By on June 8, 2009

Don’t worry Detroit: you’re not being singled out for “special” federal supervision (perish the thought). The New York Times reports that Congress is taking control of the pay and compensation for all beneficiaries of federal largesse who’ve double-dipped into the taxpayer’s purse. “The Obama administration plans to require banks and corporations that have received two rounds of federal bailouts to submit any major executive pay changes for approval by a new federal official who will monitor compensation, according to two government officials.” A Pay Czar! Heads-up, bosses, meet the new boss of bosses: Kenneth Feinberg. You may remember Mr. Feinberg as the 9/11 victims’ compensating lawyer originally tipped to be Obama’s Car Czar—a job so big the Prez eventually gave it to Wall Street insider Steve Rattner and 24 of his closest friends. Anyway, there’s an important (if not exactly auto-oriented) dynamic in play here . . .

Goldman Sachs, JPMorgan Chase and a handful of others have worked to rid themselves of their ties to the government in order to shed restrictions on pay that they say put them at a competitive disadvantage.

But under the administration’s new plans, even companies that repay the taxpayer money will not escape some form of oversight on their compensation structure.

Tin hat time. Is that why Uncle Sam was so reluctant to take back the bailout bucks? OK, this is scary.

Treasury Secretary Timothy F. Geithner plans to testify on compensation on June 18, and that may be when he outlines the principles for the entire industry. Those principles will be permanent: when bailed-out companies return the government money, they will still have to follow those principles.

The days of Chrysler and GM executive tough-snuffling are over. Or are they? Chrysler has already figured out a way to pay its suits as Fiat employees. And if GM can’t find a loophole somewhere, well, they wouldn’t be GM would they?

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25 Comments on “Bailout Watch 549: Feds to Crack Down On ChryCo, GM Exec Pay...”


  • avatar
    GS650G

    And people still think Ayn Rand was full of shit.

  • avatar
    ihatetrees

    Getting good management in Detroit was tough before – I mean, if you were a top grad or manufacturing manager, would you really want to work for GM, Ford, or Chrysler over Nissan or Toyota???

  • avatar
    Luther

    The retarded children and their politicians are a laugh-a-minute…aren’t they?

  • avatar
    lw

    This is pretty easy.. All the execs will work for General Motors Executive Compensation Inc.

    GMEC will contract the execs to GM and cover all of their “costs” within a contract rate structure.

    GMEC will be fresh and clean and will never take a dime from Obamy…

  • avatar

    Its really no different than restrictions on other government assistance programs.

    If you want to rent houses out to government subsidized tenants via section 8 you have to have your housing pass certain inspection standards that are not required for other non susidized tenants, if a school wants federal money they have to comply with certain standards like title IX in sports etc.

    If you want to suckle at the teat of the Federal bureaucracy you have to comply with their rules.

    I specifically don’t rent out my rental houses to section 8 tenants because its a lot of hassles and the tenants can be nightmares but if I want that Federal money then I have to play by their rules.

  • avatar
    AG

    Oh Ayn Rand was full of shit, to be sure. Her novel Atlas Shrugged demonstrated a total lack of understanding of not just socialism, but capitalism as well. Somehow engineers and middle-management types read that book and get it into their heads that capitalism was designed to benefit them. Just because you make more than the average assembly line dude doesn’t change the fact that you’re still just a worker, subject to being outsourced, insourced, or laid off en masse on a whim. Especially since the private sector has managed to offload their job training programs on to colleges and universities.

    Its not like anybody else was willing to step in to enforce the rules of a free market. GS650G you should be thanking Obama.

  • avatar
    midelectric

    So it takes the federal government to rein in excesses that the BoD and shareholders were unable/unwilling to curtail?

    As a taxpayer I’m fine with that, I’m sure with a little sensible budgeting a CEO can get by on $500k-1m/year.

    When they start turning a profit we can talk about a raise. Kind of like how the rest of the world works.

  • avatar
    shiney2

    GS650G :
    June 8th, 2009 at 10:02 am

    And people still think Ayn Rand was full of shit.

    Ayn Rand is full of shit. Most of the peaple who think they are John Galt are paper shuffling James Taggarts. The real irony of Atlas Shrugged is that the productive peaple were in effect forming a “union” and going on strike! Does that make it left wing literature?

