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One Step Closer To Directive 10-289

by @ 5:29 pm on March 31, 2009. Filed under Credit Crisis, Economics, Politics

Barney Frank wants to regulate everyone’s salary:

[I]n a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the “Pay for Performance Act of 2009,” would impose government controls on the pay of all employees — not just top executives — of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to “prohibit unreasonable and excessive compensation and compensation not based on performance standards,” according to the bill’s language. That includes regular pay, bonuses — everything — paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.

In addition, the bill gives Geithner the authority to decide what pay is “unreasonable” or “excessive.” And it directs the Treasury Department to come up with a method to evaluate “the performance of the individual executive or employee to whom the payment relates.”

How exactly one determines when someone’s pay is “unreasonable” or “excessive” is both undefined and undefinable, leaving a tremendous among of discretion in the hands of Turbo Tax Tim and his aides.

Of course, that’s a futile point to make because neither Frank nor anyone else who supports this legislation cares about being right when it comes to “reasonableness,” they just care about control.

For those unaware, here’s a primer on Directive 10-289, a pivotal point in the plot of Atlas Shrugged.

3 Responses to “One Step Closer To Directive 10-289”

  1. Rick Sincere says:

    Not having read the bill, I will still venture to say that it strikes me as unconstitutional, since it vests the Secretary of the Treasury with legislative powers — that is, it gives him the authority to define what “reasonable” means.

    Article I of the Constitution gives “all legislative powers” exclusively to Congress. Congress cannot delegate legislative powers — and that includes the definitions of terms in legislation — to the executive branch.

    Also, while not wishing to invite someone to invoke Godwin’s Law, I will just ask: Isn’t a law like this fascist in form? That is, doesn’t it maintain the pretense of private enterprise (ownership may or may not be retained by private individuals and corporations) while putting the decision-making authority for corporations in the hands of the government?

    It’s a bad, bad bill. I’d expect better from someone as intelligent as Barney Frank.

  2. Aaron B says:

    when will we hold our congressmen to the same standards? Lets see how much congress would appreciate p4p.

  3. Michelle says:

    It’s absolutlely unconstitutional, but it seems that to Geithner, Barney Frank, et al that the Consitution has become merely a superflous annoying document. Becoming directly involved in private business, no matter the wording of a specific bill is a violation of the constitution. The federal govt only has the powers specifically ennumerated. I’m pretty sure ownership or direction of private businesses was not one of those powers.

    I do have to say however that anyone who accepts govt money had better beware, it always comes with a heavy price.

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