Obama Sets Hard Salary Cap, Players Union to File Grievance

President Obama signed an executive order on February 4th placing a cap on CEO pay to those financial firms that will be receiving federal bail out money. The cap is $500,000. While I consider that a lot of money, it may not be to someone that has been making a few mill every year.

While the policy is great for public support, there is zero chance this will work.

Before Leon Panetta was tapped for Chief Spy, he made over $700,000 in speaking and consulting fees. Now he makes a lot less. Poor guy.

My point with that is if Panetta can make that kind of money in consulting fees, imagine what a real Wall Street CEO who just quit his high-profile gig because of the salary cap is going to make in consulting fees.

Patrick McWallstreet is so unhappy with his new found un-glory that he quits his CEO position with Bank De America. He’ll be OK. There is another bank that has an opening for a CEO. ACME Bank hires McWallstreet, but not as CEO. They hire him as a consultant at $1 mill per, plus performance incentives. The leave the CEO position open but have a Consultant-in-Charge in McWallstreet.

The only true effect the salary cap is going to have is lots of restructuring and renaming of job positions.

By meddling with free market economics, the only thing Obama has done is change someones job title from CEO to consultant.

Barak Motors, Inc.

Barak Obama recently announced he is dismissing his plan to have a “car czar” in charge of retooling American’s automakers, specifically GM and Chrysler. While I admit that the companies definitely need to rethink how they do business, I don’t think the government is the best place to learn how to do that. Fortunately for us, Obama has seen the light. Instead of having one person in charge, he is going to set up a panel, led by none other than Timothy H. Geithner.

Groan.

From the NY Times…

“The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.”

That’s just great. We’re going to fix a troubled industry by hiring someone with union ties to consult with the panel. Unions handicap business by demanding wages and benefits above what the market demand is. Someone working at a GM plant gets paid about $18/hour to install a CD player, while someone doing the same thing at Best Buy gets paid about $12 with fewer benefits if they get any at all.

Part of a free market economy that we all enjoy is that supply and demand set prices for products as well as wages.

This news comes out today as we all wait with baited breath to see what kind of plan the automakers will have tomorrow as they are expected to issue reports about their restructuring as part of loan agreement with Washington.

“The companies’ plans are required to show progress in cutting long-term costs as a condition for keeping their loans.”

Unfortunately for the auto companies, the best way to reduce long-term costs was to not enter into costly legacy deals with the UAW. When the companies are responsible for ongoing benefits, including health care, to retired union workers there are going to be huge long-term costs. Even worse, the companies are stuck with the deal. The UAW will never let the companies out of those agreements even if that means the union has to sacrifice today’s jobs.

While the auto industry may be its greatest enemy, it doesn’t need government intervention to help itself. If CEO’s had the balls to do it, they would even decline government money to make themselves leaner.

Before the election, many people were concerned about the Democrats increased leanings towards socialism. Looks like the auto industry may be first on the docket.