bankers
and brokers and return the funds to its citizens to invest.
Chet Billingsley is the Chairman & CEO of
Mentor Capital (Symbol: MNTR) that invests in hedge funds and
smaller companies. The firm has no debt and no exposure to the
financial, sub-prime or real estate sectors. Information on the firm
may be found at
www.MentorCapital.com.
(Disclosure: Bob Meyer owns stock in Mentor
Capital.)