More socialism through crisis.  Stephen Labaton of the Herald Tribune (NYT) on the Obama administration proposed new regulations of American firms:

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving U.S. government bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire

A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large, troubled companies that are not now regulated by Washington, like insurance companies and hedge funds.

But the administration’s efforts, especially on tighter regulation of hedge funds, are not expected to assuage some European countries. Moreover, the hedge fund industry has significant influence on Capitol Hill and has shown that it can defeat proposals it finds onerous.

It’s not just hedge funds that have influence over the President and Congress – its’ all the bondholders, as a class.  They give much more campaign contributions than taxpayers, as a class.  Apparently, the power to take over failed institutions will only be given if bondholders are kept whole.