Dr. Paul's stance on H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009, which unfortunately passed last week:
Mr. Speaker, many Americans are justly outraged that Wall Street firms that came hat in hand to receive bailouts from the federal government rewarded their executives with lavish bonuses. But while holding those financial firms accountable to the taxpayers is a laudable aim, the legislation before us, H.R. 3269, goes far beyond this.
This is not the first time that Congress has meddled in matters of executive compensation, and unfortunately it will not be the last. Just like Congress' meddling with the economy, each intervention creates unseen problems which, when they crop up, are again addressed by legislation that creates further unseen problems, thus continuing the cycle ad infinitum. Problems with executive compensation cannot be addressed by further burdensome legislation.
The Wall Street bailouts have already given the federal government too much power in corporate boardrooms, and H.R. 3269 is yet another step in the wrong direction. While shareholder votes on compensation may be non-binding now, once the precedent of government intervention on behalf of shareholders is set, there is no reason to believe that these votes will not become binding in the future.
Perhaps even more frustrating is that enforcement of the provisions of this bill will be undertaken by overpaid bureaucrats who lack the skills to earn comparable salaries in the marketplace by providing useful products or services desired by consumers. People who shuttle between federal regulator and federally regulated firms, trading on their political connections and epitomizing the corruption endemic to the government-managed financial system, will be making decisions that affect every single public company in this country.
In order to understand the reasons behind excessive executive compensation, we need to take a look at the root causes. The salaries and bonuses raising the most ire are those from the financial sector, the sector which directly benefits from the Federal Reserve's loose monetary policy. Loose monetary policy leads to speculative bubbles which drive up stock prices and enrich executives who cash in their stock options. It makes debt cheaper, which encourages reckless business expansion. And it shuttles money from industries that produce valuable products and services to industries that are favored by the federal government. H.R. 3269 is a well-intended but misguided piece of legislation. Until we strike at the root of the problem, we will never get our financial system back on a firm footing.