White House pay czar Kenneth Feinberg is attempting to defy the immutable laws of economics by slashing the payrolls by about 90% at the seven companies that received the most from the Wall Street bailout. The cuts will punish the executives at AIG, Bank of America (BAC), Citigroup (C), General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial. The cuts will not apply to Goldman Sachs (GS), Morgan Stanley (MS) and JPMorgan Chase (JPM). Though the move has garnered public support, it may backfire. Under most circumstances if you make a huge investment you want the best talent you can find to manage your portfolio. You don’t get the best talent by imposing below market compensation. In fact, below market compensation will drive the best talent to other pursuits. If the government really wanted to save the organizations and tax payer’s money, they should allow the board of directors to find the best talent and pay what the market requires to recruit the best talent. Say goodbye to America’s investment of several billion dollars in these troubled companies. For once again populous government policies are imposed in defiance of the laws of economics.

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