Let's say that you have invested a pant-load of money in some business. The business is failing. You want it to succeed. You want the best executive talent you can find to step in and save the business ... and your investment. Now just how helpful do you think it would be if you told the search committee looking for a new CEO that you were going to appoint some political hack to make sure that the new boss doesn't make too much money? Can you see that any extraordinarily qualified candidate for the job would tell you to take it and shove it where even the TSA couldn't find it?

Do you ever sit around and just wonder at the type of idiots we have running the show right now?

Of course we need a thread to talk about the pay caps for TARP fund recipients, right?

Stolen from fark.com and used with love whenever TARP comes up. -ww

Yesterday we got a report from Neil Barofsky, the inspector general for the Troubled Asset Relief Program (TARP). The report basically said that Treasury Secretary Hank Paulson (under the Bush administration) forced financial institutions into taking bailout money. Back in October of 2008, federal regulators chose nine of the nation's largest financial institutions and forced them to accept billions of dollars in taxpayer money. If they didn't want the money, too bad. They didn't have a choice. The report says that government officials threatened to take away their stock shares ... in other words - a government takeover of their financial institution. Wonderful, just wonderful. So this is how it works in a free market economy ... under Republican and Democrat presidents.

A few details to note from the report. We are coming to find that these nine financial institutions -- Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, State Street and the Bank of New York Mellon - were chosen not because they needed money, but because of their size and involvement in the financial system. They were big players, and the government wanted control

This is also where Hank Paulson got into some trouble. Recent news articles have reported that Paulson lied to the American public. Okay ... let's first nail down the definition of a lie. A person lies only when they utter a statement that they know to be untrue. Now, Hank Paulson assured us last year that these nine institutions receiving bailout money were healthy and that they were only taking the money for the good of the economy. However, it turns out that this was untrue and federal officials (including Paulson) knew it. The report says, "Senior government officials had affirmative concerns at the time the nine institutions were selected about the health of at least some of those institutions ... The Federal Reserve had concerns over the financial condition of several of these institutions individually and for all of them collectively absent some governmental action. And former Secretary Paulson noted concerns about the outright failure of one of the institutions."

Then the government comes along and tells these institutions that took bailout money ... under the threat of government retribution ... that they must submit to executive compensation restrictions. Restrictions that will only grow and expand with Democrats in charge.

Nice. Bureaucrats don't like what the executives of certain financial institutions are making. The institutions are healthy .. at least healthy enough to weather the downturn. But this doesn't matter to the bureaucrat class. They want something done about the money these people are making. So they gin up some rather dire threats and force these institutions to take government bailout money. Besides, the more people who accept the bailout, the more involved the government seems to be in rescuing the country from financial collapse. Then, as soon as the money is in hand the bureaucrats start setting executive compensation rates. Yeah ... that's the way it's supposed to work, right?

Do you realize how much power the Congress has given Barack Obama's pay czar? Not only does pay czar Kenneth Feinberg have "binding" authority over executive compensation, he has the ability to "claw back" money that has already been paid.

The reason this is coming to light now is because seven major companies that participated in the TARP program have to submit their executive contracts for government approval. One contract for energy trader Andrew Hall could be as much as $100 million this year. Some are looking at that amount and thinking that no one should be allowed to earn that kind of income! So the question is ... will our pay czar allow this man to receive his $100 million?

Not only that, but he hasn't even begun to explore this idea of a "claw back" provision. Did you even know that the Congress has given this man the authority to do that? Just tell me where in the Constitution it says that Congress can create laws that would allow a government bureaucrat to retroactively seize money from private businesses? Just curious ....

This power is not just limited to large TARP recipients. Feinberg has the ability to recover any compensation paid to executives of "any company that received federal assistance." Feinberg himself says, "Anything is possible under the law." He's right. Try to name a company that someone can't build some sort of a claim of having received federal assistance.

The government has some money left over from the $700 billion bank bailout. There is something like $259 billion in the fund plus another $70 billion that has been repaid by the banks. So now the debate remains ... what should be done with the "extra" money?

