Who Needs $501,000?

The Obama administration has capped executive compensation at financial companies that get bailout money from the feds at $500,000. Most people probably think this is a good idea. I don’t disagree with the concept that taxpayer money shouldn’t be sucked up by bonuses for executives in failing companies. Of course, I don’t think the government should be investing money in failing companies in the first place.

Beyond that, I have a couple of specific objections. First, a number of banks were forced by the federal government to accept TARP funds that they didn’t want. I don’t think the government, having bullied those banks into taking unwanted money, should now be in a position to dictate compensation decisions. Second, while $500,000 may sound like a lot of money, the idea that you can find an executive who will competently run a multi-billion dollar enterprise for that salary is a joke. A car dealership in a mid-sized city, yes; Citigroup, no. So Obama’s decree is basically grandstanding: it will work only if attractive stock option packages supplement the cash salary.

Another point that should be made is that the federal government lavishly compensates a great many people, far beyond a mere $500,000 salary. But those people are generally smart enough to be contractors of one sort or another, not employees. A reader writes:

A $500,000 cap on salaries? By all means…and let’s extend this…to PBS for starters…no employee of any contractor to PBS or NPR…which are “substantially” subsidized by the taxpayers….is allowed compensation of more than $500,000….

And let’s audit them all…they have a cozy arrangement where Bill Moyers, say, as big a left-wing hypocrite as you’ll ever find, charges his production company scads of money, literally millions, and the production company simply has a contract with PBS….so, sure, no salaries….just “production costs” for PBS….Jim Lehrer does the same….the practice is widespread…

In fact, let’s have some hearings to determine WHERE there are such unconscionable contracts underwritten by government subsidies.

So by all means….ANY government subsidized enterprise should have the SAME restrictions as the banks….and let’s include vendors who are so dependent on government contracts (“substantial”) that it amounts to a de facto subsidy….THAT will get some attention…

Or else let the banks do EXACTLY what PBS/NPR does….all the employees will go into several separate “operating companies”…think of them like Bill Moyers…and the banks, which will now be “portfolio companies” will contract with them for management and operations…what the operating and management companies pay their employees is their business….the banks, like PBS/NPR would just have contract expenses for management and operations.

The truth is that there are a great many people who make salaries far exceeding $500,000 through contracts or contacts with the federal government. As the Tom Daschle case shows, $500,000 is chump change for a well-connected Democrat–the party of the rich–in DC. So if we’re going to start an inquiry into whom our tax dollars are ultimately enriching, by all means–let the investigation begin!

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