Smith, Barney, and Obama

By Rick Moran

Our Federal Overlords are busy lately, sticking their noses into all sorts of things that were unthinkable just a few months ago.

Their latest plan is to dictate to the financial industry how much money businesses can pay their employees. It seems that the Commissars believe some of those guys are making too much money and it's up to the federal government to slap them down.

Deborah Solomon and Damian Paleta of the Wall Street Journal tells us that it doesn't matter if a firm received federal bail out money or not, the government is going to tell private companies how much employees are worth:

The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government's ability both to monitor compensation and to curb incentives that threaten a company's viability or pose a systemic risk to the economy.

Among ideas being discussed are Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank -- such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing "best practices" to guide firms in structuring pay.

"Moral suasion?" That's a pretty big stick the Federal government is going to be weilding when they appeal to a company's "moral sense" of how much their employees are worth.

And what about the irony of Barney Frank worrying about a "systemic risk to the economy?" Maybe he should have thought about that before he prevented monitoring of Fannie and Freddie.

The end result will be the loss of some very bright people who will go to work somewhere the government doesn't dictate what their worth to a company might be. Thus, our financial service industries will become less competitive and hasten the day when America will be an economic backwater.

Yeah - but at least no one will be able to get rich through their talents and knowledge.