The Washington Post reports, “The Federal Reserve joined the Treasury Department on Thursday in imposing new limits on executive pay, extending the government’s control over compensation at taxpayer-owned companies to institutions that are merely government regulated.”
Reread that and let it sink in for a minute. To put it in perspective, political analyst Rich Galen points out, “Putting aside defense firms — which exist on government funds — there are thousands and thousands of companies which get local, county, state or federal contracts. Does every executive of each of those companies fall under the same rule?” And oh by the way, what was the constitutional basis for taking over those companies? Oh, sorry, we already asked that question…
Comrade Kenneth Feinberg, the Treasury Department Pay Czar, announced the plan Thursday. As for the details, according to The New York Times, “The plan, for the 25 top earners at seven companies that received exceptional help, will on average cut total compensation this year by about 50 percent. The companies are Citigroup, Bank of America, American International Group, General Motors, Chrysler and the financing arms of the two automakers.” The Associated Press reports that the decision will “slash the base salaries of their top executives by an average of 90 percent and cut their total compensation in half.”
The Wall Street Journal summed it up: “These companies — and executives — owe their survival to political intervention, and the price of such taxpayer help is inevitably some populist retribution.”
But surely, this move by the Obama Politburo is worth it for the benefit to the economy, right? Not so fast. Neil Barofsky, the special inspector general in charge of oversight for the Troubled Asset Relief Program (TARP), says last fall’s bailout came at great cost to taxpayers with little to show for it. “Despite the aspects of TARP that could reasonably be viewed as a substantial success,” he wrote, “Treasury’s actions in this regard have contributed to damage the credibility of the program and of the government itself, and the anger, cynicism and distrust created must be chalked up as one of the substantial, albeit unnecessary, costs of TARP.”
So far, Treasury has spent more than $454 billion through TARP programs, and the administration is expected to announce a plan to extend $5 billion more to small banks. To date, 47 recipients have paid back about $73 billion. Despite promises to the contrary, however, Barofsky admits that “it’s unrealistic to think we’re going to get all of that money back.” Keen sense of the obvious.