Bloomberg reports that President Obama will order imposition of a salary cap on top executives who receive bailout funds from the federal government.
Thus, slowly, like a lobster boiling in a pot, the US Government is drawn deeper into the management of daily operations of major private sector financial institutions. At what point will the Government realize, like the lobster, that the private ownership of key financial institutions is at an end?
Without a doubt, the Government must stop with half measures – full nationalization will be the only way to get to the root of the crisis. Anything short of that means a slow painful cancer spreading throughout our economy. Any idea of buying up so-called bad assets and leaving the good assets is now out of the question. Why should the government get the ugly stuff and the bankers who screwed up so badly the good stuff?
In any case, at what price should the public absorb those bad assets? Too low and mark to market accounting will sink the balance sheets of the banks deep into bankruptcy. Too high and the claim that the public has been ripped off will ring true.
For an excellent analysis of the good/bad asset problem see the latest from Naked Capitalism.
Obama may not like it but he will have to move farther and faster if he is to have any chance of stabilizing the economy.