Friday, October 23, 2009

Feinberg to Regulate Bankers Pay: Sure, They Deserved It, But Then What?

If this were simply a case of politicians’ grandstanding upon the misfortunes of seven deeply troubled firms, that would be one thing. If the ruins of General Motors are the rooftop from which you wish to shout your critique of capitalism, the very best of Motor City luck to you. But the Democrats wish to see these czarish pretentions extended over most of the American economy. Senator Schumer, the New York grandee renowned for his ability to squeeze campaign money out of Wall Street, wishes to see Mr. Feinberg’s pay restrictions extended to every publicly traded company in America: not every financial company, mind you, not every TARP recipient, not every bailout basketcase, but every single American company with shares trading on an exchange. Those aspirations are authoritarian, and remarkably so. Further, Mr. Feinberg intends to demand a number of structural changes at these firms — changing the way board elections are structured, forbidding CEOs to serve as chairmen, etc. — which Senator Schumer and others may well be tempted to insist upon generalizing....Feinberg's Folly, The Editors, National Review, 10/23/2009

Three years after World War II, under a Labor (socialist) government, England, which had been on the victorious side of the war against Nazi Germany, was bankrupt, under a heavy rationing regime, and barely able to sustain itself as a nation. It was, in some respects, worse off than the wreck of Germany. Recovery wasn't very real until a brief flare in the 1960s, and substantive only during the Thatcher era forty years later. State-run economies are disasters. But state-run economies are also operated by sanctimonious hypocrites like Charles Schumer, the kind of nanny goats who don't approve any individual decision, who are the first to criticize any exercise of individual ambition (other than their own), and who would be happy to come into your kitchen and shout instructions at you on how to cook nonfat meals.

This huge intervention in corporate governance, while not surprising in banks and brokerages after their bubble-head management led to the crash and credit crunch of 2008-2009, will not give us perfected organizations, but one British-Leyland after another, i.e., a ghastly conglomeration of mismatched political and economic objectives that will have to be broken up and sold to private entrepreneurs if any of them are to survive.

The reason Ayn Rand is held in such high regard in her sometimes hyperventilating style about what happens when the state takes over enterprises is that she saw it happen in the first decade of the Soviet Union. What the current Administration is doing is becoming hard to distinguish from the demolition of private enterprise before the appearance of John Galt at the end of Atlas Shrugged. Sanctimonious intrusion heaps upon sanctimonious intrusion until the most gifted entrepreneurs and managers simply can't juggle all the bouncing demands any more. In Rand's book, the good ones fled to Galt Gulch to rebuild. But where's Galt Gulch today? The usual outcome of socialism is bankruptcy, economic stagnation, and long-term corruption so deep that only war or revolution can root it out. The magical appearance of a savior, as we know very well from the current resident of the White House, is less a guarantee of safety than of national ruin.

Regardless of how just you might think it is for bankers and brokers to have their pay constrained by the government, that's not where it ends. It ends when the sanctimonious hypocrites have their mitts on everything.

These are the stakes for 2010. These are the stakes now.


No comments: