Slippery Slope As Administration Wants To Cap Pay

We are very concerned about the slippery slope that the Obama Administration may be ready to slide down.

Recently, the administration was suggesting that those firms that received two Trouble-Asset Relief Program (TARP) infusions, such as American International Group (AIG: 1.66 -0.05 -2.92%) would have its compensation limitations placed on them. While we have some problems with this concept, it must be accepted that the government as a major shareholder does have the right to dictate terms of the employees at its investment.

However, from smoke signals in Washington it would now appear that President Obama may want to expand the curtailment of compensation to all financial services firms. This is not the area that the government should be meddling in. Raise oversight, increase regulation, make mandates on the type of mortgages a financial institution can make, what type of investment can be in the portfolio — this is where the government should focus its attention.

Congressional oversight is one thing, micro-sight is another. Government should focus on the arena where the financial markets and investors operate, not what a trader, investment banker or stockbroker is paid.

Clearly, many of the managements of institutions such as but not limited to Citigroup (C: 3.42 0.00 0.00%), Bank of America (BAC: 12.06 0.00 0.00%) and General Motors were asleep at the switch for a couple of years earlier in the decade. However, employee pay is a discussion to be picked up by the board of directors and the shareholders of the companies in question.

With risk should come rewards. Is it fair? Nothing is absolutely fair. But that’s why in a free-market we have choices, or we would all still be driving Model T’s and working seven days a week.