Let’s Wait and See on the Wall Street Pay Limitations

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I asked Dean Baker, co-director of the Center for Economic and Policy Research and one of the in-house economists for the bloggy left, for his thoughts on the White House’s new limitations on executive compensation at bailed out banks. (Times article here, full text of the new rules here.) I was pleased as punch by the announcement when it broke last night. “Finally,” I thought, “an end to these massive bonuses and ridiculous perks.”

Not so fast, says Baker. There are still some details to hammer out:

We will have to see the details of how this policy is implemented. Restricting the pay of executives at banks who are receiving taxpayer dollars to stay afloat is certainly appropriate. The real question is how widely will it be applied within a bank and how will it be determined that banks are subject to these restrictions.

In terms of how widely it is applied within banks, it is important that the pay restrictions apply to everyone, not just a small number of executives who agree to be fall guys. The point is that these banks are taking government money. We should be able to limit how much a bank pays its highest paid employees, if it is getting welfare from the government.

The other issue is how it is determined that banks are subject to these restrictions. The plan effectively grandfathers exclusions to the past basket-cases who have received large amounts of government money: AIG, Citigroup, and Bank of America. At the least, President Obama should try to persuade these banks to voluntarily accept these restrictions. Also, many banks are likely to get considerable subsidies in the future through “capital access programs.” The administration should not be shy about applying these guidelines to these banks, although the better route would be to not provide large subsidies from taxpayers to banks and shareholders. The government should simply takeover the bankrupt banks and resell them to the private sector after their books have been straightened out.

The fat cats hate this thing with a vengeance, but it looks like there is still room for improvement.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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