And you thought it couldn't happen to you

[Crookshanks]

Beyond AIG: A Bill to let Big Government Set Your Salary
By Byron York
Chief Political Correspondent 3/31/09

It was nearly two weeks ago that the House of Representatives, acting in a near-frenzy after the disclosure of bonuses paid to executives of AIG, passed a bill that would impose a 90 percent retroactive tax on those bonuses. Despite the overwhelming 328-93 vote, support for the measure began to collapse almost immediately. Within days, the Obama White House backed away from it, as did the Senate Democratic leadership. The bill stalled, and the populist storm that spawned it seemed to pass.

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill's language. That includes regular pay, bonuses -- everything -- paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of ins utions that have already received funds.

In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."

The bill passed the Financial Services Committee last week, 38 to 22, on a nearly party-line vote. (All Democrats voted for it, and all Republicans, with the exception of Reps. Ed Royce of California and Walter Jones of North Carolina, voted against it.)

The legislation is expected to come before the full House for a vote this week, and, just like the AIG bill, its scope and retroactivity trouble a number of Republicans. "It's just a bad reaction to what has been going on with AIG," Rep. Scott Garrett of New Jersey, a committee member, told me. Garrett is particularly concerned with the new powers that would be given to the Treasury Secretary, who just last week proposed giving the government extensive new regulatory authority. "This is a growing concern, that the powers of the Treasury in this area, along with what Geithner was looking for last week, are mind boggling," Garrett said.

Rep. Alan Grayson, the Florida Democrat who wrote the bill, told me its basic message is "you should not get rich off public money, and you should not get rich off of abject failure." Grayson expects the bill to pass the House, and as we talked, he framed the issue in a way to suggest that virtuous lawmakers will vote for it, while corrupt lawmakers will vote against it.

"This bill will show which Republicans are so much on the take from the financial services industry that they're willing to actually bless compensation that has no bearing on performance and is excessive and unreasonable," Grayson said. "We'll find out who are the people who understand that the public's money needs to be protected, and who are the people who simply want to suck up to their patrons on Wall Street."

After the AIG bonus tax bill was passed, some members of the House privately expressed regret for having supported it and were quietly relieved when the White House and Senate leadership sent it to an unceremonious death. But populist rage did not die with it, and now the House is preparing to do it all again.

Byron York, The Examiner’s chief political correspondent, can be contacted at [email protected]. His column appears Tuesday and Friday, and his stories and blog posts can be read daily at ExaminerPolitics.com.
=====================

This is why bailouts are a BAD idea! Once the government gets its foot in the door, it will just move in and take over. Please tell me this sets off alarm bells for most of you.

[LnGrrrR]

I'm going to use the conservative plan on wiretaps: "If you're done nothing wrong, you should have nothing to be afraid of!"

So... if you're doign your job, and doing a good job... you should have nothing to fear, right?

Honestly, I think this is an overreach. I just wanted to be snarky.

[Blake]

This is why bailouts are a BAD idea! Once the government gets its foot in the door, it will just move in and take over. Please tell me this sets off alarm bells for most of you.

Let me know when government sets the salaries of companies execs that did not ask for bailout money.

The alarm bells that went off were triggered by these idiots giving themselves bonuses after taking tax payer money.

[George Gervin's Afro]

Beyond AIG: A Bill to let Big Government Set Your Salary
By Byron York
Chief Political Correspondent 3/31/09

It was nearly two weeks ago that the House of Representatives, acting in a near-frenzy after the disclosure of bonuses paid to executives of AIG, passed a bill that would impose a 90 percent retroactive tax on those bonuses. Despite the overwhelming 328-93 vote, support for the measure began to collapse almost immediately. Within days, the Obama White House backed away from it, as did the Senate Democratic leadership. The bill stalled, and the populist storm that spawned it seemed to pass.

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill's language. That includes regular pay, bonuses -- everything -- paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of ins utions that have already received funds.

In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."

The bill passed the Financial Services Committee last week, 38 to 22, on a nearly party-line vote. (All Democrats voted for it, and all Republicans, with the exception of Reps. Ed Royce of California and Walter Jones of North Carolina, voted against it.)

