“…WORKIN’ FOR THE MAN EVERY NIGHT AND DAY…”

2/5/09

Right wing parrot Sean Hannity, commenting on President Obama’s proposal to cap pay for executives whose firms are receiving “exceptional assistance” under the TARF (Loyal readers will recall that what is not called the TARP, i.e., the Troubled Assets Relief Program, was, immediately after its proposal, referred to as the TARF, i.e., the Troubled Asset Relief Fund. The name was changed almost immediately, perhaps because one of its architect, or publicists, decided that the name TARF drew immediate attention to the digestive detritus with which “TARF” rhymes. I, however, thought the name “TARF” was particularly apt for that very reason, so I continue to call the TARP the TARF.) at $500,000, ranted, in his usual original way, that such restrictions are “a dramatic move away from capitalism and toward socialism.”

Perhaps Mr. Hannity does not follow the news as closely as he should (Who needs to listen to that vicious left-leaning mainstream media. Right, Sean?), but we crossed the bridge to socialism in the early stages of this trip down the rabbit hole. I, too, am appalled by the thought of the government dictating pay packages and find this particular episode especially malodorous because it does not apply retroactively, so the real miscreants, like the people who run Bank of America, AIG, and Citicorp, can continue to grant themselves gargantuan pay packages with the very money that is coming out of taxpayers’ pockets. (Money is, after all, fungible.) But once these corporations took federal money, they asked for it. As I’ve said before, once you take the man’s money, you play by the man’s rules. Some of these financial mavens will argue that they had no choice, but, at least according to the Wall Street Journal this (i.e., Thursday, 2/5/09) morning, when opposition to taking federal money, for reasons that should be painfully obvious now, arose among financial executives when the government ladled out $125 billion of your money in October, it was whiner Ken Lewis, whose face should be most prominent on the “Wanted” posters if the peasants ever do get out the pitchforks, who told his colleagues, in his usual potvaliant manner “We are going to do this.” The very guys who beached our financial ship took the money, even if they did so after feigned or flaccid protest, and now, according to the government’s (being generous here) arbitrary rules, they are will not be subject to any restrictions, but banks that need “extraordinary assistance” in the future will be subject to such restrictions. If the “attracting talent” argument against such restrictions holds any water, how’s that for using your bought and paid for clout in Washington to throw the proverbial monkey wrench into your competition? But such Alice in Wonderland logic is what we request when we go on the public dole.

There are other arguments against the restrictions on pay that transcend libertarian philosophy. For example, Phil Collins (not that Phil Collins; the Phil Collins who runs Sound Banking Co. in Morehead City, North Carolina) argues, quite logically, that if executives are making money for their shareholders (As my Finance students know, the objective of financial management, and of all management, is ultimately to increase the wealth of the firm’s owners. This will be on the mid-term.), “they should be rewarded for it.” At the expense of defending this federal abomination, this very sensible and obvious argument by Mr. Collins has been addressed. The “hard” limits on compensation apply only to firms that receive “exceptional assistance.” If a financial firm needs “exceptional assistance,” presumably it is not making money for its shareholders and is, in fact, decreasing, if not crippling, their wealth. Companies receiving less than “extraordinary” assistance can pay their people more than $500,000 if they disclose such compensation and subject their plans to a non-binding shareholder vote. Executives who are making their shareholders money should have no problems clearing such hurdles. One could ask exactly what “extraordinary” means in this (or any, come to think of it) context, and one would get only a blank stare from the people in Washington who coined the term “extraordinary assistance.” But, again, that is the type of Three Stooges thought processes we subject ourselves to when we start slopping at the public trough.

Some “compensation experts” worry that restrictions on compensation might dissuade firms from taking federal assistance, to which I say “Good.” If an organization is in such eupeptic financial state that it can refuse federal assistance if it doesn’t like the terms, especially terms that say that the culprits who got it into the position of having to seek federal money have to take some pain along with the shareholders they ruined, it shouldn’t be in the taxpayers’ pockets.

The people taking the money can whine all they want about “federal intrusion” into their business, an intrusion that (Surprise!) never seemed to bother them when it weighted the scales in their favor. But this is the sort of thing that one subjects one’s self to when one grovels for charity to get one out of a situation that one largely created. The only shame in this is that the really bad actors in this drama completely escape the rules to which they are subjecting their less influential competitors. But that is the craziness that defines government, in most cases.