Watching the unfolding compensation situation at banks after the last couple of years, shows that for Bank of America (NYSE:BAC), Citigroup (NYSE:C), J.P. Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC), the largest banks in America, it will be business as usual, and there’s nothing Obama or the government can do about it, and neither should they through their misguided interference in the markets.
Obama of course, once he decided to bail out the giant American banks and investment companies, had himself a huge problem that he has no idea how to deal with, now that he “saved” some of the institutions from failing, and has to face political backlash from doing it.
The rhetoric coming out of the White House is very unconvincing, and the idea of punishing the workers at the banking and financial institutions by taxing or attaching huge fees to their pay and bonuses is incredibly stupid, and will be totally ineffective.
Incredibly, Obama has went on to tell the banks they shouldn’t to that, and should just bear the pain and let the government raise billions in this manner.
Again, it just doesn’t seem to hit Obama that shareholders will suffer in this as well because the share prices will go down, and millions of Americans will be affected because they are invested in this companies through pensions and retirement funds. All Obama seems to see is trying to gain some political capital in all of this in hopes Americans won’t catch on that he’s in fact attacking them when he attacks the banks. There’s no way to get around that reality, as the interconnections of the market make that a fact, whether Obama and his advisers like it or not.
This is why there should never have been any type of government interference in the industry in the first place. There are too many connections and unintended consequences that can’t be managed or in many cases – even anticipated.
The bottom line for the compensation offered by banks is the market will decide what that will be, and no amount of ignorant rules and regulations will change that. When things like taxing compensation and bonuses come up, and maybe even be signed into law, the banks, as mentioned, will pass it on to their customers, making the government interference completely irrelevant.
Propping up the zombie banks and financial institutions in the first place are the problem, as none of this would even be an issue if they would have been left alone to let the market sort it all out. At that point executives would have had to make the tough decisions as to what their top people would be compensated and how much. The market and survivability would have determined the issue, not politicians who can’t adhere to their own budget limits, let alone interfere in someone else’s.
So not matter what the government attempts to do, it will be business as usual at the banks, even if they have to do the publicly humble postering to make it look like they’re contrite from their past actions.
The reason this is so odd and strange to many people, is they don’t understand that there should never be a blending of the government and private enterprise together, and when there is, as there is now, all sorts of strange issues and outcomes are brought to the surface as a consequence, and things that never should never had needed to be dealt with, are now considered the key to fixing the industry, when in fact it’s simply adding to the immense problems it’s already facing.