The legislation is expected to come before the full House for a vote this week, and, just like the AIG bill, its scope and retroactivity trouble a number of Republicans. "It's just a bad reaction to what has been going on with AIG," Rep. Scott Garrett of New Jersey, a committee member, told me. Garrett is particularly concerned with the new powers that would be given to the Treasury Secretary, who just last week proposed giving the government extensive new regulatory authority. "This is a growing concern, that the powers of the Treasury in this area, along with what Geithner was looking for last week, are mind boggling," Garrett said.

Rep. Alan Grayson, the Florida Democrat who wrote the bill, told me its basic message is "you should not get rich off public money, and you should not get rich off of abject failure." Grayson expects the bill to pass the House, and as we talked, he framed the issue in a way to suggest that virtuous lawmakers will vote for it, while corrupt lawmakers will vote against it.

"This bill will show which Republicans are so much on the take from the financial services industry that they're willing to actually bless compensation that has no bearing on performance and is excessive and unreasonable," Grayson said. "We'll find out who are the people who understand that the public's money needs to be protected, and who are the people who simply want to suck up to their patrons on Wall Street."

After the AIG bonus tax bill was passed, some members of the House privately expressed regret for having supported it and were quietly relieved when the White House and Senate leadership sent it to an unceremonious death. But populist rage did not die with it, and now the House is preparing to do it all again.

Byron York, The Examiner’s chief political correspondent, can be contacted at [email protected]. His column appears Tuesday and Friday, and his stories and blog posts can be read daily at ExaminerPolitics.com.
=====================

This is why bailouts are a BAD idea! Once the government gets its foot in the door, it will just move in and take over. Please tell me this sets off alarm bells for most of you.

So this makes you happy right? No more AIG type bonuses. that's what conservatives want correct?

[td4mvp21]

I don't agree with this at all, but if they showed any ounce of responsibility with the government bailout this wouldn't have to happen. Tell these companies that use the bailouts for something other than their purpose to quit being so ing greedy and then they won't have to worry about the government controlling salaries.

[xrayzebra]

.

The alarm bells that went off were triggered by these idiots giving themselves bonuses after taking tax payer money.

Hey Blake, have you always been stupid. Your Dimm-o-craps put the
bonuses in the bill and your "great leader" signed it. And then they
started making funny noises like they never knew it was there.

And now the banking queen is doing her thing and showing what a
great American he is by sitting salaries for anyone that "he" gave
money to. Give me a break............

Welcome to Amerika...

[ChumpDumper]

So don't take the bailout money.

Oh wait, they still want it.

Nevermind.

[DarrinS]

Hey Blake, have you always been stupid. Your Dimm-o-craps put the
bonuses in the bill and your "great leader" signed it. And then they
started making funny noises like they never knew it was there.

And now the banking queen is doing her thing and showing what a
great American he is by sitting salaries for anyone that "he" gave
money to. Give me a break............

Welcome to Amerika...

These AIG bonuses are an outrage!!!




Oh, wait.

[Blake]

Hey Blake, have you always been stupid.

Your Dimm-o-craps put the
bonuses in the bill and your "great leader" signed it. And then they
started making funny noises like they never knew it was there.

Have you always been this clever? dimm-o-craps is greatness.

Either Dodd is an idiot or he's a shrewd politibusinessman. Maybe a little of both. I wish it was possible for Obama to ask him to step down the same way he asked the GM CEO to quit.

Congress as a whole though made a wrong assumption that companies would give fair bonuses to their execs based on performance and maybe they now argue 'hindsight 20/20'.

I think everyone in Congress has now acknowledged how clearly wrong it was. It's why some were asked to give their bonuses back.

And now the banking queen is doing her thing and showing what a
great American he is by sitting salaries for anyone that "he" gave
money to. Give me a break............

Welcome to Amerika...

thank goodness that they didn't make provisions in the bill that allowed execs to keep setting their own salaries while taking in bailout money.

spelling America with a K is greatness too.

[ChumpDumper]

The "wrongness" of the retention bonuses as I understand them has not been explained. Folks like Dodd acted cowardly or ignorantly when faced with the wrath of the rubes who still can't understand what the bonuses were for.

