There is much that has me concerned with Federal plan to help fix the credit mess that we find ourselves in.  The $700,000,000,000 price tag for this made my eyes pop.  Then, as George Will expressed, there is a concern about proper oversight – should one person have this much control over this much money – elected or not?

Lawrence Kudlow said in his op/ed on Real Clear Politics that a clean bill requested by Treasury Secretary Paulson along with the oversight board that Senator McCain has called for should help fix this credit problem we have.

Unfortunately it doesn’t look like Paulson is going to get that clean bill, Kudlow writes:

But after Tuesday’s Senate hearing I’m very concerned. The bells and whistles that would be attached to Paulson’s plan by our Democratic friends are anti-capitalist and anti-opportunity.

Capping compensation for both the selling and purchasing institutions? What? Salaries and bonuses are no business of the government. People go to work for profits. For opportunities. It’s at the heart of our free-market capitalist system.

Now, I can understand companies like AIG, Fannie, and Freddie, which effectively have been nationalized. That’s different. I don’t care if they all make $75,000 a year, just like the regulators. But to stretch this to the banks that are selling or buying the assets goes beyond the pale. It’s France. But it’s France heading toward the old Soviet Union, or at least Tsar Putin’s Russia.

And then there’s the ownership question. Some Democrats want Uncle Sam to take an ownership position in all the selling and purchasing banks. This is nuts. In America, this is nothing but property confiscation. It also will sharply curb buyers of the distressed assets.

You think Henry Kravis or Steve Schwarzman are gonna take a salary cap and lose an ownership share of the private-equity funds they themselves created and built? They shouldn’t and they won’t. And these funds are crucial to the new process. The only banks that will sell in this over-regulatory environment are the absolute, near-bankruptcy turkeys.

Meanwhile, Sen. McCain apparently has proposed that the buying and selling banks have comp-levels no higher than the top paycheck in the U.S. government, which I guess is the president’s at around $400,000 a year. Hey, I’ve got an idea. Let’s raise the chief executive’s pay to $50 million. He probably earns it anyway.

There is a word for what they are suggesting.  It is socialism.  What business does the government have in establishing what compensation levels should be for anybody but government employees?  None.  Does the government have any business in having an ownership position in selling and purchasing banks?  Now way!

Not only does Kudlow not like it, neither does the stock market as it  took a dive when the details of the behemoth bailout were shared.  Not a good move.  Some regulation is needed in this time these proposals are an overreaction and will make this proposal ineffective essentially wasting taxpayer money.  Let’s keep the marketplace free and not allow socialism to creep in.

18 comments
  1. Nice post, and I agree with many of your assertions. But do you think–at least from a PR standpoint (which I know is aweful to introduce into this situation), that CEOs of companies that have been bought or bailed by the government should forefit some of their millions? I completely disagree with wanting to regulate private salaries, but once those companies are “saved” by the feds (which I’m also against on many levels), those CEOs should not be walking away with taxpayer-funded paychecks.

  2. Nice post, and I agree with many of your assertions. But do you think–at least from a PR standpoint (which I know is aweful to introduce into this situation), that CEOs of companies that have been bought or bailed by the government should forefit some of their millions? I completely disagree with wanting to regulate private salaries, but once those companies are “saved” by the feds (which I’m also against on many levels), those CEOs should not be walking away with taxpayer-funded paychecks.

  3. Nice post, and I agree with many of your assertions. But do you think–at least from a PR standpoint (which I know is aweful to introduce into this situation), that CEOs of companies that have been bought or bailed by the government should forefit some of their millions? I completely disagree with wanting to regulate private salaries, but once those companies are “saved” by the feds (which I’m also against on many levels), those CEOs should not be walking away with taxpayer-funded paychecks.

  4. Last week I was listening to Marketplace on NPR and they had an “expert” talking about the possibility of the $85 Billion the US was lending AIG at 11% interest could actually prove profitable.

    Then Kai Ryssdal, the interviewer and host of the show asked, “If we stand a chance to make a profit, then why don’t we do this more often?”

    The expert demurred, “Well, Kai, that would be Socialism.” I laughed out loud. Epic fail on Ryssdal’s part.

  5. Last week I was listening to Marketplace on NPR and they had an “expert” talking about the possibility of the $85 Billion the US was lending AIG at 11% interest could actually prove profitable.

    Then Kai Ryssdal, the interviewer and host of the show asked, “If we stand a chance to make a profit, then why don’t we do this more often?”

    The expert demurred, “Well, Kai, that would be Socialism.” I laughed out loud. Epic fail on Ryssdal’s part.

  6. Last week I was listening to Marketplace on NPR and they had an “expert” talking about the possibility of the $85 Billion the US was lending AIG at 11% interest could actually prove profitable.

    Then Kai Ryssdal, the interviewer and host of the show asked, “If we stand a chance to make a profit, then why don’t we do this more often?”

    The expert demurred, “Well, Kai, that would be Socialism.” I laughed out loud. Epic fail on Ryssdal’s part.

  7. @Dustin – yeah I do agree with that. If nothing else they need to be investigated as their may be criminal behavior involved not just ineptness.

    @Wayne – assuming AIG will actually pay it back.

  8. @Dustin – yeah I do agree with that. If nothing else they need to be investigated as their may be criminal behavior involved not just ineptness.

    @Wayne – assuming AIG will actually pay it back.

  9. @Dustin – yeah I do agree with that. If nothing else they need to be investigated as their may be criminal behavior involved not just ineptness.

    @Wayne – assuming AIG will actually pay it back.

  10. I am okay with no government bailouts and no regulation.. let it all go.. let the executives of failed and mismanaged companies cut and run with their gold as American workers watch their 401k and IRA accounts go down the toilet – it is after all the American way.. catering to the rich.. that is until these CEOs export all labor overseas.. maybe then we will see a need for regulation?

  11. I am okay with no government bailouts and no regulation.. let it all go.. let the executives of failed and mismanaged companies cut and run with their gold as American workers watch their 401k and IRA accounts go down the toilet – it is after all the American way.. catering to the rich.. that is until these CEOs export all labor overseas.. maybe then we will see a need for regulation?

  12. I am okay with no government bailouts and no regulation.. let it all go.. let the executives of failed and mismanaged companies cut and run with their gold as American workers watch their 401k and IRA accounts go down the toilet – it is after all the American way.. catering to the rich.. that is until these CEOs export all labor overseas.. maybe then we will see a need for regulation?

  13. On a note that is different than my more tongue-in-cheek comment above, we have to keep in mind that there really is no such thing as a “free market.” Regulation of the market is always already present – even if it’s a simple matter of informational asymmetries. The only options we have are market systems that exist on a continuum of greater or lesser regulation. The question before us is “How much regulation should there be?”

    Now, I tend to be a minimalist (without being a Libertarian) regarding this question. But, I do think that we can learn something from Joseph’s actions of having Pharaoh’s empire acquiring the means of production in preparation for seven years of famine. Times of national crisis (such as war for example) create situations in which greater control and regulation may be the best option.

    In other words, policies of minimal or maximal market regulation are not rooted in a timeless principle (true for all times and in all places), but rather are grounded in prudential decisions. That is to say, it’s an issue of wisdom and not law.

    So this brings us back to the question, “How much regulation should there be?” And to be honest, I don’t have the foggiest idea. Properly answering this question is going to require true sons of Issachar (i.e., men who knew the times).

  14. On a note that is different than my more tongue-in-cheek comment above, we have to keep in mind that there really is no such thing as a “free market.” Regulation of the market is always already present – even if it’s a simple matter of informational asymmetries. The only options we have are market systems that exist on a continuum of greater or lesser regulation. The question before us is “How much regulation should there be?”

    Now, I tend to be a minimalist (without being a Libertarian) regarding this question. But, I do think that we can learn something from Joseph’s actions of having Pharaoh’s empire acquiring the means of production in preparation for seven years of famine. Times of national crisis (such as war for example) create situations in which greater control and regulation may be the best option.

    In other words, policies of minimal or maximal market regulation are not rooted in a timeless principle (true for all times and in all places), but rather are grounded in prudential decisions. That is to say, it’s an issue of wisdom and not law.

    So this brings us back to the question, “How much regulation should there be?” And to be honest, I don’t have the foggiest idea. Properly answering this question is going to require true sons of Issachar (i.e., men who knew the times).

  15. On a note that is different than my more tongue-in-cheek comment above, we have to keep in mind that there really is no such thing as a “free market.” Regulation of the market is always already present – even if it’s a simple matter of informational asymmetries. The only options we have are market systems that exist on a continuum of greater or lesser regulation. The question before us is “How much regulation should there be?”

    Now, I tend to be a minimalist (without being a Libertarian) regarding this question. But, I do think that we can learn something from Joseph’s actions of having Pharaoh’s empire acquiring the means of production in preparation for seven years of famine. Times of national crisis (such as war for example) create situations in which greater control and regulation may be the best option.

    In other words, policies of minimal or maximal market regulation are not rooted in a timeless principle (true for all times and in all places), but rather are grounded in prudential decisions. That is to say, it’s an issue of wisdom and not law.

    So this brings us back to the question, “How much regulation should there be?” And to be honest, I don’t have the foggiest idea. Properly answering this question is going to require true sons of Issachar (i.e., men who knew the times).

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