We Will Control the Horizontal
We will control the vertical, and we will control your paycheck, says Barney Frank. Representative Frank has been quietly working on legislation entitled, Pay for Performance Act of 2009. Here is the kicker,
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.
Now that doesn’t sound that bad, but keep one thing in mind: some of the financial institutions that have taken TARP money are financially sound. They took that money because the government wanted them to take it so people wouldn’t know which institutions were in financial trouble. So a bank that has been “doing it right” now will have to put up with Barney Frank and his cronies. Don’t do what Barney wants and your bonuses might just go poof.
Oh I’m sure that Barney would say, “I’d never do that!” But look at laws like the RICO statutes. Those were to be used against organized crime, but now they are used in a variety of creative ways. For example, the federal government used RICO laws when going after tobacco companies.
RICO was designed to be invoked against organized crime, but nowadays it’s a standard bullying tactic by plaintiffs’ attorneys. This time, however, the Justice Department had to deal with an embarrassing admission, tucked away in the final sentence of the press release that announced its lawsuit: “There are no pending Criminal Division investigations of the tobacco industry.” After a five-year, multimillion dollar inquiry by two dozen prosecutors and FBI agents, the government came up with one misdemeanor plea against an obscure biotechnology company. The government dissected allegations that tobacco executives perjured themselves when testifying before Congress. Prosecutors plowed through documents for evidence that cigarette makers manipulated nicotine levels. Whistle-blowers and company scientists testified before grand juries. The outcome: not a single indictment of a tobacco company or industry executive.
Nonetheless, President Clinton collared his attorney general and she, somehow, conjured up a RICO complaint that accused the industry of the same infractions for which grand juries could not find probable cause. Among 116 counts against the industry, Janet Reno and her minions included all sorts of foolishness to ratchet up the pressure for an exorbitant financial settlement. Here’s one example, count number three: In November 1959, the industry “did knowingly cause a press release to be sent and delivered by the U.S. mails to newspapers and news outlets. This press release contained statements attacking an article written by then-U.S. Surgeon General Leroy Burney about the hazards of smoking.” There you have it — racketeering, in all its sordid detail.
Clinton insiders knew the charges were trumped up. Former Clinton aide Rahm Emanuel put it this way: “If the White House hadn’t asked [Reno, she] would never have looked at it again.”
In other words, if you give government power for one problem don’t surprised if they try to find new and creative ways to use that power to pursue various agendas. Oh and look, Rahm Emanuel. The more things change….
Getting back the Barney’s bill,
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.”
So it isn’t just top level executive and managers, but possibly any and all employees.
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.”
That’s great Rep. Alan Grayson, but what sort of limitations are in this bill? What about banks that took TARP money because the government didn’t want just the financially troubled banks taking TARP money? They weren’t getting rich off public funds, they weren’t abject failures. In fact, they were doing you guys a favor, and this is how you pay them back. With friends like Rep. Grayson, watch your back, he is a double dealing snake.
When the Democrats tell you they don’t want to run companies…don’t believe them. As John Emerich Edward Dalberg-Acton wrote long ago,
I cannot accept your canon that we are to judge Pope and King unlike other men with a favourable presumption that they did no wrong. If there is any presumption, it is the other way, against the holders of power, increasing as the power increases. Historic responsibility has to make up for the want of legal responsibility. Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it.
My fear is that the language in this bill will be stretched or built upon. Soon any business that benefits from some sort of government spending would have its pay and benefits packages scrutinized by government bureaucrats. Even if you are a well run business with a “reasonable” pay/benefits structure you’d still have to go through the regulatory process. This would increase the costs of doing business, and overall that would reduce economic growth and employment from its potential. After all, we’ve seen something similar with regards to public takings of private property, e.g. Kelo. There, the public takings clause was broadened and broadened to the point where now a city or state government can take a person’s land and give to a developer for personal gain. The compensation to the initial property holder is almost always going to be what ever sale price the original property holder would normally ask. I think it is not unreasonable to think that this type of legislation, if it becomes law, would evolve in pretty much the same way.