[Crookshanks]

I really don't care about the AIG bonuses - they are such a small percentage of the money that has been handed out by the gov't in the last 7 months. It's the phony outrage by the Obama Administration and Congress that really gets me. This is THEIR mess and they are throwing out red herrings to deflect the attention from them and their culpability in all this.

NONE of these bailouts should have been done. I was against it back in September and I'm against it now. We have laws in place to handle Corporate failures - they should have been left to sink or swim on their own, in accordance with bankruptcy laws.

Yes - it would've been painful, but much less so than the current mess we are in. Our whole culture is now geared to preventing any kind of failure. We can't use red pens to grade papers because it's damaging to young students. We have to dumb down everything so that the dumb kids don't feel bad. And this is the result - we now have the mindset that no one can fail and we must bail out everyone and everything. It's really very sad - and where will it all end?

[ChumpDumper]

Yes - it would've been painful, but much less so than the current mess we are in.

I disagree. The bottom line of so many other companies was dependent upon AIG that it likely would have been much worse had it just been allowed to fail. Again, when free-market zealots like Bush and Paulson change their respective philosophies concerning government intervention around 180 degrees when faced with the possibility of an AIG failure, I tend to think the bailout is probably the lesser evil.

[Blake]

I really don't care about the AIG bonuses - they are such a small percentage of the money that has been handed out by the gov't in the last 7 months. It's the phony outrage by the Obama Administration and Congress that really gets me. This is THEIR mess and they are throwing out red herrings to deflect the attention from them and their culpability in all this.

NONE of these bailouts should have been done. I was against it back in September and I'm against it now. We have laws in place to handle Corporate failures - they should have been left to sink or swim on their own, in accordance with bankruptcy laws.

Yes - it would've been painful, but much less so than the current mess we are in. Our whole culture is now geared to preventing any kind of failure. We can't use red pens to grade papers because it's damaging to young students. We have to dumb down everything so that the dumb kids don't feel bad. And this is the result - we now have the mindset that no one can fail and we must bail out everyone and everything. It's really very sad - and where will it all end?

if you are making this a bailout issue, then great......but if you are making this into another of your Obama rants, you do realize that if McCain was elected that he most likely would have pushed a bailout package that would include helping AIG?

just so we're clear....

[DarrinS]

I disagree. The bottom line of so many other companies was dependent upon AIG that it likely would have been much worse had it just been allowed to fail. Again, when free-market zealots like Bush and Paulson change their respective philosophies concerning government intervention around 180 degrees when faced with the possibility of an AIG failure, I tend to think the bailout is probably the lesser evil.

So Bush and Paulson caused all this?

[ChumpDumper]

So Bush and Paulson caused all this?

Not at all, but thanks for missing the point once again. You are still in blame mode. Let me know when you are out of it.

[Crookshanks]

if you are making this a bailout issue, then great......but if you are making this into another of your Obama rants, you do realize that if McCain was elected that he most likely would have pushed a bailout package that would include helping AIG?

just so we're clear....

NONE of these bailouts should have been done. I was against it back in September and I'm against it now.

I was furious with Bush for pushing it and furious with McCain for going along with it. I think anyone who voted for it should be tossed out of office!

[RandomGuy]

NONE of these bailouts should have been done. I was against it back in September and I'm against it now. We have laws in place to handle Corporate failures - they should have been left to sink or swim on their own, in accordance with bankruptcy laws.

Yes - it would've been painful, but much less so than the current mess we are in.

Drinking 100 gallons of water won't kill you, if you drink that over the course of three months.

It WILL kill you if you drink it over the course of three days.

Doing nothing and letting "the market" sort it all out, would have let one of two emotions dictate the responses, greed or fear.

In a panicked rush to the exit, you would have seen cascading failures, as one bank fails, and the failure of that bank destroys the assets of another bank that then fails, detroying the assets of yet another bank... etc etc etc.

It would have been almost quite literally like watching dominoes fall, and it would not have stopped at the sick banks, it WOULD have taken out even healthy, well-managed banks.

