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Bailed Out? Take A Pay Cut

10.22.09

This really should’ve been a no-brainer.  And it should’ve been part of the whole deal given to the banks as part of the bail out package.

All loans come with a price.  There are established ground rules for repayment including interest rates, monthly due dates, and penalties for late payments, at the very least, for a normal loan between a lender and a borrower.  The financial bailout between the government and the banks should’ve been no different.

Instead, just now, the Treasury is ordering that firms bailed out by the government must halve their salaries.  Why wasn’t this agreed upon at the outset?  Why now when it looks like the government is meddling in the private sector yet again?

Better late than never, I suppose, but this almost seems like it’s a punishment as opposed to a stipulation of the original loan, when it would’ve been much more acceptable and come across less of a politically-motivated move to appease a growing number of disgruntled, unemployed Americans who find it insulting that a company given a handout gives themselves high salaries and bonuses.

Not that these executives are really hurting financially.  The CEO-to-average worker ratio has grown exponentially over the past three decades to an almost unsustainable level.  Much like house prices became ridiculously inflated, the salaries of these executives have gotten out of control, as well.

It just would’ve been nice had this all been part of the plan originally since it’s become more and more clear that we really did give these corporations boatloads of money with virtually no strings attached.

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9 comments

  1. Possibly true, but it wasn’t part of the loan agreement under TARP and is definitely a politically motivated punishment. Worse, since that punishment was levied by the federal government without the benefit of criminal charges or trials, it is unconstitutional being a Bill of attainder.

    But then, the Liberals never had any love for the Constitution and use it only to abuse it.


    • Sigh. Yup, all liberals wipe their ass with the U.S. Constitution. Very helpful commentary, as usual.

      Might I remind you of Bush’s policies that actually ignored the Constitution? Illegal wiretapping of American citizens, torture, holding criminals without trial…


      • Aside, from a few specifics – torture not being unconstitutional – you sum up the Bush administration’s view of the Constitution in the wake of 9/11 adequately. I won’t dispute that.

        That still doesn’t stop Obama’s attack on the financial industry from being unconstitutional itself though – and Liberals gleefully support it whereas Americans weren’t too happy with the wiretapping.


        • Torture is unconstitutional: 8th amendment, cruel and unusual punishment. You’ve been listening to Cheney’s BS defense for too long.

          Obama isn’t attacking the financial industry. Those certain firms that took bailout money had collapsed. They were ruined and they took down the American economy with them. Bush first enacted TARP to try to stop the decline. Obama continued the policies. Neither Bush’s nor Obama’s administrations attacked or took over the financial industry. Those firms accepted the money, and with it, the provisions attached.

          I don’t know how his requirement of execs taking pay cuts is unconstitutional. It isn’t a punishment for a crime, hence no trials or charges, so it can’t be an illegal bill of attainer. The admin and Congress is actually looking to enact a law that will give the shareholders a say in how much the execs earn – that’s hardly unconstitutional.

          Also – no American wants to be wiretapped by the government. And to denounce liberals as “gleefully supporting” the exec pay cut is also exaggerated. Notice the PR backlash that Goldman Sachs got a week ago for giving their execs bonuses. It’s not just a liberal thing, like you want it to be. Reality isn’t as partisan as ideology. Unemployment levels are ridiculously high and affect people from both sides of the divide and those are the people who are pissed about Goldman Sachs giving themselves bonuses and pissed about these bailedout companies still earning multi-million-dollar salaries while accepting millions (or billions) in taxpayer money.

          And even if it were an attack – which it’s not – Obama is only targeting those firms that receive TARP funds. It’s not across the board for all companies everywhere. Granted, there are going to be certain regulations in place for everyone to help prevent this meltdown of corruption in the future, but no one is talking about putting caps on salaries.


        • Just to be clear, the 8th Amendment only covers punishments, not investigations…Minor point though.

          US Constitution, Article I, Section 9; Clause 3 is “No Bill of Attainder or ex post facto Law shall be passed”

          A perfect example was the Cummings v. Missouri case where the SCOTUS ruled that,

          A bill of attainder, is a legislative act which inflicts punishment without judicial trial and includes any legislative act which takes away the life, liberty or property of a particular named or easily ascertainable person or group of persons because the legislature thinks them guilty of conduct which deserves punishment.

