Obama Administration Setting Compensation — For Non-TARP Banks
I’ve said I was going to write a post — one that I’ve been thinking about since Obama’s 100-day mark — on how much worse his Presidency has been than I feared. I expected him to be a typical Democrat in the mold of a Clinton. I expected him to be a typical politician. I knew he’d be a tax-and-spender, and ramp up on regulation, but he’s taken things to a whole new level.
But he has shown in a little over 100 days that he’s ideologically in line with FDR when it comes to the power of government, and he’s determined not to “let a good crisis go to waste.” So it was with resigned dismay that I read this:
The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.
The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.
Among ideas being discussed are Fed rules that would curb banks’ ability to pay employees in a way that would threaten the “safety and soundness” of the bank — such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing “best practices” to guide firms in structuring pay.
This is a pure, naked, power grab. They want to claim that the compensation packages threaten the health of the wider economy (when things like over-leverage were the real culprits) and thus don’t want to simply limit compensation for those who took government funds — they want to regulate it all.
Remember the sea change in government authority, attitudes, and impact on the economy that followed the Great Depression and the New Deal? Well, folks, you’re watching the sequel. And I don’t see any way to stop it.
Hat Tip: Cafe Hayek (where Russ Roberts is simply left speechless by this)