Bankruptcy courts would have been completely swamped by the deluge of failures, sometimes involving tens of trillions of dollars of transactions (the debits and credits add up VERY quickly) to unwind.

In the meantime, while everyone was waiting years for the courts to work through the massively complex failures, you have untold trillions of dollars worth of capital tied up on the sidelines, as everybody waited on the Gordian knots to be untangled.

No ma'am, doing nothing would not, no how, no way have been better.

It would have been somewhat similar to lighting the wick on an oil lamp and burning it out over the course of 12 hours, or smashing it on the floor and throwing a match on it, then watching as the resulting fire burns the house down.

In the end, the amount of oil burned would have been the same, but the collateral damage would have been more than you would have been willing to pay.

We chose the "least bad" of the nasty alternatives.

[clambake]

exactly. thay couldn't possibly understand, hence, they have no idea what they're ing about.

[RandomGuy]

This is the point at which the following should be noted:

Shareholders, the ultimate owners of a company, decide, through their elected board members who comprise the "executive compensation committees", already determine what compensation should be.

Often, the existing management of a company is represented on a board, and the relationships between management and the board can be generously described as "cosy". I would use the term "incestuous" with all the repulsiveness ineherent in that word.

Quite frankly, having read my share of financial reports, and read a lot in business press, I have come to highly doubt that the high pay packages offered to CEOs and other top executives really maximizes shareholder returns, and there is some actual data to support this in the form of a study regarding the negative correlation between CEO pay and company performance. (note negative correlation = more CEO pay = lower company performance)

In economic terms utility determines total demand for any produce, and that is ultimately an entirely emotional judgement.

In this case, I am reasonably certain that the emotional judgment of most boards of directors, coupled with the rather clear conflicts of interest that are given a wink and a nod in corporate governance in this country, means that CEOs are highly overpaid for the value that they add to their firms.

Given all of this, if the government, as the newest, largest shareholder in a lot of these companies decides that its perception of added value is different from what is very likely an unethical market distortion of pay, I am not inclined to dismiss it out of hand as being inherently bad.

We, as passive shareholders, have allowed this market distortion to continue through the "free market". Quite frankly I am happy to have SOMEONE take an interest in what is best for us, as opposed to the wink and nod understanding between corporate boards and executives that seem to rob us of value anyways.

(duplicated material of mine from another thread, but applicable to this one, pardon my copy and past)

[clambake]

to have any persuading influence with major shareholders, you'd better have a considerable block of shares.

[RandomGuy]

to have any persuading influence with major shareholders, you'd better have a considerable block of shares.

We collectively own stocks through our mutual funds, and now, through the government.

I think that en les us to *some* say.

[Blake]

The "wrongness" of the retention bonuses as I understand them has not been explained. Folks like Dodd acted cowardly or ignorantly when faced with the wrath of the rubes who still can't understand what the bonuses were for.

true.

my first question was 'if it's not wrong, then why did 15 out of 20 AIG execs give their retention bonuses back?
but then you realize not just the pressure they are put under from the govt, but some of the alleged threats they say they received from some of these rubes, and the picture becomes clearer.

I think the word 'bonus' in this volatile economic atmosphere makes people go crazy. If they were to call it something like 'retention pay', maybe people realize it's part of the salary that is meant to attract and keep the best people.

[LnGrrrR]

Didn't Japan choose to do nothing, leading to the "Lost Decade"?

[LnGrrrR]

true.

my first question was 'if it's not wrong, then why did 15 out of 20 AIG execs give their retention bonuses back?
but then you realize not just the pressure they are put under from the govt, but some of the alleged threats they say they received from some of these rubes, and the picture becomes clearer.

I think the word 'bonus' in this volatile economic atmosphere makes people go crazy. If they were to call it something like 'retention pay', maybe people realize it's part of the salary that is meant to attract and keep the best people.

I don't think even the "attract and keep the best people" would fly, given that they pretty much ed up the world's economy. , i could manage to do that, and probably without being able to give myself a few million dollars.

[Winehole23]

, i could manage to do that, and probably without being able to give myself a few million dollars.

On a somewhat personal note: if given the chance to do so, would you?