From TARP to wage controls
President Obama has appointed Kenneth Feinberg as his new federal “pay czar,” responsible for determining executive compensation packages at firms that accepted TARP bailout funds. Mr. Feinberg’s plan is to limit executive pay to $500,000 and benefits to $25,000.
David Harsanyi sums up this evolving TARP quagmire quite nicely in the Denver Post today:
“What’s more infuriating: a government “pay czar” who can dictate the salary of private-sector citizens or some corporate welfare queen having the nerve to complain about a salary cut?”
By now, it is a moot point to highlight the counter-productivity of bailing out failing firms in a market economy. However, the impact that these salary caps will have is obvious: Bailed-out firms will not be able to keep or hire top-level executive talent. The pay cuts will virtually ensure continued mediocre performance from the quasi-government companies as any talented workers who were left at these firms are now sure to leave in favor of other opportunities. Perhaps the administration’s agenda is to ensure that the companies under its control operate as inefficiently as government itself.