Tax Lawyer's Blog

According to CBS News.Com President Obama has said that big bonuses paid to executives of companies that have received federal bailout money offends American values:

It does offend our values when executives of big financial firms that are struggling pay themselves huge bonuses even as they rely on extraordinary assistance to stay afloat,” the president said.

Mr. Obama lauded Treasury’s decision to limit compensation for executives from firms that have not yet repaid the government. He said Kenneth Feinberg, the special master at Treasury tasked with handling executive pay, “was faced with the difficult task of striking the proper balance between standing up for taxpayers and returning a measure of stability to our financial system.”

“Under these competing interests, I believe he’s taken an important step forward today in curbing the influence of executive compensation on Wall Street while still allowing these companies to succeed and prosper,” said Mr. Obama. “But more work needs to be done.”

President Obama has been squawking for months about the obscene amounts of compensation paid to executives of failing corporations.

The outrage, though, is purely symbolic because if you aggregated the compensation of the top executives of every company that received bailout funds from the government it would be a minute fraction of the total bailout funds.

In other words, it’s chump change.

I found an article that was published at Blog Critics in February titled The Truth about Executive Compensation in which the author observantly states:

Executive compensation, and leaving such matters to the shareholders, is not, I repeat not, what got us into this mess. Deregulation wasn’t the problem either. Let’s not forget what caused the financial crisis — borrowers who never cared about the consequences of their loans first and foremost, and secondly, the institutions that relaxed standards (sometimes at the behest of government) in order to give out these loans. This was the problem. Everything else we are seeing is a result of that. You could cap an executives pay at 1 dollar a year and that wouldn’t change the mess we are in.

But there is a deeper point here that people are missing. Obama isn’t just talking about bailed out companies:

“This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”

Especially, meaning not only those companies subsidized by taxpayers, but any company that has failed should not be rewarding executives.  

As part of Obama’s executive compensation “plan” is ” is “a Treasury-sponsored conference on a long-term overhaul of executive compensation” which is not limited to companies that are getting government bailouts. We aren’t just talking about the short term here, not just talking about companies bailed out by taxpayers. This is extremely serious business.

I agree. Controlling how big business spends its money is about the balance of power between government and the free market. Anyone wishing to understand the actions of this President and this Congress, must always keep that that in mind.

And don’t believe the President when he tells you “we don’t disparage wealth.” It’s not true.

There is nothing, nothing in the world, more abhorrent to an egalitarian liberal than a rich business man (rich entertainers and athletes don’t bother them so much). And this is true regardless of how many life-improving advancements the business man has developed and how many jobs he’s created, which are always geometrically and inevitably more than his left wing critics combined can ever boast about.

Bookmark & Share: