Obama limits exec pay

Is this President Obama’s move to strip capitalism and move even deeper into his socialistic policies? That’s the concern of some blogging conservatives. Owen Robinson of Wisconsin’s Boots and Sabers calls the president’s decision, “Another step toward a command and control economy.” Kate Wagner from An Ol’ Broad’s Ramblings in Tennessee offers, “Call me a capitalist, but I really don’t think it’s the POTUS’ job to dictate how much a company can pay it’s execs.”

Don’t choke on your lunch, but I tend to believe the president is right to make this requirement. Think about it, if you go to the bank to get a loan, don’t you sign off on a few documents of dos and don’ts? Do make your payment on time; don’t sell the encumbered property and pocket the proceeds; do give us access to your confidential credit information to determine your financial ability to repay. That’s the way I think of this decision. If you want a loan for your failing company, then agree to these regulations.

I’ve been against the TARP from the beginning, and it sure doesn’t look like it did any good. This new set of rules is for the remaining amount to be disbursed, about $350 billion, and doesn’t affect any prior money given. Also, executives needing more than $500,000 a year can get that compensation promised in their own company’s stock, but they can’t cash out until the government loan is repaid. Finally, remember these restrictions are for the heavy guzzlers, not the little loans.

Executives that don’t like these restrictions can simply head somewhere else for a loan.

Will it limit the ability to recruit talent? I would think running your company into the dumper would be more disincentive for new recruits than a limit in compensation. The talent in America is still making money, not shaking a tin cup in front of the government.

There’s no company that’s too big to fail. If you run your business into the ground, there’s no reason for government to bail you out. Artificially holding up companies that should fail only delays the unemployment to come. This decision to hand out billions will only EXTEND the recession. You want this one over? Let the economy implode. We’ll dig out of the hole that’s left.

Keep in mind you need to be aware of your investments. Are the funds you need to survive for five years in government insured accounts? Have you even saved enough to get through a year of unemployment? While some argue a paradox of savings, it’s still America. Every man for himself! Besides, Keynes, who proposed the paradox, is a favorite of those who love big government.

Remember, we’re borrowing all of this money that we’re giving away. That means we’re paying 30% to 40% more than the amounts being bantered around.

This video is worth 7 1/2 minutes of your time.


  1. Randy in Richmond says:

    Sometimes we cannot control where our inner thoughts take us. I’ll never forget, while watching Ronald Reagan’s funeral, how this phenomenon affected eight different people the same way. I and seven of my employees were watching together as the many dignitaries were being seated. As President Clinton took his seat the first thought process to enter my mind was Monica Lewinsky. It was involuntary but very real. Later I discovered that each of my employees had experienced the same reaction. And remember this was eight years after the fact.
    That same thought process was activated today as I saw Tim Geithner with the President to announce the $500,000 salary ceiling on CEO’s accepting stimulus funds for their companies. Here is an admitted tax cheat promulgating financial policy based on the administration’s claim that to pay these CEO’s more would somehow be an injustice. In reality it is a ‘politically correct’ policy that slaps free enterprise right in the face.
    I suspect, at least for me, I will continue to think ‘tax cheat’ in my inner thoughts each time Geithner invokes a financial policy.

  2. Unnnhhhh….Randy….

    The Masters of the Universe who ignored or dumped their Risk Analysis people are lucky to have ANY job, much less one paying half a million dollars/year plus stock (and club, health/dental, etc., etc.)

    Would YOU hire one of them to run YOUR business, knowing what you know now?

    Screw ’em.

  3. J. Strupp says:

    Alright I’m going to rant….

