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I Told You So: Pay Czar Strikes

Remember when Obama said he didn’t want to run the car companies or the banks?  One of the early lies in his administration.  I guess it’s like the fox saying he doesn’t want to run the chicken farm.  He just wants free chickens and eggs.

When Bush started, and Obama implemented the takeover of the American auto and banking industry, I told you it was going to be bad for America.  Once these industries and companies took the bailout, they wrote their own obituaries.  I told you the government would control salaries and prices, and eventually run these businesses into the ground, or prop them up forever at tax payer expense like AMTRAK and the Post Office.  Now you have Comrade Obama’s Czar deciding arbitrarily that certain people make too much money.  Don’t believe the lie that Obama didn’t know.  He directed the whole show.

Now I, along with people like Glenn Beck and Rush Limbaugh, don’t look so much like conspiracy theorists.

On the surface this may not seem so bad.  The companies took tax payer money to stay afloat.  It would seem reasonable for the tax payers to then have some say in how that company is run.  That’s where sanity ends and the government begins.  But letting the camel’s nose of government under the tent of business is always bad.  Let’s look at why government intervention in our economy’s businesses is a bad thing.

First of all, a failing company is failing for a reason. For the benefit of consumers and the economy as a whole, companies must be allowed to fail.  Stronger, better managed ones will spring up to take their place if there is a demand for what they produce.  Subsidizing failure with tax payer dollars helps no one except bureaucrats seeking power.  You don’t get lower prices or a better product.

Second, government is inefficient.  I use the example of helping a homeless person as an example.  There are numerous churches and shelters in most cities whose mission is to help the homeless.  If I walk into one of them and give them $100, they are so close to the front lines that very little of that money will be wasted, and more food and service can be provided for the money.  If I give that same $100 to the government, less than a penny of it will trickle back down to the shelter I could have given it to.  A certain percentage of the $100 will go to running various agencies of the government.  Most of it will be used for purposes for which it was never intended (i.e. all the money that’s supposed to be in the Social Security “lock box”).  After all the money has been laundered through the apparatus of government, lost to fraud, waste, and abuse, the inefficiency leaves little money for where it was needed the most.

Third, when government interferes with business, they screw it up.  The Clinton foray into the vaccine business is one example.  They “only” took over about a third of the industry, but they started price fixing.  That’s another area where government ALWAYS screws up.  The don’t understand the difference between PRICE and COST.  When the started dictating the price of vaccines (which they arbitrarily set, and which were lower than actual costs), it became unprofitable so companies either quit making vaccines or went out of business.  The current housing and banking mess are another prime example of how government interference screws things up.  A bank, just like any other business, is in business to make money.  A bank makes money by loaning money to people for a fee.  That fee is what we know as “interest.”  Banks charge enough interest to cover their costs and make a reasonable profit to expand their business or have savings to cover tough times.  Normally, banks loan to people who are able and likely to pay the money back.  These customers are low risk.  If they loan to someone who may have trouble paying back the loan, or who is in some other way a risk, they are charged a higher interest rate to cover that risk.  That’s basically how banking has run for centuries.  Now enter Bill Clinton, Barney Frank (pronounced Fwank), Chris Dodd and company.  They authored and implemented changes to this thing known as the Community Reinvestment Act program, I’ll just call it CRAP for short.  The stated goal of their CRAP was to increase home ownership by minorities.  Again, that sounds good on the surface, but as with all things liberal it can not be taken at face value.  What it did in essence was force banks to lend based on skin color rather than risk or ability to repay.  The AMERICAN way to accomplish the goal of home ownership is for people to work hard, earn higher wages, start their own businesses, and in general improve their economic position THROUGH THEIR OWN LABORS.  The liberal way to accomplish this goal is to take from those who have earned, and give to those who have not.  So what did CRAP do?  It coerced banks into making loans to people who could not pay them back, but at the same lower interest rates charged to those who would be a lower risk.  With the normal restraint of sound banking and business practices stripped away by government, the bankers looked for a way to make money out of the scheme they had been forced into.  The details are complicated and take a while to work through.  So what happened?  The ones who would not normally have been given the loans they received defaulted on those loans.  All the bad debt that had been bought up and sold as “securities” came due and couldn’t be paid, thus causing both the banking and housing crash.  And yet Bahnee Fwank and Chris Dodd still walk the streets as free men, serving as poster children for how government screws up our lives.  As parting examples you have Medicare (the program that wasn’t supposed to cost more than $4 billion, but now cost more than $400 billion), the Department of Energy (created in the 70’s for the purpose of decreasing our dependence on foreign oil, now a huge bureaucracy costing billions of dollars and producing no results), and the Department of Education (as the number of billions of dollars poured into this money pit grows higher, our children’s test scores and education level gets lower).  The list of government failures goes on and on and on.  Tell me again why you want government in charge of ANYTHING other than national defense?

