Executive Pay

The President’s newest gambit: capping executive pay at $500k/year for banks that have received bailout funds. Loopholes abound:

Obama’s pay rules focus on any firms that seek and receive future help from government, with a firm cap on those getting “exceptional” assistance. Citigroup and Bank of America among the few examples of firms so far that have received targeted support that would cross the threshold to be called “exceptional.” But the new rules will not be applied retroactively.

I think a lot of people wonder why it had to come to this. Why hadn’t they voluntarily cut their own pay by now? The way the news media plays it, you’d think that this amorphous group of “Wall Street Fatcats” would have huddled in their secret bunker under Lower Manhattan, and voted to lower their own salaries to avoid public ridicule.

But the media — and our politicians — have it wrong. They believe that “Wall Street” is, in fact a defined entity that has strong collective interests, and therefore will act to preserve the entity at all costs. They believe it is an entity that can be negotiated with.

This is, after all, how politicians behave. My party negotiates with your party and we work things out. But the the executives who run the world’s largest financial institutions form no such cohesive group. Sure, they have common interests (like, say, getting a new publicly-financed helipad in Lower Manhattan), but they don’t act to preserve the good of the whole. They act to preserve themselves, as we all do in our professional capacities.

And this, friends, is how you end up with a $35,000 toilet.

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