General Motors and General Petraeus

General Motors and General Petraeus
by Wilson J. Moses, February 14, 2009

Americans have notoriously short memories, so I have to remind myself that the first $700 billion bail-out, the “Troubled Assets Relief Program” (TARP), was a product of the Bush administration.  It was presented to the Senate by former Treasury Secretary, Henry Paulson, who isn’t stupid.  Federal Reserve Chairman, Ben Bernanke, also not stupid, accompanied him on his trip to the Senate, but the proposal belonged to the Bush administration.  Paulson graduated from Dartmouth, where he demonstrated sufficient agility and mental quickness to become an All-Ivy linebacker, and to make Phi Beta Kappa, as well.  Paulson was obviously playing dumb, like a fox, in his intentionally inept responses to the questions of Richard Shelby (R-Ala) ranking member of the Senate Banking Committee.

Much as I oppose the ideology of Senator Shelby, I must give him credit for saying that “Even if the Paulson plan works perfectly, which many doubt, including nearly two hundred economists, it will not stimulate new lending, stop de-leveraging, help distressed home owners, or jump start the economy.”  The Senator’s doubts were obviously well-founded, for, so far the plan has not worked.  As many suspected, although Sen. Shelby did not say it, Mr. Paulson has shown himself to be no more than high quality stick-up artist.    Many bankers have lined their pockets, with the bail-out monies, and so have the executives at General Motors.

Paulson got away with playing dumb, but he knew exactly what he was doing when he got $750 billion from the government for his Wall Street bail out.  He knew the heads of insolvent banks had no intention of addressing the economic melt-down.  He knew the money would disappear into the pockets of brilliant, but incompetent executives.  Paulson himself, formerly employed by Goldman Sachs, one of the banks he arbitrarily selected for salvation, is estimated to have earned over $16,000,000 in the year he became Secretary of the Treasury.  His estimated worth is around $700,000,000.  Fair enough everybody wants to be rich, but why should I pay him, or people like him for performing no detectable public service, and lining their friends pockets?

President Barack Obama seems to think that people like Henry Paulson have expertise for which we must pay whatever astronomical salaries the market supposedly demands.  Compensation in the $15 million range is the unavoidable cost of the superior expertise of people like Stan O’Neil, who ran Merril Lynch into bankruptcy.  But Ben Bernanke, presumably an expert of similar acuteness, draws a salary of only $191,300, and we trust him to clean up the mess.  It seems unlikely the quoted figure is Bernanke’s entire annual income, but if he is willing to serve the Fed for such a reasonable salary, why can’t the government find other people of his caliber to work in banking for similar amounts?

General David Howell Petraeus does his job for less than $250,000 per year

General Petraeus, who holds a Ph.D. from Princeton University, isn’t stupid, but he too works for a reasonable salary.  Even his critics must admit that he is capable, intelligent, ambitious, and loyal.  He has shown far more competency at his job than the people who have been managing General Motors, Chrysler, Bear Stearns, Lehman Brothers, Freddie Mac, Fannie Mae, Wells Fargo, Bank of America, Morgan Stanley, or Goldman Sachs.  Most of them are compensated with salaries and bonuses in the multi-millions.

And General Petraeus does his job for less than $250,000 per year.

I say nationalize all corporations that benefit from any government bail-out, and immediately rescale all executive salaries to correspond to salaries paid in the United States Military.  If senior business executives don’t want to work for $250,000, then let them walk.  Every year a considerable number of military officers, above the rank of major, but below the age of fifty go into retirement.  Why cannot we dip into this reservoir of talent to replace the parasites who are currently leeching off the taxpayers?  This question is somewhat rhetorical, for retired colonels and brigadiers are not the only pool of available talent.   There are other persons in this economy, besides younger military retirees, who are capable of running businesses and industries for reasonable salaries.  But the candidate pool for a nationalized business or industry would logically include military retirees, many of whom have demonstrated administrative ability along with their records of commitment to public service.