Government, Inc. Grabs Control and Law Be Damned

more at www.olcranky.com

It was with sadness that I have read and heard the latest news from our new seat of Industry–Washington.  The latest proposals now call for even more intrusion into the private sector by the Treasury and/or other regulatory agencies to mandate pay and pay methods for employees of the banks who did not receive any TARP funds.  Who knows exactly what the restrictions will be but whatever they are they will be intruding on the private perogatives of shareholders and their property and contract rights. 

The expressed rational is that Government, Inc. will use the “safety and soundness” standard under bank regulatory authority to justify whatever these new compensation restrictions will be.  I have no particular sympathy for banks or bankers but I do respect the necessity and fundamental rights of private enterprise and the free markets to manage their own affairs as they see fit and the rule of law.  I understand and do not oppose the concept that banks should be regulated.  But I expect the regulations to be utilized for their intended purposes and not as a bludgeon to brow beat banks into submission to Government, Inc.’s world view.   The Federal Reserve and FDIC and others such as the Office of the Comptroller of the Currency have had the power for decades to shutter a bank that they believe is not practicing its lending with safety and soundness.  We want our banks to be safe and certainly financially sound.  That is why we regulate them.  However what we are witnessing now is the use of this standard to control the internal affairs of the bank that have nothing to do with those principles but rather to make them conform with a political agenda  and populist notions now prevalent in Washington.

It was only about 20 years or so ago that a similar outcry was made about the large salaries paid to top CEO’s in industry, including the banks.  The argument ran that those folks were making huge sums of money without regard to long term and even short term performance.  That is what really kicked off the new method of lower salaries but then awarding stock bonuses based on financial results.  It was the simple idea of rewarding better those who performed better.  You may not recall these events but you can research and see this was the fact.  So under lots of governmental pressure at that time the CEO’s of large companies did get agreements to reward them handsomely for good results in exchange for lower base salaries.    Then we got great growth in our economy for two decades and those stock bonuses turned out to be terrific deals for those CEO’s.  Now some of the banks are staggering and the politicians are again on the hunt for scapegoats and those large bonus payments are in the bull’s eye.

The method of c0ntolling these compensation issues  is twisting, warping and ignoring the law.  As we have seen so often in the last few months the law of the land and the Constituion apparently have no meaning to those currently in power.  The “crisis” seems to justify anything in their minds.  Let’s be clear, the Federal authorities do have the right under the existing law to shut down any bank they find to be conducting itself in a manner that threatens the “safety and soundness” of the bank.  They can shut it down immediately and have done so many times over the last century.  Almost 30 have been shuttered this year alone.  The banks if they so choose could challenge that finding in court.  It never happens but at least the legal right exist to protect the shareholders of the bank.  Bureaucrats have been known to be wrong.  When the Feds went on their last rampage 20 years ago during the S and L crisis they made deals with some banks regarding their closure and then changed the rules during the middle of the game.  (Sound familar these days?)  A few of those banks finally sued and lo and behold they won!  Billions were awarded to them after the fact in the mid to late ’90’s.

The power to shut down the bank does not equate to the power to dictate compensation terms for employees of the bank be they the janitor or the CEO.  That is for the shareholders.  It is the legal right and authority of the shareholders and their elected boards to deal with that issue.  Government, Inc. is arbitrarily usurping that perogative from the shareholders.  That is a violation of law and the taking of property without compensation.  I hope some brave bank will have the gumption to stand up to them and take Government, Inc. to court.  Simply refuse to obey the mandate and dare the government to shut them down.  Then the government would have to justify its conclusion about safety and soundness in a court room with transparency that everyone seems so keen on these days and offer real evidence rather than conclusions from some 30 year old bureaucrat with his green visor, or maybe the evidence would be that the order wasn’t even from a bureaucrat but came much higher up the food chain–like the Treasury or the White House.  Be nice for the public to know exactly who made the decision and what the facts were to support it.

We created the Collossus and we can tame it if only we are brave enough to stand tall. 

I find it amazing about the recent research revealing that the twinned forces in physics when separated and then observed will react at the same time even though separated by distance.  The two forces move and react as one and that communication from one to the other seemingly defies the speed of light.  Paranormal happenings going on here?  I don’t think so but quantum physics is a mystery within an enigmatic universe I don’t comprehend.

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