04 February 2009

Obama Ends Bailout Bonus Bonanza

I was climbing down from the attic, dirty air filter in hand, dreading the trek all the way down to the basement to complete the other half of this task, when a grade school level metaphor hit me - the new $500,000 cap on senior executives whose firms receive government financial rescue money put in place today by President Obama was a lot like changing the air filters in our home air-conditioning system.

Changing your air filters regularly does more to improve the operation of your air conditioning system than it does to affect the air quality in your house, the same way capping excessive executive compensation will do more to improve the operation of the banking system than it will do to affect the economic recovery. Because if you don’t clean out the ducts through which the air passes, all you’re really doing when you change your air filter is keep whatever has accumulated in there from tearing up your blower motor.

I don't have to tell you what kind of filth has accumulated in our financial industry.

I took a look at the dirty filters before I threw them away to see if there was anything more in them than a uniform layer of fine grey dust that signaled all was well with the system. I would imagine that President Obama’s people did the same thing, reviewing the often arcane methodologies used to justify executive bonuses amid huge corporate losses to see what ill effects they might have added to the bottom lines of their companies.

If the current crop of wonder boys decide to desert their posts for greener pastures, there are plenty of up and coming banking executives who would fight for an opportunity to make a name for themselves in a time of crisis. These are the kind of people who won't blink at the pay caps today, knowing that a successful tenure when all the chips are down will bring plenty of visibility, and plenty of big paydays, down the road.

Need I spell out that well trained and qualified minority executives usually thrive in situations like this - giving twice as much effort for half as much pay?

Years ago, working part time on the weekends with my uncle, who was in the heating and air business, I got to see first hand what happens when you don’t regularly change your air filters. Old, stiff filters layered with dust, dog hairs, and pollen an inch thick would literally choke the life out of a furnace by overloading the blower motor.

If the customer was lucky, we could sometimes get their system going again by simply cleaning out the furnace, tweaking the blower motor, and taping up the gaps in their ducts.

I imagine we are all keeping our fingers crossed right now, hoping, as our new president begins to find his way amid the wreckage of our economy, that he can implement more changes like the one he has put in place today to improve the financial health of our nation's banks, the same way new air filters and aluminum tape can often get a balky furnace restarted.

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