A Bill to let Big Government Set Your Salary

Discussion in 'Politics' started by bugscoe, Mar 31, 2009.

  1. 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 institutions 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 byork@washingtonexaminer.com. His column appears Tuesday and Friday, and his stories and blog posts can be read daily at ExaminerPolitics.com.
  2. The bottom-line is that if you take TAXPAYER money to keep your company afloat ( and in some cases staving off Bankruptcy ) you are going to play by the rules of the Piper.

    If you don't want to abide by executive compensation rules, then run your company effectively and prudently - - - AND DON'T TAKE ANY TAXPAYER MONEY!

    It's pretty simple.
  3. This bill isn't targeted just at executives, it's for ALL employees.
  4. Some people here just don't get it. They think they "know" but they have no clue.

    I have worked in corporate banking for a number of years in account management and credit. Occasionally, I inherited a "special loan" client, which was a euphemism for a non-paying borrower or one in otherwise financial difficulty who has breached loan agreements in one way or another. In all such cases where the bank does not just call the loan outright, the bank almost always imposes covenants to protect its position while continuing to participate in the borrower's financial requirements. Such covenants include, but are not limited to, the limiting of withdrawals in any form from the company including the area of executive compensation in all its forms, dividends, unscheduled capital expenditures and so on. As for operating expenses, whatever they may be, unless there is a reasonable prognosis of corporate viability, then steps are taken to begin winding down the bank's exposure, and all that it entails. Everyone is in it together. Or not at all.

    Any all-knowing blowhards who are oblivious to matters of lending would be well advised to remain silent regarding topics they know nothing about.
  5. Hey dipshit, just in case you're not paying attention, we're not talking about corporate banking. We are talking about the government.
  6. Hey, Dipshit, we are talking about lending/financial assistance, and the steps that lenders undertake to protect their loan assets in times of financial distress. Can you connect the dots?
  7. T dog,

    Then what is your opinion of why these terms weren't put in place with AIG in the begining. If your post is standard protocol in private industry obviously those in Gov't must have been familiar with the private industry procedure yet did nothing to prevent the bonus issue citing contract law. Interesting is the fact the gov't didn't want to violate contract law yet is using the tax law as a punitive weapon (Charles Rangels words, whch he backed down from anyways pffttt.) which may violate some part of the constitution or some law somewhere.
  8. http://www.usconstitution.net/const.html

    I know this link is like throwing holy water on you and your party, but you connect the dots for me because I can't seem to...
  9. Good question. From a lending standpoint, I don't have an answer for you. It is certainly unlike anything I ever encountered during my comparatively mundane banking career.

    Legal nuances aside, I continue to find it repugnant that bonuses would be paid to the very people who brought AIG to its knees. However, unlike a lot of people here, I know when I am out of my depth. And so, I make an effort to differentiate my opinion from fact.
  10. #10     Mar 31, 2009