Nose in, the camel's neck follows...

All those companies that were eager to take Uncle Sam's life preserver are about to find out how tight and constricting that ring will be:

The Obama administration plans to appoint a "Special Master for Compensation" to ensure that companies receiving federal bailout funds are abiding by executive-pay guidelines, according to people familiar with the matter...

The administration earlier this year issued guidelines that include limiting salary for top executives at some firms receiving TARP funds and requiring that additional pay be in the form of restricted stock, vesting only after the company repays its debt, with interest, to the government.

Now, here's the thing. I predict a decent probability those companies that swallowed the poison pill of government funding and control will be outperformed in their industry by companies that have remained independent. At some point, the semi-nationalized companies, tiring of the government's yoke, will begin to complain the reason they can't pay back their debt is the "unfair advantage" private companies have over them, because they can pay better salaries and hire the best talent.

Of course, anytime the allegation of unfairness is raised, government's eager to get involved. Again. If history's any guide, that's the point at which government will claim the power to regulate all kinds of salaries, even for companies that weren't dumb (or desperate) enough to take the fiscal Trojan Horse. There's no chance the camel will stop with just a nose in the tent.

Should executives receive gazillions in bonuses and perks? Distasteful as many of us find it, that's not for Uncle Sam to say. Ideally, companies that overcompensate their executives for questionable performance fail as a result, and the reputation then follows them. On the other hand, if a company can pay out attractive packages and remain solvent it should be an indicator they have a well-managed business model. All this throwing federal money about to keep companies on life support precludes sorting the one from the other. It's one thing to regulate society to prevent fraud, deceit and theft. But a controlled/planned economy will never keep pace with a free market one. Never has, and never will. Our economy has become steadily more planned and less free since at least the 1930s, if not earlier. This isn't only because some are interested in accumulating power. It's also a result of Jemison's Rule #1: the usual result of government intervention is to create problems that appear to call for further government intervention.