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Thread: How about restrictions on all "bailout" beneficiaries?

  1. #1
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    Default How about restrictions on all "bailout" beneficiaries?

    I gather there is a fair bit of support on these boards and among the general U.S. population for limiting the salaries and otherwise restricting executives of financial institutions that received capital injections under TARP (not necessarily direct handouts, but "gifts" nonetheless in the form of low cost capital). The reasoning being that if they are willing to accept taxpayer funds, then they should be subject to public scrutiny and certain limitations.

    How about other recipients of taxpayer funds under the economic stimulus package? If funds go to private construction firms for infrastructure projects, should the executives at those firms have their salaries limited and spending restricted? What about funds distributed to green energy startups, alternative fuel manufacturers and the like? Should their compensation be scrutinized and, where necessary, limited? Small, local business that receive funds distributed down through the state and local levels?

    And how about individuals who receive mortgage debt relief (ultimately on the backs of other taxpayers). To what scrutiny should they be subject, if any, based on the fact that they are benefiting from public money? If, for example, a struggling homeowner receives a promotion that greatly increases her salary after having benefited from taxpayer funds, should she be responsible to pay some of it back to the treasury? Should her spending be scrutinized until the money is paid back?

    For the record, I have a hard time with the restrictions on bank executive compensation, even where TARP funds are involved. I know as a matter of fact that many banks were leaned on by regulators to take the money and loan it out, even if they didn't need it for solvency purposes, didn't contribute to the problem and, frankly, didn't really want the money. I also have a real issue with the terms of the capital injection being changed after the fact in a very haphazard fashion, which I think sets a bad precedent and creates harmful uncertainty.

    But for those who do support attaching strings to taxpayer "bailouts," how broadly should the restrictions apply?

  2. #2
    Stegodon
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    Default Re: How about restrictions on all "bailout" beneficiaries?

    IMO:

    If you mismanaged your company into the ground such that you need my money to stay afloat, you should say goodbye to all but the most meager pay if you even get retained to manage the company back into profitability.

    The profits any government-subsidized company makes should go to the government because that is government-derived capital. (It's the same premise behind giving executives a portion of the money they generate. Replace government with executive and tell me there's something deeply wrong with that.)

    If, on the other hand -- and this is my reading of your post and not necessarily indicative of anything you meant to be read as your words -- I am Namaste, that Colorado company that makes solar panels, and the government is paying me to help people supplement their energy reserves with solar power, and my company was hurting because the economy blew up because Wall Street caused a 457,697,697-car pileup, then no, I don't think the money that company makes should go back to the government. Some of it will anyway in the form of taxes, because the money you pay your employees goes to payroll taxes, and the groceries those employees buy go back to the government in taxes, etc.

    So, to sum:

    If you're part of the solution because you're the way of the future, it's in the country's interest for you to grow in a responsible way.

    If you're part of the solution because you need to be solvent, it's in the country's best interest for you to become solvent, which does not involve ridiculous compensation or anyone named John Thain. It's also in your and the country's best interests for you to be operating on your own because I do not want the government running a bank any more than I want the government making my health care decisions for me. I want financial analysts (only not the ones who screwed this all up) running banks and doctors making my medical decisions with me.

  3. #3
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    Default Re: How about restrictions on all "bailout" beneficiaries?

    Quote Originally posted by hopesperson
    I gather there is a fair bit of support on these boards and among the general U.S. population for limiting the salaries and otherwise restricting executives of financial institutions that received capital injections under TARP (not necessarily direct handouts, but "gifts" nonetheless in the form of low cost capital). The reasoning being that if they are willing to accept taxpayer funds, then they should be subject to public scrutiny and certain limitations.
    There is a fundamental difference between banks driven in the ground by incompetent management, and responsible businesses competing for stimulus funds.

    Bailout funds should be given wisely with the proper strings attached, to ensure that taxpayer money isn't swindled away as shareholder money was before. Stimulus spending should also have some safeguards on it, of course, but they'll be the normal safeguards that are appropriate for all government spending.

  4. #4
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    Default Re: How about restrictions on all "bailout" beneficiaries?

    It seems to me that the entire concept of bailouts is skewed.

    Taxpayers are being forced to reward failure.

    Darwin would not have approved.

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