Why CEO pay fed the mortgage mess

Source: MSN Money

If you're wondering how otherwise extremely bright people at the top of our country's best banks led us into the subprime mess, here's a simple answer:
There was too much money in it for them to resist.
We hear all the time that companies have to pay top execs tens of millions of dollars a year to "attract the top talent."

But dangling huge payouts in front of bank CEOs in exchange for short-term bursts of growth brought just the opposite: the worst performance by some of the best-paid execs in decades, taking a big toll on homeowners and bogging down the whole economy.
Countrywide Financial (CFC, news, msgs) chief Angelo Mozilo cashed out $400 million in stock options from 2003 to 2007. In 2007 and 2008, the company's stock fell to multiyear lows, and the lender may soon disappear.
Washington Mutual (WM, news, msgs) chief Kerry Killinger took home $24 million in 2006. A crash that started in 2007 as subprime-related problems surfaced has wiped out all shareholder gains since 2000.
The head of Merrill Lynch (MER, news, msgs) got $160 million upon his retirement last year; the head of Citigroup (C, news, msgs) collected $40 million. This happened in the same period both stocks plunged more than 40%.
And former Bear Stearns (BSC, news, msgs) CEO James Cayne got $39 million in bonus pay alone for 2004-06. He left in January of this year, just before his bank had to be bailed out with help from the Federal Reserve to avert a disaster that might have brought down much of the U.S. financial system.
Despite all the problems they helped create, these execs get to keep that loot. For that, blame lousy boards of directors for poorly designed pay plans that encouraged Wall Street's elite to take too much risk on the subprime mortgages that have caused so many problems.

A friend of mine forwarded this article and I thought this would be worthwhile looking into. I'm not quite clear in my mind in determining who the victim is/was or going to be. The pain as per my understanding is going to be broad and deep. The problems were driven by greed at each layer be it the CEO's of the investment banks that made efforts to push questionable loans through their banking arms or be it realtors that were hoping to make a quick buck or appraisers that were pushed to sign off on phony appraisals. Ir-regardless of the external forces, the consumer did jump on the band wagon and was willing to be put into loans they could not afford (One argument goes that if the consumer was financially educated, they would have walked away from the loans that would get them into trouble)... a statement that holds true only in some cases. Most people were hoping to make a windfall profit with absolutely np investment - something the bankers capitalized on and moved money by making comissions and drawing every cent from any source of credit they had. While the focus is on stating that CEO's did not put their foot down and stopped questionable loans from being made because they had personal interest in increasing revenues and growth (albeit in the wrong direction) - at the end of the day, even they will be losers. Some will have their reputation tarnished so badly that they may never head any financial organization - some may end up in prison if a direct co-relation can be made where CEO's were involved in scamming the broader banking system.

All in all... now that the party is over, there is a lot of blame to go around and while corporations struggle for their existence... and homes are lost in this game... the fact is that life goes on and people come out smarter in the end. The bankers are yet to squeeze the hands of the builders which is currently happening as part of the credit crunch.... and the fact remains... the home builders are not as important in the entire economy as they thought to be (during the boom, people were afraid of landing housing because it would destroy civilization) - guess what... they were wrong.... builders stopped selling homes quite a while back and they're running on money they made in the boom time - all the money the bankers lost is safely parked with the builders while the banker loses his/her shirt.... builders expect the banker to show mercy and give back the easy loans ....and in reality the builders will be squeezed so hard and for so long that they'll be the ones begging for mercy.