“YOU MAKE ME…MR. SUCCESS!!!”

2/14/09

Executives in the finance industry, broadly defined, and their stridulous sycophants in the financial media are whining about the admittedly rather severe caps on bonuses inserted into the stimulus bill by Senator Chris Dodd of Connecticut. Even the Obama administration, not known for being overly friendly to Wall Street, at least not until the Street starts paying even more protection money to the Democratic Party, is concerned that the limits may be too stringent. As the law currently reads, any company receiving federal bailout funds couldn’t pay bonuses exceeding 1/3 of total pay, or, algebraically, ½ of salary. This restriction applies retroactively.

Several thoughts come to mind. First, the general rule that the regulatees are almost always smarter than the regulators and thus can always find a way around regulations is once again confirmed. The easiest way around this rule, since it is aimed specifically at bonuses, is to simply increase salaries. If Senator Dodd’s intention was to punish the pack of patheticoes currently in charge of our nation’s financial industry (the industry that we are counting on, remember, to maintain our economic dominance…oh, boy!), or even if his motives were even more noble, he has failed miserably, but this is not an altogether unfamiliar position for Senator Dodd.

Second, one of the objections to the pay restrictions is that they will force “top talent” away from their firms, perhaps to hedge funds, or even out of the financial industry altogether. Nonsense. Going to hedge funds makes no sense for most of these nonentities because, if you run a hedge fund, you don’t get paid much unless you perform, unlike the situation that prevails in their present employment, in which these quisquilians get paid gargantuan sums even when they fall flat on their visages. Leaving the financial industry? C’mon! Where else can anyone, even immensely talented people (about whom we are, for the most part, not talking in the present context) make as much money as they can in the financial business unless they are over 6’10” and have some facility with a basketball?

Third, the simplistic answer to the whining pack of mega-talents that got us into this economic soup is “If you don’t want to live by the government’s addle-brained rules, don’t take the government’s money.” This is one of those not so rare circumstances in which the simplistic answer is the correct one.

Fourth, one of the severest objections, especially from Preppy Tim Geithner’s Treasury Department, to Senator Dodd’s restrictions is that it might dissuade these titans of finance from taking federal money, to which I reply “GREAT!!!” If these institutions are in a position to refuse federal help because their executives might have to endure the ignominious sacrifices involved in a seven, down from a customary eight or nine, figure pay package, then they shouldn’t be getting federal money. One observer, Alan Levine, an executive pay attorney in New York, went so far as to state that “I’ll bet you will see in the next month or so, banks paying back the government. They don’t want to run their businesses under these restrictions.” Perhaps I am not as smart as Mr. Levine, and I am certainly not as smart as the whining Wall Street wunderkinds, but why is such an early return of the taxpayers’ money supposed to be a bad thing? Further, if these financial concerns can so easily pay our largesse back, why were we forced to give it to them in the first place? It probably has a lot to do with the aforementioned protection money.

Someone has to point out to the stupefied solipsists on Wall Street that socialism is a bad idea even if this particular form of socialism were to allow them to maintain their lifelong seven and eight figure entitlements.