The Obama administration's move this week to slash the pay of top executives at 'too big to fail' firms under TARP should be applauded. And that ovation should last for about one second. The pay cuts are certainly just and good, given the current state of things, but ultimately it's the psychologically palliative equivalent of swearing when you stub your toe.
Again, the administration may be buying time with a symbolic and cosmetic tactic that ignores the forest for a few trees -- and whether they're redwoods or saplings is irrelevant. Predictably, administration spokespeople are saying that the cuts were the "independent" decision of Kenneth Feinberg, and that the president had no direct role. Never mind the fact that Feinberg was appointed to Treasury by Obama as pay overseer last summer for this exact purpose.
Yes, the new rules are a significant step forward. But it's micro policy reform when we need macro, such as what Bernanke is now finally alluding to. Allowing the current media hullabaloo and any populist elation to belie the intense challenge facing real efforts to comprehensively reform our broken systems themselves would render these small gains moot.
While the firms in question -- Citigroup, AIG, Bank of America, Chrysler and GM -- are finally getting their due smack-down, Goldman Sachs, JP Morgan and Morgan Stanley are reporting record profits -- which surely will lead to record bonuses down the road -- all while continuing to hoard money with too few loans to Main Street to show for it.
And while the much-reviled (deserved or not) Bank of America CEO, Ken Lewis, has been pushed out of his job by the White House, Citigroup -- another bailout firm -- is inexplicably hiking credit card rates to vertiginous heights, just in time for an already economically dismal holiday season.
Look at the big economic picture: As has been the case for months now, it's characterized by an obscene trend of simultaneous climbs in both the Dow and unemployment.
Restricting pay at already or nearly sunk firms will do little to change this. Or to close the chasm of wealth disparity in this country that's been widening year by year. It will do nothing for the fact that the median family income has remained stagnant for the better part of a decade. Or for the fact that just under 50 million people remain without health insurance, while many who do have it can still go bankrupt from one serious ailment.
And in the nation's capitol, to think that restricting bailout firm pay will be felt as any kind of blow to the swarms of dedicated industry lobbyists laboring everyday (with some even funded by taxpayer money)to quash financial consumer protection and financial industry regulation reform legislation risks renaming oneself 'Pollyanna'.
Entrenched, institutionalized special interests are always at a natural advantage in the fight for real, comprehensive reform -- whether it's health care, finance, climate change, or anything else. Only when the barons of Capitol Hill and the White House (which itself is stacked with Goldman alumni) feel equal pressure from 'the rest of us' will the incentive to implement real change have any chance of surpassing the incentive to raise campaign funds and please political donors.
For a litmus test of where the government-Wall Street relationship will end up, one need only look to health care. The end product of health care reform -- whether it helps millions of Americans or solely insurance companies -- will be the first indicator for everything else to come.
So yes, a quick round of applause for Kenneth Feinberg for performing the job with which he was tasked. But hold off on the standing ovation for now; the Obama era does not need a "Mission Accomplished" moment.
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