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Beyond AIG: A Bill to let Big Government Set Your Salary


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Washington Examiner

How is Barney Frank still in office? How can anyone with half a brain actually WANT this guy in office? And for Alan Grayson (D) FL. to say "You should not get rich off public money.." :huh: Why not congressman, you did. One of these days, journalists may stop pretending not to notice all these middle-income politicians, lobbyists and bureaucrats who move to D.C. and -- voila! --- a few years later they miraculously have multi-million dollar financial statements!

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It was nearly two weeks ago that the House of Representatives, acting in a near-frenzy after the disclosure of bonuses paid to executives of AIG, passed a bill that would impose a 90 percent retroactive tax on those bonuses. Despite the overwhelming 328-93 vote, support for the measure began to collapse almost immediately. Within days, the Obama White House backed away from it, as did the Senate Democratic leadership. The bill stalled, and the populist storm that spawned it seemed to pass.

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill's language. That includes regular pay, bonuses -- everything -- paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.

In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."

The bill passed the Financial Services Committee last week, 38 to 22, on a nearly party-line vote. (All Democrats voted for it, and all Republicans, with the exception of Reps. Ed Royce of California and Walter Jones of North Carolina, voted against it.)

The legislation is expected to come before the full House for a vote this week, and, just like the AIG bill, its scope and retroactivity trouble a number of Republicans. "It's just a bad reaction to what has been going on with AIG," Rep. Scott Garrett of New Jersey, a committee member, told me. Garrett is particularly concerned with the new powers that would be given to the Treasury Secretary, who just last week proposed giving the government extensive new regulatory authority. "This is a growing concern, that the powers of the Treasury in this area, along with what Geithner was looking for last week, are mind boggling," Garrett said.

Rep. Alan Grayson, the Florida Democrat who wrote the bill, told me its basic message is "you should not get rich off public money, and you should not get rich off of abject failure." Grayson expects the bill to pass the House, and as we talked, he framed the issue in a way to suggest that virtuous lawmakers will vote for it, while corrupt lawmakers will vote against it.

"This bill will show which Republicans are so much on the take from the financial services industry that they're willing to actually bless compensation that has no bearing on performance and is excessive and unreasonable," Grayson said. "We'll find out who are the people who understand that the public's money needs to be protected, and who are the people who simply want to suck up to their patrons on Wall Street."

After the AIG bonus tax bill was passed, some members of the House privately expressed regret for having supported it and were quietly relieved when the White House and Senate leadership sent it to an unceremonious death. But populist rage did not die with it, and now the House is preparing to do it all again.

Byron York, The Examiner’s chief political correspondent, can be contacted at byork@washingtonexaminer.com. His column appears Tuesday and Friday, and his stories and blog posts can be read daily at ExaminerPolitics.com.

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Maybe I'm reading this wrong, but it seems like the bill would only apply to companies that took bailout money from the government. I'm assuming that privately held companies would still be allowed to set their own pay scale. I could be reading that incorrectly though, feel free to point out if it said something about the private sector and I missed it.

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Maybe I'm reading this wrong, but it seems like the bill would only apply to companies that took bailout money from the government. I'm assuming that privately held companies would still be allowed to set their own pay scale. I could be reading that incorrectly though, feel free to point out if it said something about the private sector and I missed it.

No, you read it correctly, which is why I describe this only as a slippery slope, how many times have you seen the government acquire a new power then later relinquish it? Their M.O. is to expand any and all powers that perceive themselves to have gained. If left unchecked, this will expand.

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Maybe I'm reading this wrong, but it seems like the bill would only apply to companies that took bailout money from the government. I'm assuming that privately held companies would still be allowed to set their own pay scale. I could be reading that incorrectly though, feel free to point out if it said something about the private sector and I missed it.

that's what i got out of it. and i'm sure that those controls would go away when the money is paid back. i don't agree with the idea in principal; i mean it's not like the government tells people on welfare how they can spend their money.

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Maybe I'm reading this wrong, but it seems like the bill would only apply to companies that took bailout money from the government. I'm assuming that privately held companies would still be allowed to set their own pay scale. I could be reading that incorrectly though, feel free to point out if it said something about the private sector and I missed it.

Which I think is a bad idea too. How are these companies supposed to provide competitive compensation in order to recruit the best talent (being that they are the companies that need it the most) when the Government is basically handicapping them?

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that's what i got out of it. and i'm sure that those controls would go away when the money is paid back. i don't agree with the idea in principal; i mean it's not like the government tells people on welfare how they can spend their money.

Good point.

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Which I think is a bad idea too. How are these companies supposed to provide competitive compensation in order to recruit the best talent (being that they are the companies that need it the most) when the Government is basically handicapping them?

well, you don't take government money and then abuse it by sending your executives on lavish vacations and pay out multi million dollar bonuses at the tax payers expense.

these companies are lucky to even be afloat right now. we should have let them fail. so much for the free market solving all problems.

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well, you don't take government money and then abuse it by sending your executives on lavish vacations and pay out multi million dollar bonuses at the tax payers expense.

these companies are lucky to even be afloat right now. we should have let them fail. so much for the free market solving all problems.

I completely agree about letting them fail. I think they should have been forced into bankruptcy and given investors a chance to purchase the remaining assets at bankruptcy related discount. However, it makes zero sense that Government is willing to take our hard earned money and use it to keep these companies afloat, yet handicapping them from providing market competitive compensation to new executives. Then again, when was the last time our Government did anything that made any sense at all?

