Notable czars living large:
Bank bailout czar
U.S. border czar
Stimulus accountability czar
Middle East czar
Af-Pak czar (for both Afghanistan and Pakistan)
And now, without further ado: a pay czar!
With news of a pay czar coming down the shoot, this makes upward of 20 such top officials who answer directly, and only, to President Obama. These people may claim executive privilege, while simultaneously working free from the checks and balances of the legislative and judicial branches of government. In addition, it adds to a growing pool of unelected officials in Washington, who have no reason to be accountable to citizens.
The pay czar will also go by the nickname, “special master”, which prompts the question: who comes up with these spooky designations? For the record, we can credit the “czar” moniker to Nixon, who, among others, appointed the first drug czar.
Treasury Secretary Tim Geithner assures us that the administration only wants to cap pay for companies that take Troubled Assets Relief Program (TARP) money. According to Geithner, these will be the only firms subject to stringent compensation guidelines, set to be released soon. In addition, the regulation will apply to the top 100 paid employees of companies that take exceptional TARP funds, not only executives.
All other companies across the board, who were not forced to take TARP funds due to insolvency or being bullied by the Treasury, will have to answer to their shareholders regarding executive pay. Known as “say on pay” legislation, shareholders would take a non-binding vote on compensation.
In a statement released by the Treasury, Geithner explained his intentions:
“We are not capping pay. We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive. Instead, we will continue to work to develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives.”
While accountability to the shareholder makes sense, the U.S. Treasury is the largest shareholder in many of the financial institutions that took TARP money. Until the Treasury issues stock directly to the taxpayers from its growing portfolio, what’s the difference in pay legislation between companies who received bailout funds and those that didn’t? In the end, it’s all “say on pay” by shareholders. Except, the government wields substantially more power as they decide who gets bailed out in the first place and with how much taxpayer money. Then, the Treasury becomes a majority stockholder and proceeds to dictate employee pay. Sounds like “say on pay” to me – on steroids.
Ten of America’s largest banks have been approved by the Treasury to repay $68 billion in TARP funds, plus about $2 billion from smaller banks. What will happen to that money? Will it be used to pay down unprecedented, astronomical public debt? How about issued back to the taxpayer as a check? No and no. As predicted on a previous post, Geithner said he will use those funds as bailout money again, if needed. The law allows TARP investment of $700 billion, at any one time, until the rescue authority ends, which Geithner can extend to October 2010. And as banks have paid billions of dollars in interest to the Treasury, since taking the TARP funds in October 2008, where has all of that money gone?
With enough uproar, I’m sure we can get a czar on the case.