Tax cheat Tim Geithner wants to keep money in the program to provide "headroom" for "additional flexibility to Treasury in its efforts to stabilize the economy and build the foundation for long-term economic growth." Politicians, like Barney Frank, are just itching to get their hands on the money to be used for entitlement program. Slobbering Barney, for example, wants to use the dividends earned through interest owed by banks to go toward affordable housing programs .. read: welfare.

But the answer here should be really simple, folks. Give the money back to the taxpayers. This is not the government's money. It is not money that was willingly donated to Timothy Geithner's piggy bank. This is money that has been seized by the government from you, the taxpayers. How hard is this?

Well now. Our economy is really lunging forward, isn't it? What a ride! Are you holding on?

We're billions of dollars further in debt (trillions?) and the economy is still stagnant. TARP, the stimulus bill, massive debts our children and grandchildren will have to pay .. and what has this all brought us? Banks aren't lending, businesses aren't hiring - let along expanding - and consumers aren't buying. Oh, to be sure, the malls are crowded. Turn up the thermostats and see how long that lasts. Those aren't shoppers, they're just your neighbors trying to stay cool while watching the latest absurd teen fashion and freak shows.

Do what the initials SNAFU mean? That word was created to define government action, or inaction as the case may be. In 1942 Time magazine carried this revelation: "Last week U.S. citizens knew that gasoline rationing and rubber requisitioning were snafu." Well .. if there was ever a SNAFU, our economy would fit the description. To fully understand this, you have to know what the acronym stands for. Go ahead ... Google it

So ... after hundreds of billions of dollars, government seizures of GM, Citigroup and others, imminent bank nationalization, massive favors handed to unions at the expense of private investors, and a pantload of new czars in the White House ... all done to kick start our economy ... what do we have. SNAFU, that's what. Or TAUFU, if you like.

Look ... I'm just a talk show host. What the hell do I know? I've been sitting behind a microphone for 40 years now sparring with hundreds of thousands of callers who generally knew a helluva lot more than the hundreds of politicians I've interviewed over that time. Having said that ... I'm betting that this particular talk show host can, in just a few hundred words, give you some better ideas for kick starting our economy than you've heard from Obama and his Democrat sycophants over the past four months. Oh, and throw in most of the Republicans as well.

It's not all that hard, really. All you have to do is recognize and acknowledge the true goal of the political class. It's summed up in one word: POWER. You think they actually give a flying Krispy Kreme about you? What? I know you were born at night, but was it last night? They may care about your vote .. but that's it. It's power, my friends. Power and little else. Politicians will spout some lofty rhetoric about public service and wanting to leave this country a better place when they leave office; but, with few exceptions, that changes rather quickly. Once they get used to the privileges and the perks that go with their exalted positions their mindset changes. These people don't name research centers, bridges, parks, sports stadiums, university buildings, highways and office buildings after themselves because of their dedication to public service.

Where does that leave us? It leaves us in a situation where the people in power, the people who make the rules and decide how our economy is going to be fixed, are going to worry first about preserving and expanding their power and secondly (if they have time) about putting us back on a track to prosperity.

The basics: What does it take to get our economy moving again? Spending. If nobody is spending nobody needs to produce. You aren't going to gather the raw materials and personnel together to spend time and money creating a product or service unless you have some degree of confidence that there are people out there who either have or can borrow the money to buy it. Our economy is a constant day-by-day election process. The products and services put into the marketplace are the candidates. Consumers are the voters. Dollars are the ballots. If a candidate gets no votes, the candidate either reinvents himself or just simply goes away. The whole process slows down or grinds to a halt if the voters don't have ballots to cast.

Clearly, to stimulate our economy money had to be spent. That's basic. The question, then, was who gets to spend the money? If the American public gets to make the choices as to when and where the money is spent, that equates to power for the people. If, on the other hands, those decisions are made by the political class, it means no power to the people - the power goes to the elected elite. Now would someone please try to explain to me why these politicians, as completely immersed as they are in building their individual power bases, would ever want to turn over the power that goes with spending these huge sums of money to the great unwashed? How in the world is that going to benefit a politician? How do you generate a campaign ad for radio telling the voters that you deserve reelection because the private consumers in your district kept the local hardware store and a few clothing shops in business with their spending? Better you should be able to lay claim to a few road widenings and resurfacings and a new rehearsal hall for the local high school band.

