Perception is reality.
So it doesn’t matter what really happened when pay czar Kenneth Feinberg agreed to exempt a bunch of AIG executives from pay caps because they whined and threatened to quit over them.
This decision just looks like yet another wimpy, lame move from a government whose policies with respect to Wall Street have defined wimpy and lame.
Ever since the waning years of the Bush administration, when Washington “service” became just another rung on the Wall Street career ladder, our government has gone out of its way to protect the interests of its once and future employer.
- Idiot bondholders–the folks who provided the money necessary to fund our debt binge–have been rescued to the tune of 100 cents on the dollar
- Massive, incompetent financial firms have been bailed out and nursed along
- Counterparties ready to take a major haircut on CDS contracts have been made completely whole
- Regulators have defended their actions by saying they “lacked the necessary legal authority”–as if the lender of last resort needs legal “authority” (Warren Buffett didn’t have any “authority,” and he cut himself much better deals than the US taxpayer got).
- And so on…
And now, on the heels of outrage about record Wall Street bonuses in the face of 10% unemployment, Obama’s vaunted pay czar, Kenneth Feinberg, has revealed himself to be nothing more than a puppet:
WE’RE GOING TO CAP YOUR OUTRAGEOUS PAY!!! WE’RE GOING TO MAKE SURE YOU DON’T USE TAXPAYER BAILOUT MONEY TO PAY YOURSELVES HUGE BONUSES!!!*
*Unless you complain, in which case we’ll just forget the whole thing.
Is there another side to the story? Of course there is. Feinberg is in an impossible position, because pay caps were always a terrible idea. The US taxpayers now own AIG, so destroying it in the name of retribution for past sins would be just shooting ourselves in the foot. And when your firm value depends on your good people staying, you destroy the firm by making them leave.
But Feinberg’s predicament just reveals the insanity of our whole Too Big To Fail bailout policy, for which Bush, Paulson, Geithner, Bernanke, Summers, and Obama are directly responsible.
Too Big To Fail was a bad idea at the time–another short-term emergency fix for a country that has gotten addicted to them–and President Obama wasn’t the one who started it. But if he doesn’t find a way to appear as though he can stop the madness and stand up to Wall Street, it will be the end of him.