House Financial Services Chairman Barney Frank is taking his TARP mandate and the Obama Corporate Management Strategy to the next logical step by proposing legislation that would heavily regulate the pay received by employees of companies that have received federal assistance.
Rather than simply viewing this legislation as another government power grab into the private sector it might be useful to examine the salutary effects such idiocy might bring about. First, start with the assumption that most of the private entities that have received federal dollars are probably not long for this world as it is. It will surprise no one that several large banks will not survive the year. With Fiat being declared junk today the Chrysler marriage seems doomed and GM appears to be signaling the inevitable bankruptcy that should have happened months (and billions of dollars) ago. Many of these institutions will cease to exist, and that is at it should be.
However, the Congress, in its infinite obtuseness, is determined that any stragglers in the federal government gravy train die off just as well. By passing a law that guarantees an employee the same treatment bankers and car execs have publicly received who in their right mind would want to work for a company that falls under the purview of the Pay for Performance Act of 2009? No one, that’s who. Or at least no one that has any sense of self preservation and personal dignity (not to mention the attributes of personal ambition and a good work ethic).
Legislation of this sort will have the beneficial effect of causing any corporate CEO or Board of Directors to think long and hard about taking a dime of assistance from Congress in the future. That’s a good thing. Similarly, healthy corporations not on the federal dole will recruit the best and the brightest (by offering better pay and benefits) from those companies stuck in the federal assistance trap and eventually drive them out of business. That’s a good thing too, although the remaining employees on the wrong end of this particular form of marketplace natural selection may not see it that way. Perhaps this is what President Obama and Congressman Frank have in mind, but I doubt it.