A "punative" bailout?

Yesterday in his testimony to the Senate Banking Committee Secretary Paulson is reported to have said that he didn’t want the bailout to “be punitive”, and that was why he opposed forcing bailed out firms to limit executive pay and give up a equity stake to the government.

Let me suggest that if Congress doesn’t make this bailout punitive – painful in the extreme to those forced to ask for help – they will have sold out to Wall Street. Any competitor who came in as a white knight to save a company would expect to clear out the incompetent executive management team and take a controlling interest in the company as the price of saving them. I expect Congress to do no less with my taxpayer money. Paulson had the right idea with the AIG bailout (10.5% interest and 80% equity in the company) and that sort of hard bargain ought to be the model for any future bailouts from Congress, whether of Wall Street firms or auto makers or whomever.

We pay the President of the United States $400,000 per year (and many of us in both parties think he was overpaid at that, considering his performance) – if the government has to save a Wall Street firm, I don’t see why anyone on the executive management team of that firm should get paid more than the CEO of the firm that saved them, the President of the U.S.