Stabilizing the economy is one thing. Controlling the economy is quite different. For years the government has used a laissez faire approach, with the general rule being to not set rules and allow capitalism to run it's course.
Well that time is over.
Earlier this month Obama took the first steps in having the government run the companies that it has bought shares in declaring no executive can earn more than $500,000 a year and a permanent freeze on all bonuses. An executive position before hand could look at 8-9 figure salaries per year and now at a small figure of six the question is just how is this gonna effect the quality of the people running these companies. The government should be looking to attract some of the best and the brightest to reform these companies in hope of stimulating the economy. Instead it seems they've hung a sign around our countries most profitable businesses, businesses that we've spent hundreds of billions on to rescue, telling executives that the private sector is where to make money and enjoy the capitalist ideals that we've all enjoyed.
The plus side on this move is that we are now not spending millions of tax payer dollars on executive salaries. This won't be much consolation when the companies go under and the money is lost anyways. Which will happen if the best and the brightest go to firms in the private sector away from government control and compete with the companies we've bailed out. Thus a move focused only on the short run idea of looking good in the public's eye can possibily kill over a trillion in GDP potential.
Welcome to the new Government business where making money is only good if it's profiting the government and not the general good.
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I don't think it's a bad thing for the government to introduce some oversight in the corporations where taxpayer money is bailing them out. Take AIG (American International Group) since they were in the news this morning for insisting on their obligations to give bonuses (euphemistically termed "retention pay")totalling about $165 million, or about $112,000 on average, to top execs. I guess the threat is, if they don't get their bonus, they will go elsewhere, but I want to know how bad that would be for AIG, since these same guys (and gals) were at teh helm when the company losses for the 4th quarter in 2008 were $61.7 billion. Since billion and million look similar, let's write it out:That's a $61,700,000,000 loss, without any government interference. I'd say, let them walk.
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