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March 31, 2009

Democrats Now Want To Regulate Salaries Of All Employees At Bailed Out Firms

What could go wrong with having Barney Frank decide how much people should be earning?

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.

Timmy Giethner can't even figure out how to pay his own taxes and now he's supposed to be in charge of setting the pay scale of the kid working in the mail room of some bank?

I get, and am sympathetic to, the idea that if you take the government's money, you dance to the government's tune but this is ridiculous. The goal should be to disengage the government as quickly as possible from these companies, not to further intertwine them with the only organization more decrepit than they are, the federal government.

This kind of involvement will only make it more difficult for these firms to get back to self-sufficiency. Of course, some may see that as a feature not a bug.


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posted by DrewM. at 11:32 AM

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