Strike The Root: How the Feds helped fuel the stock market bubble

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August 10, 2003

How the Feds helped fuel the stock market bubble

(from a New Yorker article): Wittingly and unwittingly, Washington encouraged the great giveaway. During the 1992 election campaign, Bill Clinton and Al Gore made a political issue out of lavish C.E.O. pay. A year later, the new Administration limited to a million dollars the tax deductions that corporations could take for executive salaries. The reform turned out to be counterproductive. Since executive stock options weren’t counted as regular compensation, corporations had yet another reason to pay their senior managers less in salary and more in options. In 1994, the Financial Accounting Standards Board (F.A.S.B.), the descendant of the Accounting Principles Board, set out to force companies to deduct the value of the stock options they granted from their earnings. Following an intense lobbying campaign by Silicon Valley companies, several leading members of Congress, including Joseph Lieberman and Dianne Feinstein, threatened to put the F.A.S.B. out of business if it went ahead with the change. The board backed down, and the latest official attempt to control corporate avarice came to an end.

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