In the late 1970s, as the federal government arranged to bail out Chrysler, not-yet-famous economist Alan Greenspan warned the problem “was not that it would fail, but that it would succeed.” And it did, thus paving the way for more bailouts, including (again) Chrysler.
But the first Chrysler bailout was just one company, one time. The rolling series of financial bailouts over the past year -- Fannie Mae and Freddie Mac, AIG and Citibank, General Motors and Chrysler, etc. -- have not yet succeeded or failed. But they’ve raised a new moral hazard. These days, having invested so much in so many formerly private businesses, lawmakers in the federal government seem to believe they’re entitled to meddle in any company at any time.
An early hint came when insurance company AIG (which had accepted $170 billion from the U.S. government’s bailout) was contractually required to pay 73 employees bonuses of more than $1 million each. Not so fast.
Senate Majority Leader Harry Reid insisted the company must give the money back. “We expect that you will report back to Congress on your efforts to recoup these payments in short order,” the Nevada Democrat warned. Sen. Charles Schumer, D-N.Y., went even further. “If they don’t [return the money] we plan to tax virtually all of it.”
The idea that the all-powerful federal government would set out to target 73 private citizens ought to be frightening. But it’s the sort of thing Americans will be getting used to as the power of the government grows.
This summer, amid the furor over health care reform, two powerful House members are taking things to another level. On Aug. 17, Reps. Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee, and Bart Stupak, D-Mich., chairman of the Subcommittee on Oversight and Investigations, sent a letter to 52 health insurance companies.
They demand that companies compile a list of any employee paid more than $500,000 in any of the past six years. They also want to know if these employees collected any bonuses or perquisites. Further, they demand to see a “table listing all conferences, retreats, or other events held outside company facilities from January 1, 2007, to the present that were paid for, reimbursed, or subsidized in whole or in part by your company.”
The three-page letter doesn’t explain what legal authority the congressmen or their committees have for requesting this information. It simply says they are “examining executive compensation and other business practices in the health insurance industry.”