Free Markets, Free People
Apparently the “pay czar” is about to release a report that the Wall Street bonuses, paid by financial firms that had received bailout money, were largely “unmerited”.
With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
Of course, that is Mr. Feinberg’s opinion. However I don’t know his opinion about this, reported in March of this year:
Fannie Mae is due to pay retention bonuses of between $470,000 and $611,000 this year to some executives, despite enormous losses at the government-backed mortgage company. Fannie’s main rival, Freddie Mac, also plans to pay such bonuses but hasn’t yet provided details.
I know what my opinion is, but of course our government won’t talk about these two entities – both of which had a key, if not major role in the financial collapse. You see, if they investigated this with an eye toward actually figuring out how that collapse transpired, it would inevitably lead back to those two institutions and the Community Reinvestment Act. And that would lead to calls for “accountability”, a standard to which only generals and the “little people” are held. With government and politician’s popularity rating already below that of used car salesmen, they’d prefer to pretend it all happened on Wall Street.
Not that anyone should be particularly surprised by that.
The NYT’s White House reporters got an exclusive interview with Pres. Obama, and one of the pressing questions on their minds was what his ideology is. They asked if, given his spending priorities, he is a socialist, to which he said no, and when they asked if he was a “liberal” or a “progressive” or any other one-word answer, he declined to comment. I can understand him saying that.
But then, after the interview, the president called the reporters back, like he’d thought up a really good zinger after the fact:
It was hard for me to believe you were entirely serious about that socialist question. I did think it might be useful to point out that it wasn’t under me that we started buying a whole bunch of shares of banks. It wasn’t on my watch. And it wasn’t on my watch that we passed a massive new entitlement – the prescription drug plan – without a source of funding. And so I think it’s important just to note when you start hearing folks thro[w] these words around that we’ve actually been operating in a way that is entirely consistent with free-market principles and that some of the same folks who are throwing the word ‘socialist’ around can’t say the same.
Q. So who[se] watch are we talking about here?
A. [*Chuckle*] Well, I just think it’s clear by the time we got here, there already had been an enormous infusion of taxpayer money into the financial system. And the thing I constantly try to emphasize to people is that if, coming in, the market was doing fine, nobody would be happier than me to stay out of it. I have more than enough to do without having to worry the financial system. And the fact that we’ve had to take these extraordinary measures and intervene is not an indication of my ideological preferences, but an indication of the degree to which lax regulation and extravagant risk-taking has precipitated a crisis.
This is bittersweet, because on the one hand, he clears up any misconception that Bush was effectively conservative (or as John Kerry claimed, extreme libertarian). He says, to his credit, that buying up shares of banks and passing a massive new entitlement (or at least one financed by borrowing) are inconsistent with free-market principles.
I like how Obama says that the financial bailout wasn’t on his watch, when he voted for it as a Senator. But he’s right about Bush. With Obama’s help, a Republican president did dump mountains of wealth into the thermal boreholes of the most heavily regulated sector of the economy–that’s the financial sector, dear reader, although health care is way up there. And afterward, Bush was frank enough to admit that he had “abandoned free-market principles,” although he had the monumental cheek to say he had done so “to save the free-market system.”
But on the other hand, Obama claims that his team’s been operating in a way that is “entirely consistent with free-market principles“! I feel like launching into one of those “Really!?!” segments from SNL, only less funny and more desperate.
Really, Mr. President? And you’re not shoveling piles of taxpayer money into the financial system? You’re not planning any massive expansions of entitlement spending? Really? And you’re going to come up with a source of funding for all of this? Without taxing anyone but the top two five percent? Really.
Really, Mr. President, all you’ve talked about since this crisis started is how everyone in the private sector needs a regulatory cavity search deep enough to do a ventriloquist act. As if what we really need is more Sarbanes-Oxley, SEC and FASB rule changes – because it was our lax regulation that all those businesses ran overseas to escape.
And if I’m putting together a line-up of who caused the “extravagant risk-taking” like the massive overborrowing that inflated the residential real estate bubble, shouldn’t my first suspects be Fannie & Freddie, the Fed and government subsidies?
Your response to this crisis is to borrow more money to subsidize energy, public transportation, public education and state-mandated health care, and really, isn’t that what the free market is all about? Thanks for the assurances that you’re not in favor of bigger government.
Your budget, the stimulus, that second stimulus you hinted at, and rescuing all those giant institutions, some of them for the second and third time: these are all entirely consistent with free-market principles? I mean, really.
Someone help me out. Exactly which free-market principles has the president adhered to, either in his campaign promises or in his actions in office? Tell me why Obama is not mistaken or lying.