Wednesday, September 24, 2008

Let 'em keep their bucks, what can it hurt?

At least that seems to be the attitude of a lot of the punditocracy. Over the weekend I heard several commentators opine that an insistence that putting limits on executive compensation as part of the bailout plan was pointless, that it wouldn't accomplish much, that it would detract from the real hard work of straightening out the nation's economy. Then Andrew Sullivan points us to an Ezra Klein post (titled The Executive Compensation Scam) that reads, in part:
The Democrats are making a big deal over limits on executive compensation. Such limits are nice, but in the context of this crisis, utterly meaningless. If Democrats extract concessions such that CEOs can be paid a lot of money rather than an obscene sum of money, but are unable to add provisions protecting homeowners, they will have lost, and lost badly.. Limits to executive compensation are a feel-good provision with little real world relevance or impact, and while it would be nice to have them in the bill, no one should be fooled into thinking them a high-level priority, nor believing that a compromise where compensation limits feature as a key Democratic boast suggests anything other than a total collapse in the negotiations.
This is rather stupid. Is there really someone at the negotiation table who has the power to say, "OK, we'll put some limitations on CEO pay, but, in return for that, we will do nothing to help homeowners"? Who would be taking that position, exactly? No one in politics, to be sure, and this crisis has inconveniently come around in an election year.

At any rate, this is not really supposed to be a negotiation, but a bailout. The people with the money, namely the representatives of the American people, need to dictate the terms of this deal to the people who need the money, the CEOs. If they don't want the money, fine by me, we'll just let the taxpayers keep a bit more of the money they've earned. (Actually, given the virtual acquisition of AIG by the government, one can easily envision the U.S. employing hostile takeover tactics if needed; let's make an offer to the board if the CEO doesn't want to play just because we'll take away a few of his toys.)

For those people who call this a minor issue, one which shouldn't be allowed to sidetrack an otherwise wonderful deal (yes, that was sarcasm), it's not, because SYMBOLS MATTER. Any journalist who sat through two four-day political conventions just a few weeks ago should understand that these content-free shows are designed to produce gobs and gobs of happy symbols, fleecing the voter with feel-good moments instead of serious attempts to convince anyone why one party's better than the other.

Yet these same journalists are now applying cost-benefit analyses to the bailout and deciding that it just isn't worth it to apply some unwanted discipline to runaway executive compensation packages. We shouldn't be bothered that the three-month tenure of AIG CEO Robert Willumstad is entitled to be rewarded with $22 million (yes, I know that he has turned it down, but the appalling thing is that he is eligible for it).

We're asking the American people to take on vast amounts of risk and debt while permitting those who profited from the risk and created that debt to walk away with treasuries worth of money, and educated people see that as just part of the price that needs to be paid (and I am tired of Barney Frank and others telling us that the government may make money off this bailout; you have no way of knowing that, so you're just lying).

There are people, hard-working people, who are wondering if they'll keep their houses, keep their jobs, keep their lives, and we debate whether or not we can put a provision in a rescue plan that punishes the perpetrators of this monstrous fraud? Is this crazy?

Guess what, pundits, it's possible to put more than one provision into a complicated piece of legislation. We can try to fix the financial situation (with emphasis on the word "try"), maybe help out some of the homeowners and investors (attempting not to reward truly irresponsible behavior), and penalize the nimrods whose poor judgment and laser-like focus on the short term got us into this Ponzi scheme in the first place.

I'm not incredibly hopeful here anyway. We have two disfunctional groups, our Congress and the high-roller financiers, sitting down to hammer out an agreement to fix a system which rational people knew was already broken. Crisis rarely brings on judicious thought, and the American people seem all too content to call on Bruce,, of course I mean Big Hank Paulson (and his successor - Phil Gramm, anyone?) to clean up a problem which he ignored, well, until now.

Yo, government, hurricanes can hit cities, wars kill people, and an unregulated financial system leads to collapse and insecurity. Prayer might have seemed like a good proactive step to handle all these things, but it just hasn't worked. The cracks have been in the foundation for years; the time to seal them came before the 2-foot rain.

But we didn't do that, so now our basement is flooded. Is it really so wrong for the American people to insist that the CEOs have to get out the buckets like everyone else?

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