Fourth, government control removes incentive to excel or improve.  Let’s say you work for Gidget, Inc. manufacturing widgets.  You are paid by the number or properly manufactured widgets you manufacture.  You will first learn how widgets are made.  Then you will begin to make them and become proficient at making them.  Once you are proficient, you will likely try to become faster at making them so you can make more money.  This will either be done by you becoming a faster laborer, or by figuring out a way to improve the process of making widgets.  Either way makes you more valuable to the company because you are allowing the company to produce more widgets more quickly for less money, thereby increasing the company’s profit.  When government takes over Gidget, Inc. they change the wage structure for workers to an hourly wage.  Now, regardless how many widgets you produce you will get paid the same amount as someone who produces far less than you.  The natural reaction to this situation is to ask yourself “why am I killing myself for no reason?”  Workers production decreases to the minimum level that will keep them employed.  Without further incentive, workers are not likely to increase their output.

Fifth, government stifles competition.  A government run entity does not have to make a profit.  It will be propped up by taxpayer dollars regardless of how much it costs, or how much money it looses.  When government entities “compete” against private businesses that MUST make a profit, THERE IS NO COMPETITION.  The government will undercut the private business every time until the private business simply can’t afford to stay in business.

Don’t think that just because your business didn’t take the bailout that you will be exempt from the intrusion of one or more of Comrade Maobama’s Czar’s.  They have already dreamed up ways to justify controlling just about everything.  They are just waiting for a big enough “crisis” to justify the takeover.



Pay Czar Feinberg, Not Obama, Behind Decision to Slash Executive Pay

White House pay czar Kenneth Feinberg did not seek President Obama’s approval to order steep pay cuts from bailed-out executives.


Thursday, October 22, 2009

White House pay czar Kenneth Feinberg was the driving force behind the move to order steep pay cuts from bailed-out executives, and did not even seek the president’s approval before making his decision.  (Lie.  This is a smokescreen to give Obama deniability.)

The Treasury Department is expected to formally announce in the next few days a plan to slash annual salaries by about 90 percent from last year for the 25 highest-paid executives at the seven companies that received the most from the Wall Street bailout. Total compensation for the top executives at the firms would decline, on average, by about 50 percent.

The sweeping decision, though, came from Feinberg and not from President Obama. (“You lie!”)

One official told Fox News that Feinberg from the start had the independent authority to work with companies and make such a call. Obama was never required to sign off before final decisions were made. (No, but Obama told Mr. Feinberg what he expected.)

On Thursday, the chairwoman of the panel that oversees the $700 billion federal bailout fund said the Obama administration is serious about the new plan. In an interview, Elizabeth Warren said reports of pending slashes in executive salaries are “real.”  (Of course they are real.  By dictating pay an bonuses, they are ensuring that no one who is qualified to do the job will want to work there.)

“It’s real in the sense that it says, ‘Guys, you have to understand that you can’t party on like it’s 2007. (Unless you are Barack Obama, who can have lavish weekly parties in the White House at tax payer expense while “Rome” burns.) If you’re going to take taxpayer dollars, then the game has to change. In that sense it’s real,'” she said on CBS’ “The Early Show.”

The seven affected companies are: Bank of America, American International Group, Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.

Smaller companies and those that have repaid the bailout money, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., are not affected.  (Yet.)

Treasury said that Feinberg scheduled a news conference at the department to discuss the matter Thursday afternoon.

Under the plan, at the financial products division of AIG, the giant insurance company which has received taxpayer assistance valued at more than $180 billion, no top executive will receive more than $200,000 in total compensation, one person familiar with Feinberg’s plan said.

The administration also will warn AIG that it must fulfill a commitment to significantly reduce the $198 million in bonuses promised to employees in its financial services division, the arm of the company whose risky trades caused its downfall.

The pay restrictions for all seven companies will require any executive seeking more than $25,000 in special benefits — things such as country club memberships, private planes and company cars — to get permission for those perks from the government. (You’re only allowed to have things like that if you’re the government.)

Feinberg’s decisions on pay come after administration officials voiced sharp criticism in recent days of the plans of Wall Street firms to pay huge bonuses at a time when the country is still coping with rising unemployment and the effects of the recession.

It was unclear exactly how much the executives would be allowed to make, or how that would be determined. Each case is being handled individually, and no details were available on how the calculations were being made.

Tom Wilkinson, a GM spokesman, said Wednesday that the auto company was “currently in discussions with Mr. Feinberg’s office regarding executive compensation. We will have further information once those discussions have concluded.”

Gina Proia, a spokeswoman for GMAC, said the finance company has “been working on a proposal that aims at embodying the principles set forth for compensation along with balancing the need to retain critical talent necessary to execute our turnaround. Until we receive notification about that plan, we have no further comment.”

Chrysler Group issued a similar statement.

The Associated Press contributed to this report.


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