Friday, March 27, 2009

Time to Declare Economic Marshall Law!

by Nancy Osborne, COO of ERATE


Since Washington has created the mother of all moral hazards by not holding anyone accountable for this unprecedented economic disaster, the repercussions of which we will be facing for decades to come, rather they have elected to reinforce the offending behavior, thereby guaranteeing its reoccurrence, by paying the offenders enormous bonuses and labeling the Americans (AKA Joe or Jane Taxpayer) who are outraged byy this egregious inequity as “distracted”. Some how it hasn’t quite registered that if Washington is unable to comprehend something as patently obvious as not rewarding the culprits who got us into this mess in the first place by paying them enormous bonuses, then what exactly could Washington possibly be getting right in attempting to correct the disaster? If Washington is serious about wanting to prevent the same mess from occurring yet again in the future it may be time to declare “Economic Marshall Law” and make those responsible face the music. If no one has “technically” done anything illegal (how about gross negligence for starters?) and therefore cannot be criminally prosecuted, this may be the way to go.

If a corrupt compensation system, rampant with incentives in all the wrong places, helped get us into this mess, then start by eliminating it and replacing it with a system featuring the appropriate incentives which are aligned with the best interests of the U.S. taxpayers. If the American taxpayers now have a majority interest in these bailed out firms then don’t its employees have a fiduciary responsibility to protect us from further losses or at the very least to minimize our losses?

Why not begin by disincentivising the employees of the now taxpayer bailed out firms from leaving their jobs by penalizing those who do opt to go, that is those who choose to bail out on us rather than stand by to help clean up their own mess, by establishing a tax penalty or surcharge on the future earnings of any departing employees (or they could be labeled as economic enemy combatants and threatened with detention at Guantanamo:). Then incentivise these employees to stay on and help restore their firms to health by promising to pay their bonuses after the U.S. taxpayer is repaid and offer added incentive bonuses based on a time table of how quickly their firm is able to repay Uncle Sam with interest. What better way could there possibly be to retain these employees than to guarantee payment of the bonuses they claim are due to them for 2008, on top of incentive bonuses promised for rapid repayment of taxpayer dollars, than to pay out this compensation after their firm is restored to financial health and the U.S. taxpayers have been repaid? After all had these companies been allowed to go bankrupt, without taxpayer intervention, the whole bonus issue would have likely been a moot point as insolvent businesses do not typically pay out bonuses!

If Washington found a way to hold onto some 13,000 military personnel who had actually performed and bravely satisfied their employment contracts by creating the “stop loss” program, declaring a time of “extraordinary circumstances”, then declare Economic Marshall Law now, our ravaged economy has proven to be every bit of a national security threat and force these employees to stay on the job until the U.S. taxpayers are repaid. This should be their legal and moral responsibility to all current and future generations of tax paying Americans. Seems pretty simple to me, what am I missing?

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