Do you remember how much that stimulus bills was? Let's just call it $750 billion. For the sake of argument let's accept that this $750 billion had to be borrowed and spent to get our economy cranking again. Once you've accepted the $750 billion figure we're going to borrow, you then have to decide just who gets to spend that money and what they get to spend it on.

Here's an idea from Texas congressman Louis Gohmert (R 1st Dist.). Gohmert wanted a tax holiday. I've taken his idea and expanded it a bit. Last year Gohmert was floating an idea of allowing the American people to go one full month without paying any federal income or payroll taxes. The idea was that they would then spend this money and stimulate the economy. When Obama started talking about the $750 billion dollar stimulus price tag I did some quick calculations. It seems that $750 billion is almost exactly equal to the amount of federal income, Social Security and Medicare taxes withheld from American paychecks over a six-month period.

Are you following me? How about not a one-month tax holiday, but six months? How about letting people keep almost their entire paychecks for one-half of a year?

So -- here are the two possible scenarios our politicians had to work with:

1. Borrow the $750 billion and let the politicians (the looters) decide how it is going to be spent to stimulate our economy.
    
2. Give the producers a six month period in which they owe no federal income or payroll taxes. For these six months they get to keep their checks. This puts $750 billion into the hands of American workers - American producers - to spend and invest.

Either way you are going to have to borrow $750 billion. If you give the people a six-month tax holiday the money will have to be borrowed to replace the lost revenue.

You see it, don't you? There is one huge difference between the two plans. Under the government spending scenario the politicians get to decide how the money is spent. In other words, they get the power. Remember ... power is the goal. It's everything to the political class. Politicians wanted to decide which road is built, which park is refurbished, and which research project gets additional funding. Every one of these decisions would be made based on the political capital it will generate.

Under the tax holiday plan the people, not the politicians, get to cast the ballots/dollars. Spending choices would not be made on the basis of political expediency, but on the free choices of the people. Businesses that delivered a good product and good customer service would get the votes, not politicians who delivered a pork project to their districts.

A dollar spent on a new lawnmower at the hardware store does not generate a single vote. A dollar spent on a new job mowing grass along an Interstate highway does.

So ... there was a decision to be made. Massive amounts of money were going to be borrowed and spent to stimulate our economy (or so the storyline went). But just who would get to spend the money?

Do you remember that famous Bill Clinton line? It was January of 1999. The place was Buffalo, New York. The federal government had actually collected more tax money that it needed. There was a surplus. Someone asked Clinton if, considering the surplus, there might be a tax cut. His response: "We could give it all back to you and hope you spend it right... But ... if you don't spend it right, here's what's going to happen." He then went on to describe the gloomy future of Social Security when more people are collecting benefits than paying taxes.

Sure .. it's your money. You worked for it; you earned it. That money actually represents the expenditure of a portion of your life ... and here's this politician telling you that even though he doesn't actually need that money right now, he's going to go ahead and keep it because if he returns it to its rightful owner - you - then you won't "spend it right." Now excuse me, but don't you get to decide what would be the right way and the wrong way to spend your money?

You know the rest of this story. The politicians in Washington decided that they would be doing the spending, not you. You just could not be trusted to spend it "right." So President Obama sent the word to Princess Pelosi to gather together all of the spending dreams and schemes of her Democrat members of congress and compile them into a massive spending bill. The bill would be pure pork and designed for nothing more than to secure reelections; but it would be called stimulus.

Now I could waste a few thousand words here describing all of the absurd ways this money is being spent. Vice President Biden actually told us that there would be waste. He was talking to business leaders in New York in early June when he said that waste would be inevitable in spending the stimulus money. Inevitable doesn't begin to cover it.

