Reason 72 & 73: Government should not bail out corporations

President Obama is considering limiting executive pay to companies who are part of the TARP program, and GM and Chrysler are still in the courtroom fighting California’s proposed legislation to raise fuel efficiency standards. Again we highlight why government should not get involved with the free market.

First we have Obama’s marketing campaign to limit executive pay for companies getting bailout funds. From Reuters

President Barack Obama kicks off a campaign to rein in corporate compensation on Wednesday with rules limiting executive pay to $500,000 a year for companies getting taxpayer bailout funds in the future.

Sounds great doesn’t it? Boy, would it feel awesome to put the screws to the executives that screwed up! Let’s think about the reality of what will happen if this goes through.

  1. The best executives will move to other companies that are not receiving government help.
  2. The companies who must limit their executive pay will have a difficult time recruiting top talent.

I’m not saying that some of the top executives will stick around and do a good job, I’m just saying that most of the top executives will not. What would you do if you were a manager making $100k per year, but you’re company tells you “sorry, we have to cut your salary to $50k.”

You start looking for another gig, especially if there are other companies able to pay you more money for your talent. Those companies are able and willing to pay you more, since they do not have to deal with Obama regulations.

Courtesy Radio Vice Online commenter KrisT, as reported by the MSN Money Central site.

Earlier this week, Obama instructed the EPA to reconsider the case of California’s existing proposal to raise fuel-efficiency standards. The automakers have been fighting California and other states in court for several years. Last week, they pledged to continue that fight – despite the president’s instructions and, to a larger extent, his consistent and unequivocal insistence on a “green” auto industry. Except, as it stands now, the automakers are basically using their bailout money — from taxpayers — to turn around and sue…the taxpayers themselves.

Another perception problem for GM and Chrysler as they continue to fight proposed California efficiency standards for cars sold in the state.

In essence, the people are going to see this as GM and Chrysler spending our money in court fighting the government.

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Steve McGough

Steve's a part-time conservative blogger. Steve grew up in Connecticut and has lived in Washington, D.C. and the Bahamas. He resides in Connecticut, where he’s comfortable six months of the year.


  1. Lazybum on February 4, 2009 at 7:39 am

    I kinda like the idea. The gubbermint should not be involved in ANY bailout, but if they are, then it should be as painful to the borrower as the lender (me).

    I bet most companies will find other ways if they are forced to PERSONALY  bite the bullet.

    Again, we should not be bailing out anyone. The less companies that find it an acceptable option the better we off we are.

    I am sure I am wrong, but there it is.

  2. davis on February 4, 2009 at 8:26 am

    Another analysis based on opinion as to what might happen and conclusions that are at best opinions.  I believe that rewarding those who screwed up looks like you want to be screwed again. And if I was on a Board, I would not hire somebody who has recently sunk a company. Or is the system (free? as Steve keep saying) rigged so that the plum jobs are passed around from one crook to another?

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