Here’s a bit of financial advice. If your money or investments are in a bank that is receiving federal bail-out money, find another bank. That’s easier said than done right now, but I predict there will be a few popping up in near future. Among other bad omens, President Obama has decided to cap salaries for banks getting federal aid. I can see his point and it’s a populist move that I am sure will earn him favor but some unintended consequences are that any bank with a salary cap won’t be able to attract and keep the best people.
Here’s how it goes; if you’re on the board of a bank and the CEO retires, or gets hit by a car, how do you attract a new one just as good as the last? The other CEOs are already getting the top salary you can offer, so there’s no reason for them to leave their current positions and help you out. As a result, you get less than top quality executives at a critical time. Is this the best way to handle U.S. citizens investments? What sounds like a good idea has the unintended consequences of making sure we don’t have the best people watching over our money.
The good news is, once those smart folks can get their hands on some capital, which, admittedly, isn’t easy just now, they’ll start their own investment institutions, free from this government regulation, and also free to attract the best and the brightest. Investors looking to maximize their money after such a painful recession will flock to them, and the Obama administration’s plan won’t even have accomplished what it was intended to do in the first place-keep people’s money safe by regulating banks.
The fact is, government has to either control every single thing, a plan we’ve seen doesn’t work in places like, say, the Soviet Union, or we leave a loophole for clever people to get around the regulations and they don’t help in the first place. I wish we could have been avoiding credit default swaps and bad home loans in the past decade; it sure would have helped out my money, but if it hadn’t been these problems, it would have been something else.