It’s Not Just the Bailouts

This arresting exchange occurred in Robert Gibbs’ White House press conference yesterday. Gibbs was asked about the AIG bonuses, but his answer quickly veered off into executive compensation generally:

QUESTION: One follow-up. You — you mentioned that the president and the American people are outraged. There were some on Capitol Hill who have questioned his outrage. They — they say, how can he come out and say he’s outranged when his economic team had just thoroughly looked into these payments and concluded they had to be made?

GIBBS: I — I suggest that there’s very little basis for any of those — for any of that thought. I — I — I don’t think anybody on Capitol Hill should doubt the genuineness of the outrage.

There was — understand that the compensation structure for executives prior to the president of the United States, Barack Obama, laying out the way we’re going to do business changing, there was — Barack Obama came in and there was a new sheriff in town on executive compensation.

He changed the way we did business here and the way Wall Street did business by instituting the toughest executive compensation rules that had ever been entered into, changing the lawlessness with which all of this was governed prior to that announcement.

So I think it would bear some going back to any of the critics of the president’s genuine outrage and ask them what they did or didn’t do to change the way executives are compensated before Barack Obama got to town as president of the United States and, in one of his very first announcements, financial announcements, argued for a change going forward in the way we compensate executives.

As happens so often with Gibbs, it’s hard to tell what he is talking about. What “executive compensation rules” is he referring to? I don’t know. What we know for sure, though, is that there is a “new sheriff in town” who will do away with the “lawlessness” of the free market and change “the way we” — we! — “compensate executives.” In other words, the new sheriff has his hand on your wallet.

Lest anyone doubt that Gibbs was speaking for the President, here is what Barack Obama had to say this morning, before he boarded a helicopter for his campaign swing to California:

People are rightly outraged about these particular bonuses, but just as outrageous is the culture that these bonuses are a symptom of that have existed for far too long; a situation where excess greed, excess compensation, excess risk taking have all made us vulnerable and left us holding the bag.

And one of the messages that I want to send is that, as we get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don’t think that we can return to business as usual. … It means that shareholders and board of directors have to hold executives more accountable for their compensation scales. You know, the fact that these guys are looking for bonuses having run down AIG begs the question of why were they making that much beforehand when nobody was criticizing them? …

The financial regulatory package that we’re designing as well as the economic policies that we want to put in place are going to put an end to that culture. …

Now, keep in mind — I think it’s very important to remind ourselves that there are a whole bunch of folks now who are feigning outrage about these bonuses that a year ago or two years ago or three years ago said, well, we should never meddle in these compensation plans. These are the best and the brightest. They know what they’re doing. That’s part of the market. And now, suddenly, they’re outraged.

The point that I’ve been trying to make consistently has been that we believe in the free market. We believe in capitalism. We believe in people getting rich. But we believe in people getting rich based on performance and what they have add in terms of value and the products that services that they create.

And it’s appropriate for us to have some regulatory mechanisms in place to ensure that we never have a situation where the government has to step in or you’ve got taxpayers who are having to foot the bill for other people’s mistakes. … When last year, Barney Frank and I worked to allow shareholders to at least cast a non-binding vote on compensation packages, there were some people who attacked us saying government has no business doing that. Well, look, all we’re trying to say is you’ve got to be accountable to somebody. And it’s that measure of accountability that I think is part of what has made America strong. And we have to get back to those kinds of values.

So some kind of regulatory initiative on executive compensation is coming, and it won’t be limited to non-binding shareholder votes. Never let a crisis go to waste!

ONE MORE THING: A reporter asked Obama whether he would be returning the campaign contributions, in excess of $100,000, that he got from AIG. Obama didn’t answer. He’s not interested in changing that culture.

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