Peter Cohan, writing for Daily Finance on the AOL Money & Finance site, makes a bizarre case in favor of limits on executive pay.
'How will TARP repayment harm zombie banks? As I posted, it all comes down to money and people. Wall Street pays better than anywhere else on the planet. At least 60 percent of the revenue goes out to its employees every year. If Goldman no longer has TARP money, it could be free to pay its people as much as it wants without suffering the political pressure that comes from holding on to taxpayer money.
Free from those pay limits, the TARP-free banks would have an enormous competitive advantage over the rest. That's because they could offer big pay packages to the top producers at the zombie banks. This would leave the zombie banks with shrinking revenues and high costs -- a recipe for slow-motion financial failure. This leaves soon-to-be-appointed Wall Street pay czar, Kenneth Feinberg, with an important decision: Should banks that repay their TARP money be freed of pay restrictions?'
So, we're about to get a pay czar who will dictate employee compensation to any bank receiving TARP money, and wouldn't you know, somebody from academia immediately pops up to argue that once imposed, limits on pay should stay in place, even after banks pay back the government. Mr. Cohan teaches at Babson College, by the way. He says it will be a disaster if banks that can get off the dole become more competitive than the ones that stay on. That horse has long since left the barn.
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