Obama's 'Pay Czar' -- Welcome to the Twilight Zone

Posted By Bobby Eberle On June 10, 2009 at 7:15 am

We sure have seen a lot in the nearly five months that Barack Obama has been president. Who could have imagined that the government would be controlling certain financial institutions? Who would have thought that General Motors would be under the control of Obama? Who knew that it was possible to create more debt in five months than all previous presidents combined? Welcome to the new America.

But, it doesn't stop there. We've heard so much weirdness coming from Obama like the jobs that have been "created or saved," when job losses continue and the unemployment rate keeps going up, but it doesn't stop there. Today we see yet another step down the path to government control, and another effort by Obama to take freedom away from the American people. In particular, I'm talking about Obama's new plan to appoint a "Pay Czar" to monitor what people are getting paid. We have now entered the Twilight Zone...


As noted in an Associated Press story, "the Obama administration is ready to issue new regulations limiting the compensation of top executives at financial institutions that have received government rescue funds." FOXNews.com reports that the position will be a "pay czar" formally known as a "special master for compensation." Special master for compensation? Are they serious?

As noted in the stories, the position focuses on those financial institutions that received funds from the Troubled Assets Relief Program (TARP). Now, perhaps there are those who believe that if a troubled business accepts government (tax payer relief) then it should come with strings attached. In some ways that makes sense. I, as an investor, would like to see a return on this investment (bailout), but I also realize that the companies are in the best position to manage things... not me or the government.

Now people are probably jumping up and down saying, "If the companies were so good at running things, they wouldn't be in this mess." Well, that's partly true. We all have to keep in mind that this "mess" was created by forcing lending institutions to loan money to people who would normally be considered "bad risks."

Ok, back to the main point... regardless of whether a financial institution received government funds, the government has no business telling the institution how to run itself. Wages, regulations, policies, etc. are established by the company or institution. They form contracts between management and employees. That is how companies are run. For Obama to now say that he wants to control what they get paid shows two things: 1) it further reveals his desire to move America toward more and more government control. 2) It shows that Obama has no understanding of business.

If Obama limits the salaries of top executives at companies A, B, and C, don't you think those executives are more likely to go work for companies D, E, and F? What does that do for companies A, B, and C which are already "troubled?" I guess we already know the answer to that one when we look at General Motors: government "ownership" of production.

But, of course, Obama is not stopping there. Just check out the news story:

The government, however, is not stopping at federally assisted institutions. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke want to give the Fed, which regulates banks, and the Securities and Exchange Commission, which oversees the financial markets, greater powers to set compensation guidelines across the financial sector.

Can you believe this? Now, we are not just talking about institutions that accepted TARP funds. We are talking about an entire sector of the economy. Just look at what Obama's treasury secretary had to say:

"I think boards of directors did not do a good job," [Treasury Secretary Timothy] Geithner said Tuesday. "I think shareholders did not do a good job in terms of discipline and compensation practices."

So, Geithner blasts boards of directors (the managers) and the shareholders (the people). If the managers and regular folks are to blame, what's left to save the day? That's right... the government. Can we please wake up from this bad dream?