          AS for caps on salaries –

          Obama already did that in February: http://blogs.abcnews.com/politicalpunch/2009/02/president-obama.html

          And his Admin is slashing the m further now: http://blog.taragana.com/n/ap-source-administration-to-order-big-pay-cuts-for-top-executives-at-bailed-out-firms-202921/


          • I’m not a lawyer, obviously, but defending torture for the sake of defending your ideology is such a low move, especially on such a little technicality that would’ve been exposed as war crimes by anyone else had those “enhanced interrogation” methods been used on American soldiers in a foreign land. Conservatism doesn’t require torture to remain true to its roots.

            I was wrong regarding those salary caps. I was only referring to the current situation that I had heard (perhaps incorrectly) that salaries were being halved, but no limit was placed upon them.

            Again, I’m not a lawyer – perhaps you are, and you could continue shedding light on this subject. But, I imagine things are much different when the government has a stake in the company. I had read that these bailedout companies are essentially wards of the state, and while it sure isn’t going to make conservatives happy, the government does have a say in those those firms are run, which gives them the legal standing to place requirements on them in terms of salary caps or salary restrictions.

            You could argue that the government has no business interfering in private enterprise (which I’m sure you will) and that’s a valid argument. I just don’t know anything about bills of attainders aside from what I glean off the Internet. I don’t know anything about the Cummings v. Missouri case and if it at all relates to the current situation of the TARP firms.

            Either way – it’s still not an attack on the whole financial industry, if an attack at all. It’s merely the government doing what’s best for its own invested interests. And when the taxpayers don’t like what’s being done with the money they loaned a company (i.e. spent on parties, bonuses, and inflated salaries to people that helped cause this crisis in the first place), the administration has to do something. And it’s also not this giant liberal uproar – it’s an everyone uproar.


          • I’ve studied Law, but am not a practicing attorney; I lacked the requisite amorality.

            I also wasn’t defending torture, only stating that it wasn’t unconstitutional. Frankly and sadly, it wasn’t – from what I can tell – even illegal due to exactly how and where they did it. :(

            At this point I’m getting conflicting reports on the details of the more recent plan for capping salaries, so I can’t really argue the point further with any accuracy.

            You have, however, brought up a valid and scary point. The federal government now owns major portions of both the financial sector and the automotive sector. That’s entirely uncharted waters for America.

            How do you feel about the feds owning and controlling – nationalizing in all but name – key segments of American business?


          • I suppose when I think of nationalization I think of the government actually running entire industries. But, I do see the danger in what we’re dealing with at the moment.

            I am in favor of regulation. I think there should be more oversight and accountability in the financial industry. Firms shouldn’t be able to fabricate derivatives for years and years making insane profits at the expense of the American public. There need to be some checks and balances in order to keep the bankers from completely looting the economy – which they’ve proven they will do – again in the future.

            For me, there need to be rules in business. And the lack of regulation shows that people will break the rules or completely disregard them if it means making a buck. I am not an economist or a lawyer so I don’t pretend to know that TARP was essential or not. I at first was not in favor of bailing out GM – I thought it was ridiculous to give money to a completely failed business model. I ended up supporting it because it was such a small amount of funding compared to that amount given to the banks. I hated seeing the banks rewarded, essentially, for pilfering the economy for their own pockets, but I honestly have no idea the economic effects that would’ve taken place on our country had all of those firms completely failed. Perhaps, from a free-market perspective, that’s what should’ve happened, and that would’ve opened doors for other entrepreneurs to come along with a better business model and succeed where others failed. That is fine and dandy in a theoretical experiment, but I just don’t think the American public would have been patient with the time it would’ve taken for all of that to rebound organically while millions end up homeless, jobless, penniless.

            So, I suppose my thoughts are that I don’t mind the government intervening to prevent or at least lessen the blow of economic disaster. I don’t see the govt taking over industry – they’ve got their stakes in a number of specific firms, yes, but I don’t think there’s any desire to run Wall Street through Capital Hill.


  2. “Under the proposal, the 28 biggest banks would develop their own plans to make sure compensation doesn’t spur undue risk taking. If the Fed approves, the plan would be adopted and bank supervisors would monitor compliance.” – http://blog.taragana.com/n/ap-source-administration-to-order-big-pay-cuts-for-top-executives-at-bailed-out-firms-202921/

    That’s not exactly a bill of attainder.



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