Monday, October 26, 2009

Special pay master cuts off nose to spite face?

The Obama administration's special pay master, Kenneth Feinberg, ordered pay cuts for the highest wage earners at seven companies that received government bailout funds.  On its face, this may seem like a good idea, since the money is, after all, our money, right?  But as some predicted, the really talented people are abandoning ship.  From the New York Times:
Maurice R. Greenberg, who built the American International Group into an insurance behemoth with an impenetrable maze of on- and offshore companies, is at it again.

Even as he has been lambasting the government for its handling of A.I.G. after its near collapse, Mr. Greenberg has been quietly building up a family of insurance companies that could compete with A.I.G. To fill the ranks of his venture, C.V. Starr & Company, he has been hiring some people he once employed.

Now, Mr. Greenberg may have received some unintended assistance from the United States Treasury. Just last week, the Treasury severely limited pay at A.I.G. and other companies that were bailed out by taxpayers. That may hasten the exodus of A.I.G.’s talent, sending more refugees into Mr. Greenberg’s arms, since C. V. Starr is free to pay whatever it wants.

“Basically, he’s just starting ‘A.I.G. Two’ and raiding people out of ‘A.I.G. One,’ ” said Douglas A. Love, an insurance executive who has also hired A.I.G. talent for his company, Investors Guaranty Fund of Pembroke, Bermuda.
This is not good news for the taxpayer.  Continuing from the NY Times:
While America generally loves stories of entrepreneurs making a comeback, Mr. Greenberg’s success may be at the expense of taxpayers. People who work in the industry say that if he is already luring A.I.G.’s people, he may soon be siphoning off its business and, therefore, its means to repay its debt to the government.

“To me, it’s just going to be a matter of time before the valuation of what he’s building is greater than the valuation of A.I.G.,” said Andrew J. Barile, an insurance consultant in Rancho Santa Fe, Calif.
Imagine that . .. . an octagenarian American business icon starting a business from scratch in this crippled economy?  Good for him.  God bless him.  As the President likes to say, it's just another "teachable moment" for the federal government.  The lesson?  Butt out!

Where do you suppose the best doctors will go after the public health care option becomes available?

1 comment:

  1. So let me get this straight...

    The Government mandates banks to loan money to low-income folks with questionable ability to pay back the loans and we get the banking meltdown.

    The Government then mandates that minimum wage has to be raised to $7.25 and unemployment for those between the ages of 18 to 24 is estimated by some to be 50%.

    The Government then mandates that AIG and others have to limit their pay to execs to $200K and then the most talented leave to form competitive firms to put AIG out of business.

    Now the government wants to mandate to the health care professionals who they are to care for...

    Then the government will mandate how the business sector and private sector will use fossil fuels...