Today the Obama administration’s “pay czar” demanded that Ken Lewis, Chairman of the Board of Bank of America, work for free. The “czar,” Kenneth Feinberg, pressured Lewis not only to forgo all remaining compensation for 2009, but to repay the $1 million he has already received this year. Lewis acquiesced, saying that “he felt it was not in the best interest of Bank of America for him to get involved in a dispute with the paymaster.” I’m sure he was right about that.
Response to this outrage has been surprisingly muted. In my view, it is hard to imagine anything more un-American than a “pay czar” empowered to order businessmen to work for free.
The main point here is not sympathy for Mr. Lewis, although I am, in fact, sympathetic to him. He is about to retire and will receive a substantial retirement package–only, perhaps, because the pay czar lacked jurisdiction to negate it. But the idea of empowering the federal government to dictate businessmen’s compensation based on political favoritism is absolutely chilling.
This episode illustrates the problem perfectly. Lewis took on the federal government by testifying that Fed chief Ben Bernanke and Henry Paulson, a Democrat who was then Secretary of the Treasury, bullied him into committing what was, in effect, an egregious violation of the securities laws. Bank of America was due to close on its purchase of Merrill Lynch, and Lewis knew that Merrill’s value was plummeting. Lewis testified under oath that Paulson and Bernanke threatened to fire the entire management and board of Bank of America, including Lewis, if Lewis backed out of the Merrill deal or communicated to the bank’s shareholders what a bad deal the purchase had become.
So, according to Lewis, the federal government forced him to violate his duty to his shareholders in order to advance the government’s objectives. The feds were unhappy with Lewis’s blowing the whistle on their actions, which I believe would have been criminal if carried out by private citizens. Bernanke, at least, denied Lewis’s version of events.
So Lewis took on the feds, and now he’s paying the price. The Obama administration has taken away his entire salary for 2009. Political payback, or just a coincidence? In a banana republic, you never know.
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