Tuesday, February 17, 2009

Bailout Banks, Not Hobble Them

The Chicago Tribune criticizes language in the Stun-ulus Bill to cap executive compensation:
But keep something in mind: Taxpayers are now deeply invested in the companies that receive a federal bailout. We want these companies to succeed.

Compensation caps would hurt the ability of these firms to attract and retain top talent. If salaries are higher at robust firms that aren't taking federal help, that's where talented people would go. Taxpayers are not going to be better off if the best business minds in the land avoid working at firms that receive federal help. The comp rules may also persuade execs at troubled firms to leave the federal assistance program before those firms are on sound footing.

I think that is right. If you're going to tinker in businesses, why not just insist that the boards fire the bad eggs, but don't hamper their ability to replace them with good ones. These banks are still struggling. They're going to need all the help they can get to survive. Just throwing money at the problem is not going to help. They need better management.

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