    The idea of free enterprise and preserving capitalism by injecting taxpayer money into our financial system is as delusional today as it was months ago. These banks are insolvent. Bankrupt. Finished. The only reason they exist, in current form, is due to “free market capitalists” i.e. the banking lobby who think nationalizing the banking system is going to bring our economy to the brink of some sort of quasi-European socialist state. Boohoo. Complete nonsense. Look, the first half of TARP didn’t work because the Citi’s, Wells Fargo’s, B of A’s of the world are attempting to curb their massive losses by shoring up their exploding balance sheets. This has gotten perpetually worse in the last few weeks and will continue to do so forever unless we say enough is enough. The deflationary economic environment we’re about to enter will only accelerate the big banks’ inevitable collapse so injecting billions of taxpayer dollars into these guys in an attempt to re-capitalize them is throwing good money after bad. It’s over. Nationalize these big banks already, separate the trash from the viable assets, sell off the cleaned bank and Uncle Sam holds on to the crappola until we can sort this stuff out. Yes, it’s going to cost trillions to create this “bad bank” of sorts. Tough sh–. Better to take our poison now than die a death of a thousands swords ala Japan in the 90’s…..and then have to nationalize the banking system anyway. As for equity/bond holders of these zombies….too bad so sad. Thanks for playing.

    As soon as the government comes to grips with the fact that full nationalization of our banking institutions is the only way to begin getting over this nightmare, the better off we’ll all be.

    P.S. if we are truly experiencing a paradox of savings, debt deflation, ala Irving Fisher (which I believe is the case), then we better have a bit more than a year’s salary in our savings accounts. Especially if our solution to this “market correction” is to just let things implode.

    P.P.S. As for the exploding national debt…..one nightmare at a time thank you.

  4. J. Strupp says:


    In all seriousness, what is your remedy (as a pro tax cut, anti government spending conservative) for deflationary pressures in the American and global economy? If government spending is off the table, then what should be done? De-value the dollar at a faster rate than other nations are currently de-valuing to boost exports? Expensing capital investments for small businesses (which I support) in hopes that Americans businesses will take full advantage of the tax incentive, even though they are losing their collective shirts? Across the board tax cuts which will no doubt be hoarded by a heavily debt burdened population?

    I ask because, as someone who thinks critically about the direction of the Republican Party, I’m having a difficult time understanding which direction Republicans are going to go with this thing. Afterall, supply side economics appears to taking a serious integrity hit these last few months and it’ll get worse if you start to see that CPI number and real wage number go negative next month. I realize you are a true “hands off” capitalist, but the GOP doesn’t have that luxury.

    Anyway, appreciate your input.

  5. What to do?

    Nothing. Then institute a flat tax.

    It will all work out. Yes, there will be casualties. The government would be indebted to those with money in insured accounts. (Less than you’d imagine, though some money markets are now insured.) That’s it.

    Will it happen? No. America is about to spend to the point where several generations will be paying for our greed.

    And that’s what it is, folks. Hope we had a good time with it all.

  6. Randy in Richmond says:

    When you say “one of them”, I’m not sure what you mean. Would I pay someone $500,000 or more to correctly run a large corporation? Absolutely, if it was a good value.
    Let’s take McDonalds for example. Their annual revenue flow is about 23.5 billion dollars with earnings of about 4.3 billion dollars. They have about 1.1 billion shares of stock in play selling for $57–$58. Paying a man or woman $ 1 million to make all this work would be a bargain. It’s about 0.004 % of the revenue flow. Somebody like a Jack Welch would be worth 10 times that.
    These bankers and auto execs need to be weeded out but not by the government. Putting a ceiling on their income is a political move, not an economic one. The government has imposed a minimum wage and now is imposing a maximum wage. This is an extremely complex issue and running out the good execs with the bad hurts everyone.

  7. But Randy, no one is putting a limit on the salaries of those able to manage a business without government subsidy.

    Reminds me of a post I meant to do…

  8. Randy in Richmond says:

    I know, so all the good execs will migrate to the businesses where the bucks are instead of where they are really needed more. I am totally against the stimulus package and pouring good money after bad. Over-regulating is one of the primary reasons we are where we are now. Sure, there will be pain to straighten this out but with Uncle Sam involved it will never be corrected. Freddie Mac is an example of what happens when the Government gets involved and the biggest Ponzi scheme in the world is Social Security.

