Friday, October 16, 2009
Slouching Toward Socialism
Bank of America chief executive Kenneth Lewis has decided to forgo his total pay for 2009 -- giving into pressure from the Obama administration's "pay czar" Kenneth Feinberg.
Lewis announced recently that he was stepping down -- a victim of the continuing fall-out from BofA's purchase of Merrill Lynch last year. Both federal regulators and New York's attorney general are probing the transaction. While Bank of America received billions in federal TARP money, the takeover occurred even as Merrill was going broke, but its executives were receiving millions in bonuses. BofA shareholders ended up losing millions in stock value.
There needs to be a full accounting this deal, no question. Already, a federal judge last month rejected Securities and Exchange Commission settlement with Bank of America -- declaring that the shareholders were left holding the bag. He ordered a full trial on the SEC's allegations against BofA.
There is clearly something going on in the BofA/Merrill/bonuses story. It may turn out to be the last great financial scandal of the first decade of the 21st century.
All that said, it is a major mistake for the Obama administration swooping in and basically intimidate Lewis into giving up all compensation for this year. Admittedly, the core issue here involves the American people trying to prop up many banks -- even as many of those same banks managed to disburse rather hefty bonuses.
Feinberg may see pressuring Lewis into giving up his compensation as protecting the taxpayer. However, perhaps Feinberg has forgotten -- or perhaps never saw -- the "SOCIALISM?" signs that have popped up at Tea Party protests and town halls this year. Americans might not like seeing bank executives getting big bonuses right after they've gotten a federal bailout. But they don't exactly like the idea of one individual setting pay for various executives either.
Besides, there is absolutely no evidence as yet that Ken Lewis has done anything criminal -- or even unethical, for that matter -- in the acquiring of Merrill Lynch. Even if it turns out that he has, there is something called due process. Let that play out and, if necessary, go after Lewis' bonuses in the courts.
In almost any other circumstance, forcing Lewis to give up his salary and bonus could be seen as an unconstitutional "taking." It could also be deemed an equally unconstitutional "bill of attainder" -- punishing one specific individual in a manner that no one else is being so sanctioned..
Even in the current tough economic times, class envy hasn't gotten so intense that Americans can't find something wrong in the idea that a man can work hard at his job for nearly a year, but a federal official -- one of the controversial "czars," to boot -- can swoop down and declare, "You have no right to that money; return it now."
That's the ultimate big-government move.
Socialism? Not exactly, but the sort of overreach that invites real distrust of federal power.The president might be inclined to rein in his pay czar.
Labels: Bank of America, Merrill Lynch
