The media war over compensation for bankers is getting more intense. On Friday, Sen. Claire McCaskill, a Democrat from Missouri, said, “We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer. They don’t get it. These people are idiots.”
I mentioned the topic of bonuses in a previous post, but here’s a new twist… Now Sen. McCaskill has introduced a law that would cap total compensation for employees of any company that has accepted federal “bailout” money. Her threshold? The salary of the President of the United States: $400,000 per year.
I will probably never make that amount in any given year of my life, in today’s dollars. But I have to admit, I think that’s a terrible idea. This would basically DOOM any company that accepted bailout money.
Employees who are accustomed to making more than $400,000 a year will LOSE THEIR MINDS if they are suddenly limited like that. Some top top TOP executives may be willing to take that hit for the year, in a show of support for the bailout and such (my company’s CEO and his senior executive team have all forgone their bonuses for 2008, so they’ll have to make do with their million or so in base salary) but your upper-management folks or top salespeople will balk, and flee. They’ll jump ship in a heartbeat for the nearest large company that didn’t accept bailout loans.
I understand the sentiment behind this proposal, I do. It’s a lousy time for the economy in general, and for the banking field in particular. But even companies in bankruptcy still compensate their top talent with high salaries and bonuses, if their performance has earned the company millions of dollars.
It makes me sad that politicians are pandering so blatantly to public sentiment here. The masses are pissed off at the failure of the banks, and at the fact that federal funds are being used to prop them up. (Most don’t understand that these are LOANS, mind you, and that the banks receiving those funds are paying a higher interest rate to the federal government than we’re paying the banks for mortgages)
Knee-jerk reactions to show the public that we’re “sticking it” to the banks aren’t going to solve anyone’s problems. All this would do is drive off talent to companies that didn’t accept bailout funds, which would make it even less likely that “bailed out” banks can succeed, which makes those federal investments worthless.
I wish we could return to the days when politicians understood CONTEXT, and when “nuance” wasn’t a bad thing. It’d be nice to have politicians explaining things carefully and concisely to the American public, so we could all develop informed opinions for our Congress to respond to.