Bailout Banks, Not Hobble Them

The Chicago Tribune criticizes language in the Stun-ulus Bill to cap executive compensation:

But keep something in mind: Taxpayers are now deeply invested in the companies that receive a federal bailout. We want these companies to succeed.

Compensation caps would hurt the ability of these firms to attract and retain top talent. If salaries are higher at robust firms that aren't taking federal help, that's where talented people would go. Taxpayers are not going to be better off if the best business minds in the land avoid working at firms that receive federal help. The comp rules may also persuade execs at troubled firms to leave the federal assistance program before those firms are on sound footing.

I think that is right. If you're going to tinker in businesses, why not just insist that the boards fire the bad eggs, but don't hamper their ability to replace them with good ones. These banks are still struggling. They're going to need all the help they can get to survive. Just throwing money at the problem is not going to help. They need better management.

Patriotism Vs. Business

It's easy to be hard on companies who accept bailout money and still continue their lavish ways.

However, correct me if I'm wrong, but weren't there a bunch of other banks who were asked to accept bailout funds even though they didn't want them, just to help with a) protecting the anonimity of some of the other banks, and b) to stimulate the economy?

So if you're one of these banks that took money they didn't need, and now you're being told you have to abide by certain rules, including some that didn't exist when you accepted it, doesn't this actually interfere with their successful operation?

In other words, no good deed goes unpunished. This should make anyone else who wants to be helpful in the future think twice.

UPDATE: JPMorgan CEO Jamie Dimon criticizes the restrictions and makes a few good points:

“Pay got a little exuberant, and there were some legitimate complaints,” Dimon said. “But I don’t think the president of the United States should paint everyone with the same brush.”

New York-based JPMorgan, the second-largest U.S. bank, doesn’t have so-called golden parachutes or retirement packages, and all top executives must retain 75 percent of their stock- based compensation, Dimon said.

This is essentially government micromanaging businesses. Yes, there needs to be some concession from bailed-out institutions, but I don't think the Federal Government is a good candidate to determine how business should be run. After all, this is the group that has posted losses that make the banking sector look successful by comparison. And whose top officials don't feel obligated to pay taxes.