The Treasury and the FDIC forced Goldman Sachs to sell it $10B in Goldman stock which Goldman bought back in full with $425M in interest eight months later. At the time of the Treasury’s acquisition of Goldman’s stock, the Treasury made no demands to regulate the compensation of Goldman executives. At present, Treasury still owns Goldman warrants, but it does not own any Goldman stock. Treasury no doubt can be expected to argue that it is lawful for the Treasury to attach strings to the receipt of financial benefits from the Treasury if the enforcement of those strings would enhance liquidity. But the Constitution was written to define and to restrain the government, and there is simply no authority in it for the acquisition of stock in private companies and the regulation by bureaucrats of the compensation of those who run those corporations.

Notwithstanding the above, it is exquisitely unfair for Treasury to argue now, after it forced-fed TARP to Goldman, that Goldman’s executives are making too much money. It is, quite simply in terms of Econ 101 and the Constitution, none of the government’s business how much those executives earn. Had Treasury wanted to control Goldman’s executive compensation, it would had to have done so at the outset. However, even then (“In return for the $10B we are forcing you to take, your executives may not be paid more than $XXX.”), the right to earn whatever you can is protected by the Constitution. Thus, even if the government attached strings to the TARP funds, when those strings interfere with a right specifically guaranteed in the Constitution–freedom to contract–they are patently unconstitutional. Short of blatant violations of the personal freedoms of unpopular corporate executives, and short of a seachange in American political thinking which moves the U.S. from private ownership and private control of the means of production (free enterprise) to private ownership and government control of the means of production (fascism), there is no lawful way for the federal government to regulate personal compensation.