Politics

Does Obama's CEO Pay Cap Make Sense?

The Obama team made a lot of taxpayers happy when it capped the pay and perks of execs who have been lining up for government help.

The Obama team made a lot of taxpayers happy when it capped the pay and perks of execs who have been lining up for government help. But will it do any good?

President Obama and his Democrat colleagues, no doubt, are well intentioned. And they're tapping into a deep vein of justified anger about the huge losses that millions of innocent investors endured seemingly at the hands of greedy Wall Street bankers, some of whom like to renovate their offices with $35,000 toilets, among other extravagances.

But will capping executive pay at $500,000 for banks that get "extraordinary assistance" from Uncle Sam help get the economy back on a sound footing? How much help is a "name and shame" provision designed to prevent financial institutions from holding expensive parties and conferences at exotic resorts that they fly to on corporate jets?

The plan could end up making the financial mess worse. Goldman Sachs is already making plans to give the money it took from the government back as quickly as possible so that it's not subject to these onerous provisions. To an aggressive firm like that which has rewarded its executives and traders for performance above all else, returning the money too soon just in order to be out from under such draconian restrictions could come at the expense of more reasonable and strategic decision-making. Is that Washington really wants right now? Other banks may decide they'd rather pass on taking the money than have to swallow these bitter pills, and in the end fail as a result. Will that help solve the nation's credit crisis?

Wall Street executives may deserve all the condemnation Washington can rain down upon them, but America can do better. How about President Obama and Congress focusing more energy on really figuring out how we're going to fix the housing mess? Most congressmen still don't know what percentage of new mortgages written after 2000 were adjustable rate as opposed to fixed-rate. Does the White House know?

That'd be a rather important number to get hold of if you're proposing -- as many are -- that lenders be forced to modify troubled variable-rate mortgages into fixed-rate mortgages. This is something that affects a wide swath of the banking industry, not just the Wall Street titans blamed for the mess we're in.

Who wasn't greedy? That's a big part of why the problems went undetected for so long and got so out of control. Yes, bad CEOs should be punished. But we live in a capitalist society with free markets, which have long done a good job of getting rid of CEOs who don't perform to the satisfaction of shareholders or who engage in malfeasance. Sometimes it takes a while to root out these guys. But look at the alternative systems in place around the world. Where would you rather live?

Whacking Wall Street's wizards may boost poll ratings but will a public pillory ensure that fewer people who are in mortgages they never should have been put in don't end up on the street with nowhere to go and nowhere to work?

Most Popular

Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Retirement Income Shouldn’t Depend on the Market; It Should Depend on Math
retirement planning

Retirement Income Shouldn’t Depend on the Market; It Should Depend on Math

The math isn’t as tough as you might think. It all starts with dividing your assets into three different buckets.
May 23, 2022

Recommended

Will a Gas Tax Holiday or Suspension Lower Gas Prices Near You?
Tax Breaks

Will a Gas Tax Holiday or Suspension Lower Gas Prices Near You?

One way to bring down the price of gasoline is to establish a gas tax holiday. But will Uncle Sam, or your state government, suspend the gas taxes tha…
May 18, 2022
Maryland Suspends Gas Tax to Offset Inflation at the Pump
Tax Breaks

Maryland Suspends Gas Tax to Offset Inflation at the Pump

The gas tax holiday will save Maryland drivers about 36 cents per gallon for gasoline and roughly 37 cents per gallon for diesel fuel.
March 18, 2022
40 Ways to Earn Extra Cash in 2022
business

40 Ways to Earn Extra Cash in 2022

We flag a wide variety of cool side hustles to earn bonus bucks for expenses both expected and unexpected as we begin to emerge from the pandemic.
March 2, 2022
The New Cold War With China
Special Report
business

The New Cold War With China

A Kiplinger Special Report
February 15, 2022