The virtues of limiting executive pay

Companies that took TARP loans should just take it up the butt, they should have not taken the TARP money. Too big to fail - baloney. Now for all the other companies that have never taken a cent of taxpayer funds, they should tell uncle Sam to stay the hell out of their affairs.

"Companies that took TARP loans should just take it up the butt"

Bingo!

With a few exceptions, that IS how they took the money.

" they should have not taken the TARP money"

I thought Hank Paulsen forced the healthy banks to take the funds:

"We don't believe it is tenable to opt out because doing so would leave you vulnerable and exposed."

Some banks were “involuntary recipients” to minimize the usual stigma of going to the discount window (NY Fed), and the subsequent negative market signal that would send. If everyone got funds, it’s harder to detect the really sick ones.

We can extend Yandle's argument even further: Imagine an amendment to the Constitution that would require Congress to place identical regulations on the behavior of its members and the body as a whole whenever it attempts to regulate economic activity. For example, Don recently posted several comments about the advisability--or lack thereof--of insider trading prohibitions. On one of those threads, a commenter posted links to stories about the continued legality of Political Insider Trading, and the ability of some Congressmen to consistently beat the market. If the aforementioned amendment were in place, then back in the 1960's (I believe that's correct) Congress would have been required to prohibit political insider trading along with the corporate variety.

I wonder if Public Choice economists would approve of this amendment as a method of ensuring that Congressmen have more “skin in the game”.

Dream on, Sir. Congress has to change what congress is doing unethically.

Want to figure the odds on that one?

Dem what make de law no gotta live by de law.

Here is an example of how congress thinks.

http://www.chron.com/apps/comics/showComic.mpl?...

Kinda silly.

Is, say, the pay for a congressional representative why they take and keep the job and do what they do?

Or is it the millions of dollars in donations to their re-election campaign, the perks lavished upon them by lobbyists and constituents, and the huge salaries the get speaking, lobbying, and consulting after they leave?

The problem is, some companies were forced to take TARP funds so that failed banks would not be exposed. Many of those companies have already paid that money back.

The problem is....that there was TARP money in the first place.

Without the bailout, lots of the so-called "talent" would now not have to worry about executive pay caps.

"The problem is....that there was TARP money in the first place."

Bingo.

The presumptive lie raises its ugly head again, From the article:

"President Obama said: “They’re doing what they always do — descending on Congress, using every bit of influence they have to maintain the status quo that has maximized their profits at the expense of American consumers, --- despite the fact that recently a whole bunch of those same American consumers bailed them out as a consequence of the bad decisions that they made.”

Obama presumes that we the people are to weak minded to remember that the bailout decisions weren't made by the American consumer, and that it was socialist government that shoved it on us, particularly the socialist leadership from president through both houses of Congress.

But, lie is what politicians do.

There are ways to mend the constitution so that it will work for the people and not the servant, and pay is just one minor part of what needs to be addressed.

Nice take.

CEOs usually get a lot of their compensation in deferred stock. CEO's have bosses. By selling their stock and even shorting it, shareholders can easily reduce a CEO's pay until it reflects their opinion of how well he's doing steering the company.

Politicians decide their own compensation. We, their supposed bosses, don't have any say in how our rulers choose to compensate themselves.

Why, they're even excusing themselves from that super duper awesome government meatgrinder "health" plan they're forcing everyone else into.

Off topic, but I just read this and had to pass it on.

"At Southwest Georgia Community Action Council, director Myrtis Mulkey-Ndawula said she followed the guidelines the Obama administration provided. She said she multiplied the 508 employees by 1.84 — the percentage pay raise they received — and came up with 935 jobs saved."

Yep. Sounds like typical civil servant thinking to me.

...professor yandle's comments sound similar to things professor roberts has mentioned on econtalk over the years.

I just cannot see how government interference will produce any good. In my view it is not the level of compensation but rather the detachment of their pay and the risk they create. If these were sole proprieters or entrepreneurs they could well earn equal or greater amounts. However they would also bear the risk - if things go south it comes out of their pocket first. Real moral hazard has a way of moderating risk taking. These executives and other highly compensated risk takers are divorced from this moral hazard. In good times they reap substantial rewards. Exercise bad judgement that bankrupts the company - you lose your job but not any of your accumulated wealth. With nothing but upside here it is no wonder that unreasonable risk are taken.

I just cannot see how government interference will produce any good. In my view it is not the level of compensation but rather the detachment of their pay and the risk they create. If these were sole proprieters or entrepreneurs they could well earn equal or greater amounts. However they would also bear the risk - if things go south it comes out of their pocket first. Real moral hazard has a way of moderating risk taking. These executives and other highly compensated risk takers are divorced from this moral hazard. In good times they reap substantial rewards. Exercise bad judgement that bankrupts the company - you lose your job but not any of your accumulated wealth. With nothing but upside here it is no wonder that unreasonable risk are taken.

Actually, since the biggest source of systemic risk is the government.. what do we do to align their political incentives better against their economic effects