Slobbering Barney Frank has been busy lately. Last week he proposed the idea of relaxing regulations on the sale of condos. This week he wants to use TARP money to put poor people into housing. See, banks participating in TARP have to pay dividends to the Treasury. So far those banks have paid $5 billion. So now Barney Frank comes along and says, "Hey, I know how we can spend all of this money!" Certainly not to stimulate the economy, Barney, and not to pay off some of the debt you're running up either.

So here's Barney's plan. He has introduced legislation that would use $1 billion of those dividends in order to give rental housing to the poor, poor pitiful poor and to urban outdoorsmen. Here's the plan ... the $1 billion would be put into something called a national housing trust fund. This fund has apparently already been created ... it was done when the government decided to takeover Fannie Mae and Freddie Mac. So Barney has the fund .. but no funds. Now Barack Obama's 2010 budget calls for this fund to receive $1 billion, so Barney's plan is just a way to make that happen. That's just the beginning, folks. That's just "seed money." The goal would be to put $150 billion over the next decade into this housing trust for poor people. That's a "15" with a pant-load of zeroes behind it.

Stay tuned! That's not all ... another $1.5 billion of these TARP dividends will be allocated to state and local governments to help them redevelop abandoned and foreclosed properties.

It keeps going. Barney Frank also wants to use some of the TARP money itself, not just the dividends. He wants $2 billion in TARP dollars to go toward an emergency mortgage relief program. Then another $2 billion in TARP dollars would create a program to help people cope with foreclosures on multifamily properties. All of this would be run by the Department of Housing and Urban Development.

We're never going to pay any of this money back my friends, not while the Washington Barneys see ways to use it to buy votes.

Tax cheat Timothy Geithner has decided that the government should not impose caps on executive pay at companies receiving bailout funds. Thanks for finally clearing that one up for us, Tim. But he does believe that the government should set policies that would discourage financial companies from rewarding excessive risk-taking.

He says, "I think we can bring about broader reforms of compensation incentives in finance as a whole," not just at companies participating in TARP. "We'll make it much less likely that people get paid to take large amounts of short-term risk at the expense of their firm and the system as a whole."

Now, of course, we need to figure out who gets to define whether or not risk-taking is "excessive." I guess that would be the government. And a quick question for you ... where would our country be today if our history were not full of people who were willing to take "excessive risk" for a fantastic reward.

Just remember that whenever government says that a program is going to cost a certain amount, it is never ever going to cost that cited figure ... it will always cost more. In this case we are talking about the $700 billion TARP, which was originally cited to cost the tax payers $189 billion. But guess what? The Congressional Budget Office has raised its estimate of how much the tax payers are really on the hook for .. try $356 billion. That's just a mere $167 billion more than originally estimated. It is guaranteed to go higher.

By the way, TARP belongs to Bush, you know. The original intent was to purchase toxic assets from financial institutions so that they could lend again. Sure didn't work out that way. Another spending program that belongs to Bush is the Medicare prescription program. I wonder what the tab is for that now. At a minimum it is twice what Bush told us it would cost.

Yesterday Obama released his plan to loosen up the credit markets. The Dow liked it, rallied 500 points. For those of you who really want the details, Jamie Dupree has the plan posted in its entirety.

Here's the gist .. The government in partnership with private investors will purchase bad assets from troubled financial institutions. If the value of the securities goes up, the private investors and taxpayers would share in the gains. If the values go down, the government (the taxpayers) and private investors would incur losses. The goal is to generate $500 billion in purchasing power by using $75 billion in TARP money, combined with private investment and loans from the FDIC and the Fed. And as we've already known, these toxic purchases could grow to $1 trillion.

It's wait and see time. At least Obama sees a role for the private sector. I have a fear though. What if the private sector entities who participate in this rescue end up making a lot of money? How quickly will Barney Frank et all start screaming for windfall profits? Remember, AIG has shown us that you can't trust the government to abide by a simple contract any more. Why trust the government in this?

The latest corporation up to the chopping block: JP Morgan Chase. The company has received $25 billion in TARP funds. But it plans to buy two luxury corporate jets worth $138 million and also build "the premier corporate aircraft hangar on the eastern seaboard" to house them. The new hangar will apparently be built with reclaimed wood, quarry tile and even include a "vegetated roof garden." The Gulfstream 650's are supposed to be the "fastest," "widest" and "most comfortable" private jet ever. Can't you feel the wealth-envy building?