  • avatar
    Anchorman33

    midelectric :

    So it takes the federal government to rein in excesses that the BoD and shareholders were unable/unwilling to curtail?

    As a taxpayer I’m fine with that, I’m sure with a little sensible budgeting a CEO can get by on $500k-1m/year.

    When they start turning a profit we can talk about a raise. Kind of like how the rest of the world works.

    I agree with basic prinicple here, but not that it takes Federal oversight to accomplish it. One would think in a rational world (I know, big strech) that shareholders and a compent BoD would police themselves to not send millions to execs who have driven a company into the ground or can’t dig out of the current hole.

    The constantly expanding circle of oversight makes me nervous to the point of worrying about what’s next outside of industry/finance. I was never overly excited about the Detroit bailout, now I’m even less so. Almost glad I’m not in the market for a car right now execept in my daydreams.

  • avatar
    VerbalKint

    Here’s hoping Hollywood and the music industry will need bailouts. It would serve them right.

  • avatar
    lw

    VerbalKint:

    I doubt that will happen.. Not that politicians wouldn’t do it, but I can’t see how peak credit could cause hit Hollywood hard enough to require bailouts.

    Less pictures will be produced, stars will take smaller paychecks, but people will still go to movies, although they may be paying more with cash vs. Visa.

    Dinner and a movie probably becomes dinner or a movie and I think most folks would rather see a 2 hour picture with popcorn and drinks vs. a 45 minute meal at Outback.

  • avatar
    dkulmacz

    I read Atlas Shrugged in college and thought Ayn Rand was The Shit. I’m currently listening to an unabridged audiobook version of it, and after 25 years of real life experience, I now realize that she was Full of Shit. I’m amazed (and somehow saddened) when I hear about people who’ve never outgrown her. Seems a bit common here.

  • avatar
    BDB

    “There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged.

    One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world.

    The other, of course, involves orcs”–John Rogers

  • avatar
    long126mike

    Like when Reagan cut the taxes and the economy boomed. They hate that to this day and try to rewrite the history.

    I nominate this for the unintentionally ironic and misinformed comment of the day.

  • avatar
    psarhjinian

    Like when Reagan cut the taxes and the economy boomed.

    Yeah, ask H. George Bush about that “boom” and what followed it.

  • avatar
    BDB

    Reagan gave us the second biggest tax increase in American history in 1986.

  • avatar
    jkross22

    The Dems still whining about Reagan need to let it go. He had overseen, and in a couple of ways, encouraged the economic expansion that occurred under his watch.

    He wasn’t perfect, but on balance, he did much more good than harm… Unlike the junior Bush and our current CEO in Chief.

  • avatar
    long126mike

    Oh, how the communist types hate Reagans success.

    “His” “success”?? Thanks for the laugh.

    Reagan got to enjoy a period of cheap oil prices, thanks to Jimmy Carter. Reagan is also responsible for the largest hike in fuel taxes in US history, followed only by his sidekick, HW Bush.

    “Read my lips – no new taxes!” Luckily, America is full of myth-lovers like yourself who are easily duped by rhetoric.

  • avatar
    long126mike

    Unlike the junior Bush and our current CEO in Chief.

    Obama’s been in office a total of four and a half months and you’re evaluating the outcome of his actions? Talk about premature.

    A lot of the noise heard now differs not one bit from the noise in early 1993. Red-baiting, Nazi-baiting, death of the Republic, Carter II… yeah, how did that turn out?

    Right. The greatest economic performance in modern American history.

    Let’s reserve historical judgment for when we have the actual results to look at.

  • avatar
    T2

    I believe Obama himself mentioned that the shareholder base of large companies is often too diffuse to be able to exert any control.

    Thus GM’s insulated BOD allowed management to run rampant. It is therefore not surprising to me that they began to award themselves generous compensaton packages.

    This “entitlement” thing is also appearing in the civil service. We just had the CEO of eHealth resign. Being paid $240k from the public purse wasn’t enough apparently so she threw in an additional $124k bonus.
    If the prevailing mantra is to be – I am controlling millions – I deserve a million.
    Then by that logic extrapolating on a bus driver making 100k driving a $400k bus infers a jetliner pilot should make at least 100 times that – say $10million p.a. ?