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The moral of the story.. Don't want government all in your shyt? Don't come begging on your knees for government money..

The End

I agree with you there, but another moral is: If you're an idiot politician whose only business experience comes from the male prostitution ring that was run out of your apartment, don't first declare a company "too big to fail" pour billions of taxpayer dollars into it, then pull unconstitutional legislation out of your azz (no double meaning here intended) that would handicap that very same company to such a degree that you ensure it's eventual demise anyway.

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well, you don't take government money and then abuse it by sending your executives on lavish vacations and pay out multi million dollar bonuses at the tax payers expense.

these companies are lucky to even be afloat right now. we should have let them fail. so much for the free market solving all problems.

Exactly right

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I completely agree about letting them fail. I think they should have been forced into bankruptcy and given investors a chance to purchase the remaining assets at bankruptcy related discount. However, it makes zero sense that Government is willing to take our hard earned money and use it to keep these companies afloat, yet handicapping them from providing market competitive compensation to new executives. Then again, when was the last time our Government did anything that made any sense at all?

right, but this wasn't an issue when the money was first given out. the companies then abused what they got. the government had to do something b/c the public was outraged that many people were losing their jobs and are struggling meanwhile these companies are sending the same executives that got us in this mess to expensive resorts and giving them outrageous bonuses with the public's money.

I don't agree with it, but AIG forced the government's hand.

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I completely agree about letting them fail. I think they should have been forced into bankruptcy and given investors a chance to purchase the remaining assets at bankruptcy related discount. However, it makes zero sense that Government is willing to take our hard earned money and use it to keep these companies afloat, yet handicapping them from providing market competitive compensation to new executives. Then again, when was the last time our Government did anything that made any sense at all?

It makes zero sense because it's not about money at all. Do you think anyone in this government cares about the market, or your money, or job security?

This is all about the expansion of government. Rahm Emanuel himself said, "Never let a crisis go to waste". Well, Obama and Barney and Nancy and Harry are all down with that. Big time.

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Did any of these companies have the power to turn down any government intervention and just file for bankruptcy protection? I remember reading awhile back that certain banks were given moeny they didn't ask for and didn't need. The government can't force money onto any corporation can they?

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No, you read it correctly, which is why I describe this only as a slippery slope, how many times have you seen the government acquire a new power then later relinquish it? Their M.O. is to expand any and all powers that perceive themselves to have gained. If left unchecked, this will expand.

You certainly make a good point here, but I don't think it would be quite that easy. I mean, if the government starts saying "all buisness", you should definately be worried. Though if that happens I would hope the morons that refer to themselves as politician would stop it, but who knows. Anyway, at this level I really don't think this is worth worrying about. As previously stated, if you don't want the government telling you how to run your business, then don't borrow money from them. If you do borrow money from them and enough money to give them a majority stake in your company, than you should expect them to tell you what to do. It's not that much different from a majority stake holder in a company setting policies for that company. Happens all the time.

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right, but this wasn't an issue when the money was first given out. the companies then abused what they got. the government had to do something b/c the public was outraged that many people were losing their jobs and are struggling meanwhile these companies are sending the same executives that got us in this mess to expensive resorts and giving them outrageous bonuses with the public's money.

I don't agree with it, but AIG forced the government's hand.

But giving the money to them and then handicapping what they can do with it is counter-productive. Either give them the money and allow them to provide competitive compensation, or don't give them the money at all.

And this whole "they abused what they got" is debatable at best. Is it not out of the question to say that the expensive resorts were used to, maybe, attract new clients? And I could go on and on and on about justifying the bonuses.

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There are a ton of sales people that work for these companies that are about to get screwed. Brokerage companies now receiving TARP money include:

Smith Barney

Merrill Lynch

Morgan Stanley

AG Edwards

Many of those brokers are great financial advisors that have steered their clients away from the problem areas, and are about to have their pay (100% commission based) scrutinized.

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But giving the money to them and then handicapping what they can do with it is counter-productive. Either give them the money and allow them to provide competitive compensation, or don't give them the money at all.

And this whole "they abused what they got" is debatable at best. Is it not out of the question to say that the expensive resorts were used to, maybe, attract new clients? And I could go on and on and on about justifying the bonuses.

Some would ask. What is the price tag on patriotism? If you had the skills and knowledge that would bring these financial institutions out of crisis and help save the entire economy, would you refuse to help because you felt your skills wouldn't be compensated enough?

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Obama's plan will dictate to companies who have NOT takin bailout money as well. This is HUGE news and seemingly the MSM is waxing right over it as though it doesn't matter.

Right, and I can see how that would be a huge issue. What I'm asking is where in this article does it say that? If you're taking leaps of faith to get to that, cool. I have no problem with that, I'm just looking for a direct reference to that happening in this article.

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Here's the deal. The best and brightest business men get PAID, and PAID alot of money to do what they do. Do all of them make wise decisions? NO, so they get canned. You limit what Americans brightest can make and they'll go abroad and get paid, and that will screw America as well. Get out of the markets pockets Obama. Govt. does NOTHING well, and bloated Govts are a huge part of OUR problem.

Well I guess that answered my previous question. lol

Very interesting...

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I cut and pasted this for you:

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

See the part that is bold??? And trust me, The Examiner is not "waxing" over anything! I'm surprised that garbage paper printed that much!! <_<

Obama's plan will dictate to companies who have NOT takin bailout money as well. This is HUGE news and seemingly the MSM is waxing right over it as though it doesn't matter.
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