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10/27/2009
Burri: Bailouts, Banks, Health Care, and the Mob

So, giant financial institutions, are you glad you took the money now?

NEW YORK -- The Obama administration plans to order companies that have received exceptionally large amounts of bailout money from the government to slash compensation for their highest-paid executives by about half on average, according to people familiar with the long-awaited decision.

The cuts will affect 25 of the most highly paid executives at each of five major financial companies and two automakers, according to the sources, who spoke on the condition of anonymity because the plan has not been made public.

Question: if the anonymous sources are anonymous “because the plan has not been made public,” but the anonymous sources themselves are making the plan public, why are they still anonymous?

The administration will also curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement, people familiar with the matter have said. Individual perks worth more than $25,000 have received particular scrutiny.

In making the ruling, the administration's "pay czar," Kenneth R. Feinberg, will be inserting the government as never before into pay decisions traditionally made in corporate boardrooms. His decree, which is expected to be announced by the Treasury Department on Thursday, will culminate a months-long review prompted by public outrage over outsize paydays at failing companies saved with taxpayer money.

I love the word “decree” in there.

One may wonder what the legal basis for this is: did the banks – private institutions – agree to it as a condition of the bailout?

Regardless, the banks are finding out what happens when you take the money. When you go, hat in hand, asking for help.

You get the help, sure, and you get a partner besides. Because nobody likes to think their money’s being wasted. And when your partner is the government, you’re subject to government whims. The bureaucrat who interprets the rules. The Congressman whose constituents are angry. The Senator who sees a news story about a rare form of cancer.

You took their help. Now accept their influence.

In the movie "Goodfellas," a restaurant owners needs help, or thinks he does. So he asks the local mob boss to become a silent partner. To protect his business; to protect him from other mobsters.

It worked, but it didn't. He got the protection, but he got a partner, too. The mob boss used the place as a front for black marketeering. Bought liquor wholesale on the restaurant’s credit, sold it below cost. He ran the business into the ground, and then, when it was all used up, he had it burned down for the insurance money.

All because somebody wanted some protection, asked for it, and got it.

The banks wanted protection – from the economy. The government provided it, but now they want control.

The people want protection from expensive health care; from unfeeling insurance bureaucracies. The government is on the brink of providing that.

Once they’re providing it, they’ll start making decisions. Decisions about who can have what, when, for how much, and whether or not you’re holding up your end. Decisions like: no, we won’t pay that much. We’ll only pay this much, because it’s too expensive to pay more. Or: no, you don’t need to spend money on that. You should be spending money on this. The latest constituent complaint, the latest tearjerker news story will rule over health care. Not you.

They’ll want – and they’ll get – to dictate. To decree. Because taking the money means taking on a partner.

And taking on a partner means giving up control.

Lance Burri blogs regularly via his site, The TrogloPundit.

COMMENTS

The comparison is spot on. The banks are now beginning to experience the bitter after-taste after taking a bite from that apple called 'Help from the government'. And there's little doubt in my mind that the rest of us will go through the same should we end up with Health Care "Reform" end up being imposed on us.

Oddly enough, I find myself thinking this is a good thing. In the long run it would be great if everyone knew that getting 'help' from the government meant losing all control of your business or industry. It should not just be a bitter after-taste. Federal intervention should be viewed as a rancid smelly fish.

If you take Federal dollars, you should know that your salaries would be tied to the Civil Service employee rate table, that no employee gets paid a bonus, that your work facilities will not be lavish offices but cubicles within a concrete block building, that travel to 'schmooze clients' or go to 'seminars' would be restricted to Webex.

I think it would be great if EVERYONE knew that help from the Government stinks. Just like Health Care "Reform" is going to stink.

Jeff Riedl (Tue Oct 27 08:40:56 2009)

I agree with most eveything except the cement block building. Very few government buildings are that type. Many are lavish granite with huge columns and personalized paintings on ceilings and walls.
Otherwise you are right on track!
Although I seem to remember that many government employees are paid more than their counterparts in civilian life. I'm not sure of that however. Might be interesting story!

John Hyland (Tue Oct 27 09:05:33 2009)

The banks own the gov't, not the other way around. It all goes back to "I have unwittingly ruined my country" Wilson, who started the Fed. These banks used the govt to steal taxpayer money to cover their hides, and try to keep the US punctured economic balloon afloat, but the trick didn't work.

