Thursday, June 11, 2009

Administration Seeks To Rein Private Sector Pay

The Obama administration says executive compensation must be better managed to prevent the sort of risk-taking that jeopardizes the economy.
Excessive Risk means potential for both excess profits AND excess losses. If our government wasn't in the business of bailing out failed companies, then the consequences of those excessive risks (financial ruin) would mitigate future risk taking.

Bailing out excessive risk takers will simply promote such risk taking on the basis that the government will make whole any losses you are to sustain for taking said risk.

Even more egregious is the fact that the excessive risk taking, which most banks engaged in, was encouraged by the government with all of the 'free' money given to banks via low interest rates. Such excessive risk taking could not have happened without the government's encouragement to take those risks in the first place!

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