Pigs at the Trough


Kos comes across this remarkable admission from White House spokesperson Tony Fratto (emphasis mine):

With respect to executive pay, again, I’m not going to get into specific, point-by-point details on what our views are on that, other than the Secretary of Treasury said it would make [it] more difficult to make this plan work and effective if you provide disincentives for companies and firms out there who are holding mortgage-backed securities and other securities from participating in the program. You have to remember, these are not all weak or troubled firms that own mortgage-backed securities. A lot of them are very successful banks and investment houses that have done very well, have been responsible, are holding performing assets that have value. They were not necessarily irresponsible players, and so you have to be careful about how you deal with them.

Who are they kidding? Of course the Democratic proposal for limits on executive compensation only applies to firms who participate in the bailout. But apparently the White House view is that “very successful banks and investment houses that have done very well” should be bailed out, too, and they should be allowed to have their cake and eat it, too.

Actually, as I think about it, it’s even worse than that. Under its “the more the merrier” plan, the White House doesn’t want firms who are doing just fine to be discouraged from the participating in the bailout. Kind of like the way Republicans always want to make sure we maximize participation in Medicaid, welfare, and other social service programs, right?

Late Update: TPM Reader SL hints at the flip side to this:

I think you guys are off on the outrage about good banks getting in on this bailout. First off, I think it all stinks. I’m nauseated. I’d prefer a massive bankruptcy reorganization and fire sale.

BUT… if you are going to bail out any bank, you have to bail them all out. Why? Because otherwise you’re creating a competitive disadvantage for those who don’t participate. You reward the ones who have taken the most risks and punish their competitors if you don’t.

Later Update: Similar sentiments from TPM Reader AM:

Regarding the outrage over the bailout plan covering responsible
banks, I think that the administration is arguing that responsible
banks are cutting back their lending due to mortgage backed
securities. So while these banks don’t need the bailout plan to
remain solvent, they won’t be lending. And since the plan isn’t
designed to keep individual companies afloat, as much as it is
designed to avert widespread economic catastrophe, it does make sense
that the administration would want “responsible” banks to participate.

That said, I think the administration is wrong. A bank whose
leadership avoided dramatically improving their balance sheet because
of executive pay limitations would face shareholder lawsuits in a


David Kurtz is Managing Editor and Washington Bureau Chief of Talking Points Memo where he oversees the news operations of TPM and its sister sites.