Marketplace Scratch Pad

Morning Reading

Scott Jagow Jun 24, 2009

Citigroup is increasing base salaries for its employees by as much as 50%, according to the New York Times. And the government can’t do a thing about it, even though it will soon own a third of Citigroup. The administration’s pay “czar” only has power over the salaries of the 100 highest-paid executives.

Clusterstock’s take on it:

This is a disaster. Without taxpayer guarantees and funding, Citigroup would be unable to give its employees higher base salaries. The best employees would leave for other firms. This market process would further diminish Citi and enhance its better managed competitors. Everyone, except Citi shareholders and some of its senior management, would be better off. Instead, taxpayer funds are being used to block this market process, trapping talent inside a failed firm and rewarding management’s worst mistakes.

Since taxpayers are loaning more money to car companies, Businessweek asks Can Tesla Become A Real Automaker? It’ll be difficult:

The Silicon Valley company faces a massive challenge to generate the kind of cash needed to develop new cars that will sell in sufficient volume to make real money eventually. While Tesla is racing to lower costs and hone the development of its first-generation Roadster–along with a fleet of less expensive, more mainstream cars–it’s tough for any company to make a significant profit on low-volume cars.

Those electric Roadsters sure are pretty, though.

The New York Times has a story about Fed Chairman Ben Bernanke. The Times says behind the scenes, Bernanke has been pushing to get more power for the Fed because, well, it’s been doing such a good job:

Despite criticism by some lawmakers that the Fed failed to anticipate the problems that led to the crisis, Mr. Bernanke has told associates that such critics fail to recognize the extraordinary actions taken by the central bank over the last year.

Mr. Bernanke believes the Fed’s actions have played a major role in averting a possible second Great Depression, according to government officials who know his thinking. Those steps, the Fed chairman has told these people, demonstrate that the agency is up to the larger task assigned to it by the Obama administration.

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