From Banks to Battered Wives
By now you've heard that President Obama has limited the salaries of executives at bailout-receiving companies to a half-mil a year. Or, as the Reuters news agency puts it:
High-flying Wall Street executives have had their wings clipped by government officials who earn less than many junior bond traders after President Barack Obama on Wednesday capped at $500,000 the salaries of executives whose companies take U.S. bailout money.
Oh, snap! Anyway, one point that's already been largely forgotten in the fooferaw is that the federal government not so long ago FORCED UNWILLING BANKS TO TAKE BAILOUT MONEY. Remember how that went?
Although Wells Fargo chairman Richard Kovacevich resisted, Paulson gave the bankers no choice. It's partial nationalization
Italics mine, to italicize. As Newsweek put it at the time,
Richard Kovacevich had a point. Why should his company, Wells Fargo, sign its freedom (and his compensation) away to the U.S. Treasury when, unlike many other banks, it hadn't overloaded itself with risky mortgage-backed securities? The Wells Fargo chairman eventually agreed Monday to Treasury Secretary Hank Paulson's capital injection plan–it was, frankly, an offer he couldn't refuse–but Kovacevich's objections still resonate. Amid the continuing market turmoil, there is a sense that all of us are being asked to assume collective guilt for the large, but still identifiable, group of rogues and villains who got us into this mess. And then we're supposed to just forget about it.
Unless you are one of the rogues and villains, that is. Sure enough–"Bailed-Out Bank Nixes Lavish Vegas Junket After Outcry From Capitol Hill":
"Let's get this straight: These guys are going to Vegas to roll the dice on the taxpayer dime?" said U.S. Rep. Shelley Moore Capito, a Republican who sits on the House Financial Services Committee. "They're tone deaf. It's outrageous."
Having been a Wells Fargo customer for too much of my adult life, I can say without fear of contradiction that the bank deserves to be dipped in a vat of boiling grease. And I'll stack up my class resentment against anyone's, particularly when it comes to billionaire hosebags scarfing at the public trough. However, the only "outrageous" thing going on here is that the government forced itself upon a comparatively successful private company, bitched about the host's ingratitude, and is now doing what the federal government does best: Setting compensation rates at commercial banks. What's that you say? Bank stocks tumbling on "nationalization" fears? Why I never!
To sum up: In a fit of righteous anti-greed, people who make several hundred thousand dollars a year as federal employees (then millions more out of office doing whatever it is Tom Daschle was doing) are consciously driving the best talent out of endangered firms that are sitting on scores of billions of taxpayer dollars that they were made to accept by force. Shoot, what could go wrong with that?
As President Obama said,
There will be time for them to make profits, and there will be time for them to get bonuses–now is not that time.
It will likely never be that time, as long as the government is in the business of running private commerce. Banks will be forced to write 4 percent mortgages. Automakers will be forced to build magical green cars that spew out 3 million jobs from their exhaust pipes. Airlines will be forced to Buy American, governors will be forced to spend their budget-filling bounty on unionized teachers, and newspapers will be forced to run Rahm Emanuel columns. Local commercial decisions will be made in Washington, based on politics, instead of by business-owners, based on consumers. As a direct result, the once-autonomous firms, despite all that fancy money, will get less and less competitive, spend more and more of their time trying to please Washington instead of their customers, and will continue coming back for more as long as the well doesn't run dry.
Even if some of the details are off, the general results are as preditable as a Beltway school closing early on a snow day. Nationalizations have happened time and time again over recorded history, and their rate of success is not ambiguous.