Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“Have we the courage and the will to face up to the immorality and discrimination of the progressive tax, and demand a return to traditional proportionate taxation?”     Ronald Reagan

May 12, 2009

Obama Administration Setting Compensation — For Non-TARP Banks

by Brad Warbiany

obama-teaching
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)

TrackBack URI: http://www.thelibertypapers.org/2009/05/12/obama-administration-setting-compensation-for-non-tarp-banks/trackback/
Read more posts from
• • •

8 Comments

  1. I think it makes a lot of sense. What is the problem with Obama’s remarks? I don’t see way it should be bad to prevent banks from motivating their employees to destroy the banking systems.

    Comment by Hermann Stern — May 12, 2009 @ 10:56 pm
  2. Some employees see the current compensation as a power grab by greedy SOB’s. Let them eat cake attitudes lead to revolutions with unintended consequences. Of course that notion is upheld, that kind of compensation is good for business, must exist; because someday too, one might be able to attain that something for nothing.

    Comment by VRB — May 13, 2009 @ 2:28 am
  3. VRB, two points:

    1. “one might be able to attain that something for nothing.” Do you have any examples of this? I know that those in upper management in my company work well over 40 hours a week (try 60 plus) and are paid a flat salary (meaning if they work 1 hour or 100 hours in a week they are paid the same amount). This is typical across American businesses and industries. How is this “getting something for nothing” ?

    2. Even if the compensation is “too much” ITS STILL NONE OF THE FEDERAL GOVENERNMENT’S DAMNED BUSINESS! IT’S NOT THE GOVERNMENT’S PLACE TO DECIDE HOW A PRIVATE COMPANY RUNS ITS BUSINESS.

    It’s clear to me that you haven’t learned a thing from The Liberty Papers despite being a regular reader (or frequent troll at least).

    Comment by Stephen Littau — May 13, 2009 @ 10:07 am
  4. If you think you’re smart enough to regulate transactions across an entire industry, you’re too stupid to do it right.

    Comment by Quincy — May 13, 2009 @ 5:10 pm
  5. Stephen Littau,
    I do come here for the learning experience. I like to know what other people think. I don’t think of myself as a troll. I comment only when I have something to say. I say some things because there is never a dissenting voice. The discussions are more variations on a theme, never discordance or contrapuntal improvisation.

    Don’t you work for a salary too? Do you sit on your ass to get paid? Is your contribution 10, 100 or 1000 times less valuable than the top managers or CEO.

    Comment by VRB — May 13, 2009 @ 6:39 pm
  6. Every day I am more discouraged by the lack of freedom we endure. First a minimum wage, coming soon, the maximum wage. Licenses, permits,insurance galore for the privilege of being allowed to offer one’s skills to the community or to someone else who has obtained the permits et al. The government has no business interfering in a contract between to individuals. As I recall, something similar was tried before and it didn’t work then.

    Comment by John — May 13, 2009 @ 7:29 pm
  7. VRB,

    I appreciate your contribution, even though it is usually antithetical to the general philosophy at The Liberty Papers.

    Your points are often the type of foil that encourages further discussion and exposition of libertarian principles. Basically, without reasoned and reasonable discourse on these topics, readers who disagree, but prefer not to post, would not have their convictions aired for discussion here.

    Of course, you’re usually wrong, and Stephen is usually right, but that’s just me ;-)

    Comment by Akston — May 13, 2009 @ 8:14 pm
  8. And my answer to your question, the main line of this thread is:

    Yes. A CEO’s contribution can well be 1000 times greater than mine at a corporation. It’s measurable. Contribution has to do with profits for the owners of the company (shareholders in corporations). It’s not only rational for profitable companies to reward their leadership, it’s pragmatic. If rewarding every employee with higher salaries, benefits, or profit sharing is shown to increase bottom-line profits for a company, they should do that too. Making a profit is not evil, it’s successful.

    Healthy markets are an evolutionary soup of business models. The successful models naturally propagate, and the unsuccessful models die off (when allowed to). This keeps companies competing for both customers and employees. It keeps employees competing for employers. It rewards the best, and we get more of it.

    Bailouts reward the worst, using resources expropriated from those who are “not worst” (all the rest of us). We end up sustaining and creating more of those failed models.

    But beyond all that pragmatism, I agree with Stephen:

    It is simply not constitutional for the Federal Government to run private industries.

    “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” There is no enumerated power to “set what the President thinks are reasonable salaries for CEO’s”. That is what dictators do, not Presidents of the United States.

    Comment by Akston — May 13, 2009 @ 8:37 pm

Comments RSS

Subscribe without commenting

Sorry, the comment form is closed at this time.

Powered by: WordPress • Template by: Eric • Banner #1, #3, #4 by Stephen Macklin • Banner #2 by Mark RaynerXML