  9. Over regulating? Do tell. I thought we were in this mess because no one regulated–not the boards of directors, not the execs, not the government.

    I agree that the flip side—micro-managing private enterprise—would bring a whole new mess and exacerbate the current one.

  10. I guess Randy must have missed Markopolos’ testimony today, regarding his opinion of the “over regulation” going on in the market, specifically regarding SEC oversite in the Madoff scheme over the past 8 years.

    Take a peek at the transcript and let me know how regulatory agencies “over regulated”. Markopolos’ testimony will make you want to vomit.

    P.S. you aren’t about to blame this whole crisis on the GSE’s and CRA again are you? The failure of the sub-prime loan industry is but the tip of the iceberg we just smashed into.

  11. “America is about to spend to the point where several generations will be paying for our greed.”

    Your statement assumes that this country has not been this very thing for the last 25 years.

    I was still hoping to get some input of how supply side Republicans will address this crisis since we both know that letting the house of cards fall to the ground is not a political option.

  12. I can’t predict what they’ll do. McCain’s out with a plan today. I’d assume some tax cuts.

    Perhaps part of my unwillingness to jump through your hoop is that I really can’t get past the point that we should do nothing. And if we can’t do nothing, at least accept the “first do no harm” principle.

  13. Randy in Richmond says:

    I make no excuses for fraud, greed, and mismanagement. If Markopolo’s testimony is true those that did not follow through should be punished. It appears more regulation on the regulators is certaintly called for but if they had done their jobs, as Markopolo testified, Madoff could have been exposed as early as 2001 and the rip-off would have been much less.
    Nice try Strupp in trying to take my thunder on the CRA and GSE’s. You’re right that they are but the tip of the iceberg– but they are the very tip our Titanic ran into. The Community Reinvestment Bill of 1992 along with Freddie and Fanny set a foundation of soft, wet soil that failed as the weight of the sub-prime mortgages were built upon them. Add to that the failure of the Congressional oversight committes to act on warnings from regulators that the policies of Freddie and Fanny were constructing a house of cards, even as those in charge were denying there were any problems. They also cooked the books to maximize their bonuses. The three main leaders of this were Franklin Raines, James A. Johnson, and Jamie Garlick. Combined these three civil servants received over 200 million dollars in bonuses. All three are Democrats. While they were in charge Freddie and Fanny contributed millions to ACORN, Jesse Jackson, and elected officials of both parties, among others. The top four elected officials by amount donated to are:
    1) Christopher Dodd
    2) Barack Obama
    3)Chuck Shumer
    4)Barney Frank
    Sound familiar?

    In 2005 Republicans sensed a problem and proposed the Reform Act of 2005, which the Democrats opposed and it did not pass. All four of those listed above voted against the Bill in their respected body.
    This mess is huge and has roots growing in many directions but the taproot is the failure at Freddie and Fanny, the quotas set by the Enterprise Bill of 1992, and regulators along with oversight committees that have been looking the other way.

  14. J. Strupp says:

    ….and no one, especially me, is saying that this is not the case. But you only describe one component of a much larger disease.

    Somehow the idea that tax cuts in times of relative prosperity without curbing government spending is never addressed when discussing our current economic crisis. We are currently undergoing the long overdue process of global deleveraging as a consequence of two and half decades of deficit spending (both government and consumer). One only has to look at the data issued by the Tax Policy Center which has projected over a $2 trillion additional deficit from years following the Bush tax cuts. Now I don’t disapprove of tax cuts and other supply-side incentives for private enterprise, but without fiscal restraint in times of prosperity, this economic policy fails miserably (as we now are seeing). To assume no blame for the economic policies of deficit spending in times of prosperity, revolutionized in the early 1980’s, is ignoring the root of the problems we face today.

    We are now facing an economic environment that minimizes the impact of tax cuts and business incentives. THESE are the times deficit spending is to be employed and I support the federal government’s willingness to do so.