Executive Salary Cap is Like First Step on the Moon

[Post Summary]

My spikenard sends forth its fragrance.
—Song of Solomon

* * * * *

Do you remember the words Neil Armstrong spoke when he first stepped on the moon on July 20, 1969? President Obama's announcement of new executive compensation rules this morning carried something of the same message. It's one small step for the man; one giant leap toward nationalization.

I am not about to enter into the fray arguing whether executive salaries are excessive. If shareholders are willing to bid up the stock of a company paying its directors gazillions of dollars, then who am I to say executive compensation is over the top?

Ditto bonuses. When you take risks, there always is a chance you will lose. Does this mean a bonus is undeserved, then, when losses are suffered?

The issue presently, though, is different on two counts. These put to rest any concern caused by extraordinary governmental actions currently being directed toward financial industry executives.

The first consideration, of course, is the matter of imposing a measure of decency attempting to make extraordinary financial interventions palatable to those who not only are being made to foot a very large bill, but who are being put at great risk as well. Thus, it is reasonable that, as long as financial firms are receiving taxpayer largess the status quo involving executive compensation go the way of the dodo.

The other consideration summonses a subtle, yet far more substantial matter. It is at the intersection of tragically short-sighted business models and a national interest encouraging vital businesses remain going concerns. This is where government regulation fills a void left by shareholders so greatly focused on short-term gains they become blind to long-term risks.

This is where larger social concerns take precedence over matters involving the ways in which wealth is accumulated. Here, too, Congress should humble itself identifying past failures, and resolve to correct its ways. Likewise, the People.

Yet even now, despite having traveled far down the road to financial ruin, such humility as will be necessary to rapidly restore our economy's stable financial underpinnings continue being resisted. Support for nationalization of the banking system finds little air play even at this late hour.

Although the President and Treasury Secretary talk the talk as though nationalization is not forthcoming, the walk they walked today tells a different story. Willingness to alter the status quo for the sake of affecting necessary change is a step in right direction.

Even if the financial rescue program announced next week turns out being more of the same old, same old, the bar was raised today when Treasury Secretary Geithner said, "Nothing is more important to me than earning the confidence of the American people that every policy we embark on is motivated not by privilege or private gain, but by the public interest in strengthening our economy and creating shared prosperity."

Given this standard, then, what chance do largely unpayable electronic entries burdening every corner of finance have against the necessary, primary means of "strengthening our economy and creating shared prosperity?" Whether revealed next week or some week soon after, the answer will be none. On that day the banking system effectively will have been nationalized — whether outright, or simply by some decree radically altering its present, hopelessly bankrupt position.

—Tom Chechatka