"Most men die of their remedies, not of their diseases," a smart-alecky Frenchman once observed. At this point, many Americans might be pondering a similar thought: What's worse, the recession or the prescription?
It began with the federal government rescuing financial institutions because they were, allegedly, too big to fail. Somewhere along the line, treating this ailment included cajoling perfectly healthy financial institutions into accepting taxpayer medicine (some of those have returned the TARP funds) for the common good.
Inevitably, a few institutions abused their new funding in supposed "reckless" corporate extravagance. Congress dealt with the ensuing populist fury by passing a bill that retroactively and punitively taxes nearly all of executive bonus pay -- undercutting both the spirit of the Constitution and the sanctity of contractual agreements.
If you accept government money, you should be prepared to have your salary regulated, right?
OK, well then why, according to The New York Times, is the Obama administration considering oversight of all executive pay of banks, Wall Street firms and "possibly other companies," whether they accepted government funds or not?
What is the justification for capping a private citizen's salary? Actually, don't say a word. I can already hear the president's moralistic splendor (maybe on David Letterman?) about sacrifice and greed in times of crisis.
This week, the crisis means doing away with pesky financial regulation and independent oversight (in place to try to mitigate political interference). Instead, the Treasury wants to give itself new power -- "in consultation with the White House, the Federal Reserve and other regulators" -- to sweep in and take over any financial institution that poses a threat to the broader economy.And seeing as how Tim Geithner's done such a bang-up job with the banking crisis so far, why not?
Obama has said he hopes "it doesn't take too long" to pass this legislation. By which, of course, he means he hopes there's no debate. Don't worry, Mr. President.
(I suppose it would be a waste of time to point out to Democrats that they won't be eternally in charge and that this kind of executive power grab will only make complaints about the next Republican president's abuse of power even more impotent.)
But moreover, if we really believe that the state can save a company from inflicting broader damage to the economy, why not have government unilaterally take over other failing institutions? Why not run the steel industry? The auto industry? Why stop?
In any event, one doesn't have to dig hard to understand the kinds of conflicts of interest and the thousands of unintended consequences we inject into the market with flailing remedies.
Let's mention just one. Most of those AIG execs have returned their bonuses -- immediately making them far less contemptible than most of Congress.
According to Newsweek, the Federal Election Commission shows that some institutions that received TARP money, such as Bank of America (which got $15 billion) and Citigroup ($25 billion), have been doling out campaign cash to many of the same elected officials intimately involved in bailing them out.
Yet one of the most concerning aspects of all of this meddling is that every sweeping action of government has necessitated another more intrusive, more far-reaching action -- with no end in sight.
When does the prescription run out? Or does it ever run out?