On the same day Manny Ramirez rejected a one-year $25 million deal with the Dodgers, President Oba
ma announced this ludicrous $500k cap on executive salaries. Like it our not, Ramirez is a perfect example of capitalism at its best. He feels he's worth more than the current Dodger offer and because we live in a free market society he has the right to try and earn what he feels his value is. Obama's stay on salaries is a perfect example of socialism. What's the benefit for a top-ranking executive, much like Ramirez is a top-rated MLB player, to take a job at a corporation forced to impose the salary lid? There is no benefit to said executive. And our financial institutions already struggling with the credit crisis lose out on talented executives who will opt to head up corporations outside the financial field.These top executives, for the most part, earn what they do because their perceived value to their companies is worth said salary when leading corporations handling billions of dollars monthly. While many of these financial institutions' undoings are wholly their fault by issuing garbage loans, many receiving bailout money are actually being forced to take it. I.E. Wells Fargo. And, for those companies that fail to meet earnings expectations, they should look toward new senior leadership. A senior executive who is terminated loses value in the market. Much like Ramirez loses value if he bats .225 for the season. Moreover, bailout money or not, forced sanctions such as this stay on salaries will eventually sway top companies to look outside the country for their headquarters and our economy could ultimately suffer even more.
The first wrong is on President Bush for issuing the bailout in the first place, and this latest news from Obama is equally frustrating. I'm from the school of thought that we need to let poorly operating corporations fail or find their own way to fix their wrongs and not bail them out. Northwest Airlines is a perfect example. They were bailed out time and again only to fail time and again. They never learned from their mistakes and were fortunately bought out by a stronger player. Much like underperformer Wachovia was bought out by Wells Fargo.
Does the government step in and bail out the mom and pop hardware store down the street when Wal-Mart or Home Depot opens up next door? No, the government doesn't. That's capitalism. If mom and pop can't keep customers coming through the doors, they must close those doors. It's just the way it works.
And it should have worked that way with those large financial corporations issuing credit to every Joe Plumber who came through the door, even if he hadn't worked on any plumbing for 5 years. Yes, Joe and Jane can share the blame for greediness and poor financial planning, yet at the end of the day, the financial institution has the final say on approving rolling lines of credit, adjustable rate mortgages and home equity loans. Certainly a failed financial institution has a greater impact on you and I than the closing of mom and pop stores, Linen 'n Things or Circuit City. And this is why the government instituted the FDIC to protect your bank deposits up to $100,000. Yes, the same FDIC set up after massive bank failures of the Great Depression. This is government doing what it does best, protecting and serving. Is the bailout and salary lids protecting our citizens? It's a fuzzy gray area at best, but you know where my opinion sits.
Economists and historians have long debated what caused the Great Depression. Was it the massive bank failures that were the cause or the bad economy and historic droughts that were the culprit? While our current situation is nowhere near Depression status, the FDIC was set up for a reason. This one should have played out without government intervention. Either way, if the economy slips further into recession or rises up, 25 years from now decisions made today will be referred to in great detail regarding economic policies.
I could be slightly biased because the bailout hasn't moved my house off the market and the housing market still doesn't seem to be loosening up. Perfect place to end my rant. I'm not going to use this blog to voice my political opinion often. Only when I get really hot! The views expressed in this blog are mine and mine only. Tracy has no part of this one.
