TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

The Pay for Performance Act:

The new legislation, the “Pay for Performance Act of 2009,” would impose government controls on the pay of all employees — not just top executives — of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The legislation, passed by the House on April 1st, applies to all employees of all firms who have taken any TARP funds, and gives the Treasury Secretary the power to define what is “reasonable” compensation.

The (ostensible) idea behind providing capital to banks was: to temporarily remove pressure from their balance sheets until the crisis ended. The “Pay for Performance Act” is a blatant power grab by the government, to take full control of financial companies. If this bill passes the Senate and is signed into law by President Obama, the Federal government will be deciding how much employees are paid for a wide variety of companies.

Making this even clearer, Obama said this during a meeting with top financial executives after one executive said he’d like to return TARP funds as soon as possible:

Dimon also insisted that he’d like to give the government’s TARP money back as soon as practical, and asked the president to “streamline” that process.

But Obama didn’t like that idea — arguing that the system still needs government capital.

The president offered an analogy: “This is like a patient who’s on antibiotics,” he said. “Maybe the patient starts feeling better after a couple of days, but you don’t stop taking the medicine until you’ve finished the bottle.” Returning the money too early, the president argued could send a bad signal.

Several CEOs disagreed, arguing instead that returning TARP money was their patriotic duty, that they didn’t need it anymore, and that publicity surrounding the return would send a positive signal of confidence to the markets.

Many companies were forced to take TARP funds — some by threat — and now when they want to return them because of the government’s all-too-obvious power play, they are told they can’t. They aren’t allowed to pay the loan back, because if they did, the government would have no claim over them anymore.

This is what happens when passions are aflame, and government is free to do as it chooses: the government uses crisis and anger as pretext to grab complete control.