A spokesman for JBMorgan Chase says that no TARP money would be used to make any payment for the new jets or hanger improvements.

But that doesn't fit well into the wealth envy argument, does it? All that matters it that these evil corporations want the luxury of having private jets!

The Obama administration is ironing out the details of his plans to increase government oversight of executive pay. I'm not just talking about the top TARP recipients .. I am talking about all banks, Wall Street firms and possibly other companies.

The New York Times reports ...

Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could go beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on company boards to tie executive compensation more closely to corporate performance and to take other steps to ensure that compensation was aligned with the financial interest of the company.

Today in Washington we are going to have a Congressional beat down of AIG CEO Edward Liddy. He is going to appear in front of a House financial services subcommittee. And I think we can safely say that he is going to get a less than pleasant welcome. Liddy is going to have to defend the concept of abiding by the terms of your contracts with your employees. Look for Maxine Waters ask Liddy some questions ..

"What is a contract?" would be a good start. Mensa Maxine is so darn good at this sort of stuff. We'll also be treated to some posturing from the man most responsible for this mess ... and that would be Barney Frank.

So it turns out that AIG paid bonuses of $1 million or more to 73 of its employees. Eleven of those bonuses went to former employees. The contracts were written in March 2008, and they guaranteed 100% of their 2007 pay for 2008. They were not based on performance. Apparently the top individual bonus was more than $6.4 million, and the top seven received more than $4 million each. Did these people really earn this money? Possibly not. But they were parties to a contract .. and if the money had not been paid they would have most certainly sued for it.

Here's something I'm guessing you don't know. The Financial Services Division of AIG is headquartered in Wilton, Conn. In Connecticut they have a little gem called the "Wage Act." This law says that if an employee has to sue for wages payable pursuant to a contract they recover twice the amount that is contractually owed. That would have meant $330 million instead of $165 million. Add some attorney's fees on top of that. So ... you're running AIG. What would YOU do?

Now ... here is just a sampling of some of the comments coming out of Washington.

I'm sure that Chuckie Schumer would like to have his way with Edward Liddy. Did you hear what he had to say about these AIG bonuses? If not, here's a brief synopsis of what Chuckie had to say on the Senate floor:

"My colleagues and I are sending a letter to [AIG CEO Edward] Liddy informing him that he can go right ahead and tell the employees that are scheduled to get bonuses that they should voluntarily return them. Because if they don't, we plan to tax virtually all of it. He should tell his employees that if they don't give the money back, we'll put in place a new law that will allow us to tax these bonuses at a very high rate so it is returned to its rightful owners, the taxpayers. So for those of you who are getting these bonuses be forewarned, you will not be getting to keep them."

He wasn't the only one who had something to say about these bonuses. Harry Reid declared on the Senate floor, "Recipients of these bonuses will not be able to keep all of their money."

And slobbering Barney can't let a good wealth-envy moment go to waste. He's still sputtering about all of these bonuses asserting, "The time has come to exercise our ownership rights. We own most of the company. And then say, as owner, 'No, I'm not paying you the bonus. You didn't perform. You didn't live up to this contract."

Oh and we're not done yet. Senate Finance Committee Chairman Max Baucus says, "They're not going to get the financial benefit of those bonuses."

And Ohio Democrat Tim Ryan introduced a bill into the House that would tax at 100% bonuses above $100,000 for any company receiving bailout money. Ryan says, "We will use any means necessary ... It boggles my mind how these executives can be so unaware of what the American people are going through." Democrat Rep Steve Israel also sponsored this bill. Israel says, "If we can't kill the bonuses, we'll tax the bonuses." He says, "American families shouldn't be forced to reward these professional financial failures with extravagant bonuses that could buy fancy cars and yachts ... AIG may not like it, but since they had to come to the federal government for help, the federal government now has a say in how they spend taxpayer money."

