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Feinberg told Fox News that pay cuts are not meant to be vindictive, but rather meant to guarantee the viability of the companies that the government has financial interests in. But how does cutting overall compensation keep companies viable when competitors are no longer participating in the Troubled Asset Relief Program and are free to pay market pricing? Feinberg has a naive answer for that. He told Fox he hopes non-TARP firms will voluntarily cut their own compensation plans. Of course that's not how the market works, and Feinberg, who has spent a portion of his career determining the value of such items as the Zapruder film, should understand markets. Instead, nonregulated players will simply keep compensation at current levels because talent whose take home pay is cut will migrate to better-paying opportunities. The scenario will not only play out at Wall Street firms, but at the carmakers. Ford Motor Co. (NYSE:F), Honda Motor Co., Toyota Motor Corp. (NYSE:TM), Nissan Motor Co. Ltd. and Hyundai Motor Co. Ltd. will pick off top designers from General Motors Co.and Chrysler Group LLC. With fewer talented designers, how will GM and Chrysler become more viable? Instead, the TARP automakers may have even more difficulty developing new models that satisfy customers while rivals continue to innovate. In fact, the recently released Consumer Reports 2009 Annual Car Reliability Survey bears this out. Ford is the only top-rated U.S. automaker, and Chrysler ranks as the worst of 33 brands sold in the U.S. More specifically, Ford's Fusion midsize sedan outscored the Honda Accord and Toyota Camry and was only beaten by the Toyota Prius in its class. Ford is the only U.S. automaker to refuse Uncle Sam's help last year And, just as on Wall Street, which fears that talent will go abroad or to nonregulated entities to escape compensation regulation, a similar scenario could play out at the automakers. Imagine a circumstance where GM and Chrysler designers opt instead for Chinese or Indian carmakers looking to crack the U.S. auto market, leaving the TARP automakers not only with stale products, but new rivals with lower labor costs. So what would the administration do next to keep its carmaking wards viable? Feinberg's logic is something of a slippery slope. If non-TARP participants don't behave as the administration hopes, what then? Does the administration then extend the rules beyond TARP participants? Populist critics of the bailouts have been arguing that financial firms using the FDIC loan guarantee program should be subject to compensation cuts too, so it isn't a far leap to believe that extending the pay regime is a possibility. For automakers, do you use participation in the Department of Energy's lending program for alternative fuel vehicles as a means to extend pay cuts to the rest of the industry? Do you also slap tariffs on imported cars? Such a move would certainly receive support from both the Rust Belt and Southern states where BMW AG, Hyundai, Kia Motors Corp. and Mercedes-Benz have set up shop. So the cuts may not be vindictive, but they certainly have the potential to be contagious. - Matthew Wurtzel
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Obama administration pay czar Kenneth Feinberg's pay cuts may not be "vindictive," but his rationale may be dangerous. 
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If America is so in love with capitalisim why is it that some companies, such as GM, are saved? This is just another show of bias toward the haves assuring they keep having.