Obama's Salary Regulation Plan Offends Me

I find this story truly scary. Its one thing if the government wants to regulate the executive compensation of firms that take TARP money. There's nothing wrong with a few strings attached to a few billion dollars. I don't necessarily agree with it, since I think it undoubtedly handicaps these firms, but I am not up in arms about it. I'm also not flipped out by creating guidelines that require banks not to have executive compensation structures that encourage too much risk. I completely disagree with it. I think that if you want to regulate risk then regulate risk, but it doesn't worry me. Banks are an important part of a functioning economy and are already heavily regulated...with good reason. One foolish regulation won't keep me up at night.

What will keep me up is the set of guidelines the Treasury Department is proposing which will apply to private equity firms and hedge funds. Their executive compensation must also not encourage "too much" risk taking. Excuse me? Maybe I WANT that risk. If the government wants to prevent banks from risking too much money which will result in the FDIC from having to pay out massive amounts to innocent depositors (who should not have to investigate the financial stability of the bank they put their money in and therefore ought to be protected by the government) fine. But where does the government get off telling me how much risk I can encourage my hedge fund manager to take? Thats MY money. Risk = reward in the market. Thats the way it works. Maybe I am willing to take on more risk to get more reward...as is my RIGHT.

This infuriates me. Once the government can regulate how great a risk I take with my money we are entering some REALLY murky waters. Especially when they don't even do so directly but rather do it by limiting the bonus package hedge fund managers and private equity firms are permitted to put in place. I realize this isn't the most sympathetic group in the world, but what right does the government have to tell them how they should be paid...or me, as an investor, how I can pay them? Not to mention we aren't generally talking about unsophisticated investors here. Most private equity firms and hedge funds are only open to those willing to invest 100's of thousands of dollars, if not millions, and require the money to be locked up for at least a few years and then can only usually be taken out at specific times during the year (usually no more than quarterly). If you are prepared to lock up that amount of money for that length of time you probably have some idea what you are doing...or else don't deserve government protection. For me this is WAY too far. Once the government starts meddling in my personal investment practices and the payment plans of individuals with no public duty whatsoever we have crossed a serious line in the sand.

If the Treasury Department does this, and enforces it, Obama will somehow have managed to lose my vote. I may be a Democrat, but I am an American and a free market Capitalist first...communism is not OK. Looks like I may have to either cast a blank ballot or vote for a 3rd party candidate in 2012, unless this doesn't go through.

Madison