    AG: wrote
    Somehow engineers and middle-management types read that book and get it into their heads that capitalism was designed to benefit them. Just because you make more than the average assembly line dude doesn’t change the fact that you’re still just a worker, subject to being outsourced, insourced, or laid off en masse on a whim.

    Exactly right AG, and this ‘hire and fire’ mentality from today’s management has been observed by up and coming generations who will be eschewing science and engineering degree courses for the career stability offered by MBAs and Commerce Degrees etc.
    Unless the SEC is proactive and makes effective shareholder democracy a reality then the opportunity cost of investing time and money in persuing specifically an engineering or science education will just not be cost effective. Is this what we want ?

  • avatar
    Dynamic88

    RF – are you sure you have the facts right? After the loans are repaid (if ever) I don’t see how the govt. can oversee exec compensation.

    Meanwhile, salary caps will make it difficult to attract the kind of talent the private sector traditionally goes for – you, know, guys like Red Ink Rick, and Boot ’em Bob.

    Salaries might be so low that only the competent will be attracted to the jobs.

  • avatar
    dzwax

    Wow,

    “I agree with basic prinicple here, but ”

    imagine what we could accomplish if we communicated with each other like this all the time.

    I agree with you, but,

    Wow.

    It’s possible that we could actually come to a consensus and move ahead.,

  • avatar
    jkross22

    Obama’s been in office a total of four and a half months and you’re evaluating the outcome of his actions? Talk about premature.

    No, I’m evaluating his actions for what they are. The fact is that Obama’s budget calls for just under $1 trillion in new taxes over the next 10 years. Wake up.

    http://blogs.abcnews.com/politicalpunch/2009/02/obamas-budget-a.html

    Also, see here for a graphical breakdown of where Obama’s budget is significantly higher than the prior year’s budget:

    http://online.wsj.com/article/SB123870974208284245.html#project%3DOBAMABUDGET09%26articleTabs%3Dinteractive

    A lot of the noise heard now differs not one bit from the noise in early 1993. Red-baiting, Nazi-baiting, death of the Republic, Carter II… yeah, how did that turn out?

    Right. The greatest economic performance in modern American history.

    With that in mind, please name the top 2 or 3 things you believe Clinton did to help usher that economic growth? Clinton was a centrist, contrary to popular wishes otherwise. He tried being a hardcore left winger, but soon learned he wouldn’t be successful leading that way. Within a few years of his presidency,the Democrats lost big numbers in the House and Senate, and Clinton was faced with the ‘Contract with America’ Republicans that together, created a very successful partnership with Clinton.

  • avatar
    Robert Schwartz

    I think this a great idea, anything that makes sure that GM and Fiatsler fail sooner, rather than later, will eventually save us money.

  • avatar
    agenthex

    Unless the SEC is proactive and makes effective shareholder democracy a reality then the opportunity cost of investing time and money in persuing specifically an engineering or science education will just not be cost effective. Is this what we want ?

    We’re currently resorted to importing all of our talent. Seems to work ok, especially at suppressing the price/wages of that talent.

    1) On people making more than $250,000.

    $338 billion – Bush tax cuts expire
    $179 billlion – eliminate itemized deduction
    $118 billion – capital gains tax hike

    Excuse me while I look for the world’s smallest violin.

    Number 3 makes no sense. I thought obama was going to bring about financial Armageddon. Where exactly are they getting their capital gains? I demand an investigation into this suspicious figure.

    $17 billion – Reinstate Superfund taxes
    $210 billion – international enforcement, reform deferral, other tax reform
    $4 billion – information reporting for rental payments
    $5.3 billion – excise tax on Gulf of Mexico oil and gas
    $3.4 billion – repeal expensing of tangible drilling costs
    $62 million – repeal deduction for tertiary injectants
    $49 million – repeal passive loss exception for working interests in oil and natural gas properties
    $13 billion – repeal manufacturing tax deduction for oil and natural gas companies
    $1 billion – increase to 7 years geological and geophysical amortization period for independent producers

    Isn’t this the stuff the corporate subsidies and tax loopholes that free market balanced budget “conservatives” usually rant about? Aren’t you glad the gov is out of the business of distorting the market?

    I mean, you can’t be serious bringing in such self-humiliating arguments. This has to be a trick.

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