Ok, here's my idea. Tell me what you think.
We have these financial firms that got in really bad trouble. They took crazy risks and blew themselves up -- you know, subprime lending, credit default swaps, that kind of thing -- and nearly took the whole global economy down with them. And then there are these auto companies. They were so bad at making efficient cars and managing their businesses that when the recession hit, they were thrown into bankruptcy.
We had to bail them all out at the taxpayers’ expense to save the system overall. Taxpayers now own huge stakes in these firms -- in some cases, the whole firm. And the worst of them will be on public life support for years to come.
The executives who made all the terrible decisions that led to this got incredibly rich in the process. Most of them have many millions salted away from bonuses and other compensation received before everything blew up. It hardly seems fair.
So what do we do about it?
Let's appoint a "pay czar" at the Treasury to slash compensation for execs at the firms that needed the biggest taxpayer bailouts – AIG (AIG), Bank of America (BAC), Citigroup (C), General Motors, GMAC, Chrysler, and Chrysler Financial.
Great idea, huh? Now that taxpayers need people to nurse these firms back to health, let's make it so that nobody will have any incentive to work for them. It's brilliant, I tell you. Brilliant!
Well, at least the plan recovers all those ill-gotten gains made by the villains who created this mess. Oh, wait – I guess it actually doesn't. It affects only the money executives make now and in the future when they make big profits for these firms. But if they can't make any money for themselves, why should they stick around and make profits for their firms?
In other words, why should they stick around and help the taxpayers get their money back?
They won't.
But at least taxpayers will have the satisfaction of saying we punished the scoundrels.
I assume you realize that this isn't really my idea. But it's no joke either. Treasury announced it Thursday. This idiocy is actually happening.
Now, at the same time, some smart things about compensation are going on at the Federal Reserve. The Fed announced that it intends to put rules in place for all the banks it regulates -- all banks, effectively -- to prevent any compensation system that threatens a bank's financial stability.
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