Friday, July 23, 2010

According to the headline, pay czar Kenneth Feinberg claimed that "17 bailed-out banks overpaid executives" and the story goes on to say that "17 banks gave their top executives $1.6 billion in lavish payments while they were receiving billions of dollars in taxpayer-funded bailouts".

What a half-a**ed story.

Not until the end does the story reveal that the 'overpayment' consisted of payments that were proper at the time they were made, they only became 'lavish' if you apply rules that were enacted in February 2009 to payments made before then... and that is improper, no one can be found guilty of violating a law that didn't exist at the time they committed whatever it was that they did.

It also doesn't mention that 'excessive' exists only in Feinberg's mind. In fact, a good number of people feel Feinberg's caps were set for political purposes, have no relationship to the value of the employee and have actually hurt bank profitability.

The reporter doesn't mention whether these payments were due contractually to the employee or whether they were somewhat discretionary. If the former, in implicitly criticizing the banks, is the reporter arguing that the banks should have violated employment contracts based on guidelines that weren't even in place at the time the payments were made?

And this is probably beyond the reporter's grasp, but it is also misleading to suggest that these banks paid out this money at the same time they were begging for funds from the government. Very few of the banks receiving money were in need of the money, in fact, a good number of the banks were forced to take the money in order to allow the banks in trouble to hide among healthier banks.

Rewriting the story, we have a relative handful of banks compensating their executives at a level that a government bureaucrat with limited banking experience later decides is more than he would pay them.