Keynesian "economics" NEVER works, because it depends on a continually "expanding" economy, which is not natural. Gold and silver remained the world's currency for thousands of years, and were stable during all ages.

In other words, the world economy did not "expand". Gold only goes "up" in price when the currency used to buy it devalues, so more currency is needed. Our "economy" depended on cheap credit--unbacked by anything to secure the debt--which is now no longer so plentiful. China will no longer fund our debt party; they are a net SELLER of Treasuries now.

Note that the info was given anonymously, which could easily mean it's not true at all, and when the truth does come out, "ANONYMOUS" can't be held accountable for spreading lies. Even if it is true that these banks execs are getting pay cuts, if the truth re. the real state of the economy, and the banks, were to come out, their banks would be FOLDING instead.

(Just as the gov't tells lies re. the current unemployment rate, which is 20%, not 9%! They "don't count" those whose unemployment has run out--but those people STILL don't have a job! The way unemployment was calculated during the last Depression was honest, unlike the number-crunching that goes on now.

I recall a well-traveled friend telling me about how happy the gold companies were in South Africa when the socialist gov't first came to power there, and took over the companies. His wife naively thought they'd be devastated, but she was told by the gold exec, "No, this is great! We will STILL make a profit, and the gov't will cover all our losses with taxpayer money!"

I also know of a recent local case where a man's bank sold his mortgage, DIDN'T TELL HIM, and he as a result got foreclosure notices from the new mortgage-holder. He got no answers from the "selling" bank, and he doesn't know where his payments went all this time.

I believe this press release is just more of the same smoke-and-mirrors this "transparent" administration is noted for.

emily matthews (Tue Oct 27 10:26:26 2009)

Ah yes, those big bad government bureaucrats limiting my choices and making medical decisions for me. The devil I do know intimately is the big bad insurance company and the big bad medical providers jerking me around at tremendous cost with no transparency and no recourse. Give me Medicare any time. There are some industries that are well suited to a pure private operation with no regulation other than safety and fraud. Health care isn't one of them and neither is banking. Yes, you take money from the government and you can lose some control as an industry. And the health care industry should lose control, lots of it. We didn't get to this health care mess because of the government, we got into it because of the lack of government regulation and standards. I believe a health care industry should use money to provide health care instead of an industry that uses health care to generate profits. And why not? The column seemed to put the government in the role as the bad guy. Other than not regulating the derivative industry and mortgage industries in the late '90s and through 2008 the government was the savior from a total meltdown. Letting the banks face the wonderful cleansing of the market was not an option, not unless you think that 20% unemployment is a good thing because it is more retribution for our sins. Anyone who believes the massive bailouts were unnecessary is a fool. We would have melted down. Remember it was a Republican administration that did it. But I blame the Clinton and Bush administrations only for allowing the rapacious and corrupt industries that caused this fiasco to grow unchecked.

dave allen (Tue Oct 27 15:22:46 2009)

Dave- OK I am a fool because I realize that the banster bailout only papered over the crisis, took money from those still profitable, lined the pockets of the corrupt, government connected banks at the expense of all who hold cash and dollar denominated assets. AND those troubled assets? The banks still largely have them, as bailing out car companies (or rather, bailing out union voters) became more important. NONE of the underlying problems have been addressed, except that SOME overvalued assets sank to their real value. So the REAL crunch still awaits us.

To be sure, there was much fraud going on, and not just with the likes of Madoff. But even there, the creation of fiat currency tended to postpone HIS day of reckoning, allowing him to wreak more havoc. What good are more laws, more regulations going to do if no one will enforce them? Indeed, with the Community Reinvestment ACt, it is not much of a stretch to say that fraud was mandated. Letting market adjustments take place in 2001, as was started, surely would have moved up the necessary day of reckoning, but having nipped the current crisis in the bud would result in a shorter and less severe period of adjustment. The major adjustment STILL awaits us, meanwhile the banksters continue to steal our wealth with fiat currency and the pols. punish the successful, sucking more life out of the economy, making the end result worse.

Free markets may not be pretty at times, but they surely are more humane in the long run than the ruin caused by interventionism and legalized counterfeiting.

Ken Van Doren (Tue Oct 27 16:15:06 2009)

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