It was nearly two weeks ago that the House of Representatives, acting in a near-frenzy after the disclosure of bonuses paid to executives of AIG, passed a bill that would impose a 90 percent retroactive tax on those bonuses. Despite the overwhelming 328-93 vote, support for the measure began to collapse almost immediately. Within days, the Obama White House backed away from it, as did the Senate Democratic leadership. The bill stalled, and the populist storm that spawned it seemed to pass.
But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
As David Bowie once asked, do you remember your President Nixon? He tried this back in 1971 and it didn't go particularly well. Of course, now that the smart people are in control there won't be any unintended consequences like runaway inflation, because the economic responses of Treasury Secretary Geithner will be so finely calibrated that they will be fail-safe. And if you are even slightly skeptical of this serendipitous outcome, our Congressional betters are happy to correct such retrograde thinking:
Rep. Alan Grayson, the Florida Democrat who wrote the bill, told me its basic message is "you should not get rich off public money, and you should not get rich off of abject failure." Grayson expects the bill to pass the House, and as we talked, he framed the issue in a way to suggest that virtuous lawmakers will vote for it, while corrupt lawmakers will vote against it.
"This bill will show which Republicans are so much on the take from the financial services industry that they're willing to actually bless compensation that has no bearing on performance and is excessive and unreasonable," Grayson said. "We'll find out who are the people who understand that the public's money needs to be protected, and who are the people who simply want to suck up to their patrons on Wall Street."
Actually, I agree with Rep. Grayson. People shouldn't get rich off public money and should not get rich off of abject failure. And if we extend the logic, I would expect to see Rep. Grayson returning most of his income to the U.S. Treasury and further expect him to reside in a youth hostel while he's in Washington. I don't think such expectations are excessive and unreasonable -- do you?