Admission Of Failure

January 31st, 2009at 01:21pm Posted by Eli

Dean Baker is not happy with the vague “officials say” reporting of the Washington Post, but I’m more pissed off about this part here:

At one point, it even is so polite to tell us that the administration doesn’t want to limit executive compensation as part of getting welfare from taxpayers because “officials” are worried that such limits would discourage banks from participating.

(…)

Who cares if some banks don’t participate in getting handouts? Citibank, Bank of America, and many other major banks have no choice. They will go bankrupt without assistance. If some banks actually can get by without the government’s assistance, why would we want to force it on them?

If their toxic assets have really frozen lending, although not actually jeopardized their solvency, then the shareholders would have a great lawsuit against any bank executive who refused to act in the interest of the shareholders in order to preserve their own high pay. Such instances would presumably be rare, but could nonetheless provide a great source of free entertainment to a nation suffering through a severe downturn.

In short, there is good reason to believe that the Obama administration is trying to slip hundreds of billions of dollars to bank shareholders and their top management. The Washington Post seems to be helping.

It was bad enough when the Bush administration crippled the executive compensation limits in the bailout; it’s even more infuriating to read that the Obama administration wants to do the exact same thing.

Look, a request for TARP funds should be viewed as an admission of failure, and failed executives should be rewarded as such.  If they don’t want to take our money, then they can either earn their fat paychecks by trying to muddle their banks out of trouble without outside aid, or they can take an even bigger pay cut when their banks fold or fire their sorry, unable-to-manage-risk asses.

And for opportunistic banks that don’t actually need TARP funds but want them anyway, bringing in all that free money will look a lot less attractive to senior management when it means a pay cut instead of a raise.

There needs to be enough of a disincentive so that only the most desperate banks seek TARP bailout money, and I can think of few disincentives better than pay cuts.  Make the CEOs have to actually pay for our money.

Entry Filed under: Bush,Corruption/Cronyism,Economy,Obama,Wankers


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