GOP Opposes Pay Limits On Bailed-Out Bankers
Wall Street bankers, with their $18 billion in bonuses, private jets and gaudy conferences, are causing headaches for the GOP.
President Obama has proposed capping compensation for executives at banks that take taxpayer bailout money at $500,000. Republicans hate the idea -- a position puts them uncomfortably on the side of people currently about as popular as child-porn producers and subprime mortgage brokers.
Senate Minority Whip Jon Kyl (R-AZ) blamed the "tone deaf" bankers for creating the political environment that allows Obama to call for a cap.
"Because of their excesses, very bad things begin to happen, like the United States government telling a company what it can pay its employees. That's not a good thing in America," Kyl told the Huffington Post.
"What executives have done is troubling, but it's equally troubling to have government telling shareholders how much they can pay the executives," said Sen. Mel Martinez (R-FL).
Sen. James Inhofe (R-OK) said that he is "one of the chief defenders of Obama on the Republican side" for the president's efforts to reach across the aisle. But, said Inhofe, "as I was listening to him make those statements I thought, is this still America? Do we really tell people how to run [a business], and who to pay and how much to pay?"
Democrats argue that banks that take government money must accept any rules the government decides to send with it. Massachusetts Sen. John Kerry and Rep. Barney Frank are both working on legislation that would complement Obama's attempt to get a handle on executive compensation.
It's not a novel concept, and it's one the GOP supports -- when applied to welfare recipients, at least. "We demand that welfare recipients do an honest day's work for their checks. And now, since President Obama laid down the law Wednesday, we demand that the guys who ran our banking system into the ground abide by our pay scales in return for our bailing them out," writes Harold Meyerson in a column Friday.
"After all, what's the moral distinction between welfare recipients and the wizards of Wall Street, other than that the welfare recipients aren't the ones responsible for tanking the global economy?"
Welfare reform that passed in the 1990s created the program called Temporary Assistance for Needy Families (TANF). The government intervenes intimately into the lives of TANF recipients, requiring drug testing, time spent doing government approved activities and near-constant documentation of continuing compliance. The intervention is justified by reference to the payments being made.
One House Democratic aide quipped that bankers should be required to jump through some of the same hoops that welfare recipients are, beyond a simple salary cap. He suggested making bankers fulfill a strict work requirement and submit a time sheet, signed by a supervisor -- perhaps the Board of Directors -- in 15-minute intervals, proving that they worked 40 hours each week. Only certain activities would count, as is the case with TANF recipients.
"That three hour jet ride to get to the meeting in Chicago doesn't count. Reading the Wall Street Journal is also not a countable activity. If they fail to do this once, you cut them off of TARP funds. If they fudge the time sheet, you charge them with TARP fraud and make them pay back any government money they've received," the aide joked. "I'm sensing a legislative opportunity."
Sen. Sam Brownback (R-KS), though, said the underlying reasoning has merit. What applies to welfare recipients ought to also apply to corporate welfare recipients, he said.
"I think it does apply to that," he said. "People are livid about these big bonuses and if the groups want to take government money it seems they should be able to have some limits on these bonuses."
"If they don't need it, don't want it, fine. Don't take it," the Kansas Republican added.
Other Republicans disagreed. "It's still government running business," Inhofe said.
"It's a leap, because the executive at the bank is a free agent who can leave the bank and go to work someplace else," said Sen. Bob Bennett (R-UT) of the welfare comparison. "You run the risk of having a brain drain at the bank of their top talent."
Bennett said, "Some of the things some of these bank executives have been doing demonstrates they have a tin ear. At the same time, I'm generally troubled by wage and price control, no matter how logical it may appear."
The objection to the government intervention in salaries is rooted in the Republican belief that government is inherently ineffective. "If Congress can run a financial institution, it belies everything I've seen in this body. Government does not do a good job running private institutions," said Sen. Kit Bond (R-MO).
Sen. Tom Coburn (R-OK) agreed: "If we do such a good job of running the federal government, what business do we have telling them how to run the banks?"
The GOP is also concerned that setting compensation limits could put the country on the road to serfdom. "This is just a symptom of what happens when the government intervenes and we start controlling all aspects of the economy. This is just the first piece," said Sen. Jim DeMint (R-SC). "If you accept the fact that the government should be setting pay scales in America, then it's hard not to go after these exorbitant salaries. But I think it's a sad day in America when the government starts setting pay, no matter how outlandish they are."
"What are we going to do next?" wondered Martinez. "Tell a company if they get TARP money where there offices should be? They should be renting maybe from an abandoned federal building?"
Minority Leader Mitch McConnell (R-KY) and and Sen. John McCain (R-AZ) may have had the savviest responses to the tricky political question. McConnell didn't acknowledge that he'd been asked the query; he walked on to the Senate floor instead of answering. McCain declined to comment.
Opposition isn't uniform. Beyond Brownback, other Republican senators spoken to for this article, including Sens. Coburn, Richard Lugar (R-IN) and Orrin Hatch (R-UT), expressed some support for a government effort to control the salaries of executives of banks that take bailout money.
At least one Republican has thought about the plan and come around to it. "In theory, I don't like it. I just don't like the government telling private industry how to run their businesses," said Sen. John Thune (R-SD) when first asked about it.
About fifteen minutes later, Thune had changed his mind. "You know what? I think I'm for that," he said of Obama's plan. "I don't disagree with what he's doing."