Bank of America has failed to find a new president to replace the outgoing Kenneth Lewis. There is little doubt why: Obama administration "pay czar" Kenneth Feinberg and fanciful executive pay rules make more sense in an ivory tower than they do in a boardroom.
Without serious academic or practical corporate experience, Mr. Feinberg claimed he knew how to run a business. Indeed, he claimed that he knew how to run businesses better than shareholders did.
If Mr. Feinberg's pay regulations make it impossible for Bank of America to hire top-caliber leadership to head the nation's largest bank, it is hard to understand how the pay czar serves anyone's interests. Mr. Feinberg capped the salaries paid to the highest-earning executives at Bank of America and other regulated firms at $500,000 this year. Now no one with the necessary credentials is willing to take the top job. Mr. Feinberg might think executives are worth only so much money, but - perhaps surprisingly for the pay czar - executive salaries are set by the market principles of supply and demand, not by wishful thinking.
When Mr. Feinberg set up his regulations, he assured everyone, "The law makes it clear that the determinations I render are designed, first and foremost, to make sure those companies thrive and that the taxpayers get their money back." Whatever the intentions, the results show how fallible a government bureaucrat can be.
It's not clear what President Obama's regulator will do next. The most sensible move would be to declare he made a mistake and raise salary caps, but don't hold your breath. Government bureaucrats rarely admit such colossal blunders. Eventually, though, that's exactly what the administration will have to do if it hopes to prevent a leaderless Bank of America from losing even more business, which would leave American taxpayers with more bailout losses.
The leadership vacuum is government-created. Bank of America wouldn't be looking for a new chief if Mr. Feinberg hadn't decided Mr. Lewis deserved a negative income - less than zero - this year. It's hardly a surprise that when faced with paying for the right to work, Mr. Lewis quit. The government needs to get out of the way and let the market work itself out.