Another bill introduced by Democrat Rep Gary Peters would "create a 60 percent surtax on bonuses over $10,000 to any company in which the U.S. government has a 79 percent or greater equity stake in the company. Currently, AIG is the only company that meets this threshold."

This is an absolute orgy of pandering to wealth envy. In the meantime the government cruises along operating a Ponzi scheme that makes Bernie Madoff look like he's selling brushes door-to-door. That would be Social Security. Someday we're going to face a meltdown over this soon-to-be welfare program that is going to make AIG and Madoff look like two-bit operators.

It was only a matter of time before we got to this point. And it took Northern Trust Corporation to do it. That is the evil corporation that has sent John Kerry on a mission to make sure that he is seen as a watchdog for the taxpayer!

Here's the set up. Northern Trust is a bank based out of Chicago. It received $1.6 billion under the government's $700 billion Troubled Asset Relief Program (TARP). According to the bank, it did not seek TARP assistance, but it agreed to participate in the program at the request of the Treasury Department. The TARP funds were essentially forced on Northern Trust. Northern Trust has made it clear in corporate statements that TARP "funds are not allocated to operating expenses, including marketing, advertising, corporate sponsorship or charitable activities."

Back in the fall of 2007, the bank signed a five-year contract to sponsor the Northern Trust Open, which is a PGA tour event. We are talking about a year before TARP even existed, okay folks? On February 19th-22nd .. just last week .. the bank held its second annual golf tournament. Phil Mickelson won, for anyone that cares. The event included parties and concerts and goody bags from Tiffany's. Does it look bad? Yeah. But is that the whole story? Of course not.

Then comes John Kerry, Barney Frank and the rest of the wealth-envy crowd. They are upset with the "extravagant spending practices of U.S. banks" that receive taxpayer money. John Kerry actually pulls out this line, "Americans who play by the rules are losing their jobs and struggling to pay their mortgages ... It's an embarrassment that this legislation is necessary, but some companies clearly need a reality check to get their priorities straight so taxpayer money is used to get their house in order and not to pay for lavish parties."

So what legislation is he talking about? Under John Kerry's legislation, which would go into effect March 1st, a TARP recipient could not "host, sponsor, pay for conferences and events and pay for holiday or entertainment events for the year in which they receive TARP funds." You can seek a waiver from the ... government ... for an event that the TARP recipient believes would be directly related to the operation of business. If you violate this restriction, the TARP recipient would have to reimburse the government taxpayers for the cost of the event and pay a $100,000 fine per violation.

Barney Frank is already calling on Northern Trust to refund the taxpayers for the golf tournament.

We already knew that Barack Obama wants to limit executive pay to $500,000 for executives of companies receiving bailout funds. As Obama put it, the compensation restrictions would only apply to banks that receive "exceptional assistance."

But thanks to Chris Dodd, chairman of the Senate Banking Committee, that is not exactly how it is worded in the government enhancement bill that will be signed into law tomorrow. The bill will limit executive bonuses on all banks that receive bailout money .. not just those receiving "exceptional assistance." The rules written into the stimulus bill also apply retroactively to companies that have received TARP money. And when it comes to those evil corporate bonuses, Chris Dodd has a plan for those too .. although any bonuses included in contracts before February 11th will not be affected.

Here's the deal:

"Under the new restrictions, top executives can only collect bonuses no larger than one-third of their annual salary. And those bonuses must be given in the form of restricted stock options that executives could not cash in on until their company's bailout money was repaid to the government ... In terms of how many executives would be impacted by the rules in the stimulus bill: The restrictions would only apply to the highest-paid employee for companies receiving less than $25 million in government funds, but they would impact senior executives and at least the 20 next most highly paid employees at companies receiving $500 million or more in TARP funds."

Now the Obama administration says that it wants Congress to change parts of the executive compensation provisions included in the stimulus. Obama is apparently angry that Chris Dodd is trying to "one up" him with even more restrictions on executive compensations.

Whatever happens with the bonus provisions of the bill one thing is certain .. these restrictions ill insure that the affected companies cannot go into the marketplace to find the best available executive talent to bring their companies back to profitability. But the wealth-envy crowd will be happy.