Here comes Socialism!

First the government imposes this kind of bullshit on an industry everybody loves to hate. No public backlash. In fact, there will probably be dancing in the streets.

Next, you'll see the proposals to limit all private sector compensation. There are already movements in the works to limit the highest paid employee of a given company to 100x the income of the lowest paid employee. For those of you that don't think it's going to happen, how much else did you say would never happen over the past 18 months?

The government juggernaut is on a roll, and it is not going to stop. Their aim is to remove all financial incentive from private industry, thus making the country completely dependent upon an immovable central government. Read your Saul Alinsky, boys and girls. Your president certainly has.

I mean I can understand why the government would feel they have a say in monitoring and supervising how companies who took TARP money are spending it, and I could at the limit understand capping executive pay but coming in and changing compensation in the private sector is ridiculous.

Im not american, I lived there for a long period of time and as far as I know it's always been a country based on ambition and compensating hard work. Can someone explain why changing that mentality will be beneficial? Won't it mean a drop in motivation to ascend to the top? Or people moving around to work in other countries or non american companies?

If this truly is what is going to happen, i'm baffled...

Just to play Devil's Advocate:

"Executives at companies that have already received money from the Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already received federal money may well be coming back."

... You have two choices: 1. Borrow from the government and face compensation restrictions. 2. Go Bankrupt- which leads to things that rival compensation restrictions in terms of being bad.

"Nothing is so permanent as a temporary government program."

"The government solution to a problem is usually as bad as the problem."

"We have a system that increasingly taxes work and subsidizes non-work."

"Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government."

Whether or not your are a fan of Friedman, the guy is probably not too far off in what he believes. And especially with that first quote, just watch this play out. Once all this socialist policy is in place, good luck getting rid of it.

The war on business has commenced...

All the recent grads will jump in your shit. Don't you know that the free market is the Devil???

...but it is not structured quite as harshly as the headline suggests. Top execs would have no absolute cap on compensation; rather, anything above 500k could be taken in restricted stock options which can't be repaid until the government is paid back. If this applied only to the top 10 or so execs in a firm, it won't be as harmful as it might be due to that provision. Although it obviously increases their risk astronomically, they can be compensated and even gain an upside under this plan. I agree it is a very slippery road to start down though, and no doubt the socialists will lose any reaming shred of reason when a bank gives 10mm in restricted options to encourage a necessary exec to stay on and keep them afloat.

I love it when people get a hard on by criticizing something as socialism - I'm sure you enjoyed Econ 101 and love using labels.

Now start thinking realistically.

Haven't seen you in a while, bro. You've gotta love what your boy's up to.

Just curious, if you don't call the government's control of the banks socialism, or at least socialist, what do you call it? Keep in mind I disagree with the whole concept of TARP, and the banks shouldn't have had access to that money in the first place. So just don't preach to me about how the banks have to accept this now because they took the money. On that, we probably agree.

Good to see you again Edmundo.

My criticism is more towards what I perceive as overuse of the word 'socialism'. My perception is that people throw it around with the intent of conjuring up images of Europe/USSR/China, thereby implying that the US is doomed to fail. These implications are dangerous because there are too many situation-specific, confounding variables to say what does and what doesn't work, so I think it's unfair to state there's causality.

I am not denying that government interest in banks is socialist - but I don't think it's socialism, and I don't think socialist measures are always bad.

I am also against TARP, and frankly, I'm an advocate of letting failing banks fail. I think this crisis is beyond anybody's comprehension and we should let nature/markets take their course.

Obama's genius will be taking a pragmatic approach and not gettig tied up in idealism or labels.

I believe the compensation limits are only for banks that take FUTURE tarp money. Hence, it seems like a political stunt by the obama administration to appease some people while not basically doing anything except causing banks to fear taking money (which I dont agree with, btw), and effectively forcing management out of the industry. It basically undermines the idea of a bailout. I think they should instead look at some ways of changing accounting standards so that losses occurred during 2008 could be annualized over the next 10 or so years. $5B or so a year wouldn't hurt citi too much. Either way, I heard Australia is a nice place to live, anyone comment?

I meant pragmatic in the sense that if whatever stimulus bill passes doesn't have a positive impact, he'll work to amend it instead of being attached to spending v. tax cuts.

Obama has already - against the advice of notable economists such at Joseph Stiglitz, Paul Krugman, and Larry Summers, and Goldman Sachs' internal economists - pushed for more tax cuts than initially planned. I don't think tax cuts are the answer, but they show Obama isn't stuck in one political camp.