Press Releases

Bachus: End Government Micromanagement Of Private Business

WASHINGTON, February 25, 2010 -

-Financial Services Committee Ranking Member Spencer Bachus made the following statement during a Full Committee hearing on compensation in the financial industry:

"We are the largest and strongest economy in the world.  We didn't get there by having government run businesses.  The traditional view, which I share, is that we got there through the free enterprise system in which it is inappropriate, ineffective and dangerous for government to impose controls on the executive compensation practices of privately owned companies.  It is inappropriate because such companies' practices should be controlled by their stockholders, the owners of the money which is being paid to executives.  It is ineffective because government bureaucrats have shown themselves to be particularly inept at making decisions governing executive compensation.  Most critically, it is dangerous because government bureaucrats inevitably allow political considerations to distort their decisions.

"There is no need to elaborate on the first point.  It is the stockholders' money; and unless the government is a shareholder, the government has no right to tell them how they may disburse it.  The pretense that this is a safety and soundness issue is simply an excuse to disallow pay that many, myself included, often find excessive.  But, stockholders already have the power to stop their money being paid to executives who do not deserve it.  To ensure stockholders have the information and access they need to exercise their control, Republicans have supported giving shareholders of publicly traded companies a triennial, non-binding shareholder vote on executive compensation.  This approach is far preferable to entrusting more power to the same government bureaucrats whose regulatory failures helped cause the financial melt-down.

"The ineffectiveness of bureaucratic controls is clearly shown by the experience of Fannie Mae and Freddie Mac which the government does own.  I am particularly pleased that that we will hear today from the Federal Housing Finance Agency Director, Mr. DeMarco, about the Christmas Eve decision to award multi-million dollar pay packages to executives of Fannie Mae and Freddie Mac.

"The $6 million pay packages given to each of the CEOs of Fannie and Freddie -- an amount 15 times more than the President makes and 30 times more than a Cabinet Secretary makes -- represent just one example of what happens when the federal government is given responsibility for regulating compensation. 

"Employees of AIG, another company owned by the taxpayers, were awarded more than $100 million in bonuses this year.  Executives of General Motors, a firm which has already received $52.4 billion in bailout money, were recently given a waiver to receive compensation in excess of the statutory $500,000 pay cap.   In addition, GM's ousted former CEO, Fritz Henderson, is being brought back to serve as a consultant and will receive compensation of $3,000 an hour!  And these are two companies controlled by the government.

"The greatest danger is that dramatically increasing government micromanagement of compensation practices will provide bureaucrats with a powerful tool to influence business decisions for political, not economic purposes.  Every society that has followed that path has come to grief. Government should not be micromanaging private businesses.  We need to end the bailouts and let businesses rise or fall on their own merits. Letting the government decide who prospers and who doesn't and bailing out those that fail is not how we became the most powerful economy in the world."

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