The United States of Obama Has Arrived

Treasury Secretary Timothy Geithner's statement on executive compensation packages is a clear signal that a dictatorship has arrived in America. Make no mistake, the compensation package regulations that are about to be instituted will go way beyond regulations on banks and other financial institutions that took TARP money. It is about controlling the entire financial sector--which will ultimately result in controlling the entire economy.

Geithner pays lips service in his statement to shareholders:

First of all, we will support efforts in Congress to pass “say on pay” legislation, giving the SEC authority to require companies to give shareholders a non-binding vote on executive compensation packages. “Say on pay” – which has already become the norm for several of our major trading partners, and which President Obama supported while in the Senate – would encourage boards to ensure that compensation packages are closely aligned with the interest of shareholders.

But, the real meat is here:

...we will propose legislation giving the SEC the power to ensure that compensation committees are more independent, adhering to standards similar to those in place for audit committees as part of the Sarbanes-Oxley Act. At the same time, compensation committees would be given the responsibility and the resources to hire their own independent compensation consultants and outside counsel.

Beyond legislation, I also want to emphasize the importance of the efforts being taken by Chairman Bernanke and the bank supervisors to lay out broad standards on compensation that will be more fully integrated into the supervisory process. These efforts recognize that an important component of risk management is getting incentives right, and we will support the Fed and the other regulators as they work to ensure executive and employee compensation practices do not create unnecessary risk.

Finally, I want to be clear on what we are not doing. We are not capping pay. We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive. Instead, we will continue to work to develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives.

As we seek to strike this balance, the President’s Working Group on Financial Markets will provide an annual review of compensation practices to monitor whether they are creating excessive risks. And we will encourage experts in the field – academics, business leaders and shareholders – to conduct their own reviews to identify best practices, emerging positive and negative trends and call attention to risks that might otherwise go unseen

Got that? Three different groups will have oversight over compensation: The SEC, the Federal Reserve and the President's Working Group on Financial Markets. There are enough pressure points here, between these three groups, that waterboarding will look like a fun experience in comparison for any exec who even thinks about stepping out of line.

Keep in mind, even before these regulations are enacted, the government has Wells Fargo swinging in the wind. As best I can tell, the infraction that resulted in Wells Fargo not being able to pay back TARP money when 10 other banks managed to, is that Wells Fargo chairman Richard Kovacevich had the gumption to bid for Wachovia Bank when the government wanted to hand the bank to Citigroup, essentially for free, and then Kovacevich called the asinine stress tests, just that, asinine.

Now that the government is moving in to control the financial sector, the rest of the economy will be a lay up. Money controls the economy and Barack Obama is about to take over the money infrastructure. Money is going to end up going to some very funny places. Mostly to people who control lots of votes in the next presidential election, and to those who finance such election campaigns. In other words, the connected. In the first group, we are talking unions, in the second group we are talking about Goldman Sachs, Carlyle Group and the like.

When this is all over, the United States of Obama is not going to look anything like the America we now know. Think Cuba, think North Korea, that's how all dictatorships end up.

I am not optimistic.