Obama’s bank dilemma

Posted by Marc Hodak on June 9, 2009 under Executive compensation, Invisible trade-offs, Reporting on pay | Be the First to Comment

So, you’ve played the populist card on executive compensation, Mr. President.  You used it to provide cover for the mammoth, Democratic-payback-mondo-porkfest called the “Stimulus Package.”  You used $500K to buy $787B.  Well played, sir.  But now that card is on the table.  You can’t just pick it up again.

So, now we all have a bunch of silly-assed compensation rules that anyone could have predicted would create retention risk at American public banks.  Sure, most people were saying, “Screw ’em.  Where else could they go?” but we knew otherwise, didn’t we BO?  We knew that any bank under TARP would chafe at the pay restrictions, in part because it put them at a competitive disadvantage.  We knew that once you set some of the banks free, they would poach the others into submission, those big wounded banks still trapped under TARP, with all that taxpayer investment.  Poof.

So here we are, on the eve of a TARP repayment by some banks that you have done everything to slow.  But that part of the game is finally up.  Now, what do you do?

Of course.  You try to maintain some uniformity on the pay restrictions across all the banks, in and out of TARP.  So, you’re forced to loosen up some of the restrictions on the remaining TARP banks while imposing new ones on the soon-to-be non-TARP banks.  I know where you’re coming from, Mr. President.

Don’t worry, your secret appears safe, for now.  The media has not a clue about your strategy or its motivation.  Most of them are still at the “where else can they go?” stage.  And the regular readers of this blog are plenty smart enough, but there’s only a few dozen of them–not enough to really alert the media.  So, don’t worry.  Do what you have to do.  It’s all you can do, isn’t it Mr. President, as political choices lead to economic consequences that prompt more political choices…