Obama Devising Ways To Limit Executive Pay

WASHINGTON — The Obama administration is tackling the bailout of the battered financial sector on two tracks: overhauling how the government spends the money while devising new executive compensation restrictions for banks that get it.

Administration officials said the pay limits could be announced this week, but said the more complicated task of setting up a new framework for rescuing the nation's ailing banks would have to wait until early next week.

President Barack Obama, in a grim assessment of the financial industry, said Monday he would probably need more money to bail out troubled institutions to ease a suffocating credit crunch. Still, he added, "some banks won't make it."

The Treasury Department is expected to announce new rules that limit executive pay for companies that receive "exceptional assistance" under the bailout program.

Obama reacted angrily last week to reports that banks gave more than $18 billion of bonuses at a time when they were relying on taxpayer money for their survival.

Administration officials say rules under consideration would prohibit institutions receiving "exceptional assistance" from giving severance payments to their top 55 executives. Their bonus pools would be reduced by about 40 percent from the 2007 level. Such companies would include Citigroup Inc., insurance giant American International Group Inc. and automakers General Motors Corp. and Chrysler LLC, all of whom received bailouts under the Bush administration.

In the Senate, Republican leader Mitch McConnell, R-Ky., urged the administration to proceed with caution.

"I think we're all appalled by these _ some of these executive salary arrangements and bonus arrangements and perks and all the rest," he said. "On the other hand, I really don't want the government to take over these businesses and start telling them everything about what they can do. Then you truly have nationalized the business."

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Neither Obama nor other administration officials said how much a renewed rescue plan might cost. It is possible that additional help could come from the Federal Reserve, not from Congress.

Still, Obama's acknowledgment reinforced what many economists and bank industry officials have speculated for weeks.

"We can expect that we're going to have to do more to shore up the financial system," Obama said in an interview with NBC News that aired Monday.

Treasury Secretary Timothy Geithner plans to announce a new framework for rescuing the financial sector in a speech next week. The plans will focus on how to use the remaining $350 billion in the $700 billion Troubled Asset Relief Program that Congress approved last fall. It will include new programs aimed at helping homeowners stave off foreclosure, and efforts to stabilize the banking sector.

Officials are considering setting up a government-run "bad bank" to take on the bad debts and investments of financial institutions. In addition, the Treasury could seek help from the Federal Reserve and the Federal Deposit Insurance Corp. to provide banks with guarantees against losses on assets backed by residential and commercial real estate loans, as it did with Citigroup in November.

"We're going to have to wring out some of these bad assets," Obama said.

Meanwhile, Senate Republicans sought to ease the clogged credit market by proposing to give banks an incentive to make loans at rates between 4 percent and 4.5 percent. They offered the plan as part of an alternative to a Democratic economic recovery proposal.

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Associated Press writer Daniel Wagner, Special Correspondent David Espo and White House Correspondent Jennifer Loven contributed to this story.

Comments

[jerrypl]

IT MUST BE RETROACTIVE, MR,. PRESIDENT, OTHERWISE, WHY BOTHER!!

http://eye-on-washington.blogspot.com

[WritusMaximus]

WE'VE BEEN HAD! Only banks in the future who receive gov money will have to abide by these salary caps, and it is a VOLUNTARY system/SELF REGULATION!

It's back to same old, same old.

[peanut2005]

I own a small business and in the past when we have applied for loans, Chase impaticular, they grill you about what you are going to use it for. We just wanted to have them pay our credit cards off direct so we would make one payment to them. When we told them to consolidate cc debt they actually said "How do we know this is what you are going to use it for?"!!! And they took over a month to come back to at us with that question. A**holes. We weren't even asking for a fraction of what these banks have received and we were going to pay back! There should be caps on their income and government oversight ,since it is tax payer $.

[MaryinNY]

You know, when I took out my mortgage, the bank told me first I had to do certain repairs to the house and, of course, carry homeowner's insurance. When I got financial aid for school, I had to maintain certain grades. When I took out my car loan, they told me I have to carry collision insurance.

It is nothing new to have strings attached to loans and grants - as a matter of fact, that is the way most work.

These execs and idiot repubs are just too removed from the real world that they do not understand how things have spun out of control. How many years have you been shaking your heads at these golden parachutes that loser execs get on their way out? and at the trips, jets, bonuses and all the other crap? Don't know about you, but I'm dizzy from shaking my head at this - and not just for the last 8 years, this started well before that. only now, it has reached a level of seeming that we are being punked by these people since this stuff is just too bizarre to be real.

[bwiser]

I agree, the situation is surreal. I absolutely favor salary AND bonus limitations for entities who rely on this bail-out money. If we all screwed up at work as badly as these guys, we would surely be out on the street. How can the execs at Fidelity, or any of the other firms responsible for the devastation of their customers' assets, even think of bonuses when 1/3 (27% to be exact) of my retirement fund simply evaporated last year. Help Police, I've been robbed!!

[Suzieknowsbest]

Meanwhile, this is happening!

http://www.flickr.com/photos/coyote2012/2676481387/

[Icantbelieveher]

"On the other hand, I really don't want the government to take over these businesses and start telling them everything about what they can do. Then you truly have nationalized the business."

These republicans just don't get it -- IT'S OUR MONEY THEY ARE GIVING AWAY! And don't split hairs that they used the company money for bonuses, because if the company has that kind of money to give away, they don't need our tax dollars!!!!!!

[mnhtn24]

A bit of nationalization at this point, would not be such a bad thing.

[Rule Of Law]

Isn't this just a little bit like closing the barn door after the cow makes off with the whole freakin' US Treasury and leaves us holding the mortgage?

[Emlyn]

Some years ago, I worked for a large company, the largest in its field. There were about 300 employees at our branch. One day, the President called us all into the lunchroom to talk about the wonderful profit the company had made the previous years. Instead of thanking all of his employees - the clerks, the computer operators, etc., he thanked three men, two Vice Presidents and one other employee. Then he walked out of the room. We found out later, that he gave huge bonsues to those three men and he got a million dollars. In less than a year, the company was bought out by a competitor and we found out that the President received a huge bonsus for selling out the company.

[schatsie]

It's time for a major tax reform, take the cap off of the payroll tax and make Capital Gains tax progressive and increase the tax on those earning more than 150 grand a year and Obama will be able to pay for universal healthcare­.. The medicare system can handle it with very few changes...­.

[RAFord24]

That's a great idea, but as long as big business support Republicans that's not gong to happen.

[dst1]

"I WON!" So what else do the republicans need to know? Who holds the purse strings? Last time I looked President Obama was pretty much in ccharge of TARP Dollars and he should still take care of the last $350 B.

[Lemon722]

To every executive offered a bonus the real question is OK we give you a bonus although we lost money and accepted bail-out funds. The bonus will be the same as before but once you get the bonus you have to resign with no benefits, just leave, we will give you a good recommendation SHOULD some other company hire you (yeah sure that will happen). I bet most would opt to forego the bonus. There has to be some penalty for not doing a good job. If I don't do a good job I get fired, if the company doesn't do well I get laid off. If an executive who is making the decisions screws up he gets a bonus and keeps his job -- what incentive does he/she have to do a good job?
Have heard the argument that some executives (not making millions only hundreds of thousands) are hired at a lower yearly rate with the understanding they get a bonus to "make up" the difference. Having worked in corporate America my entire life it's time to remind these elites that a bonus means the company did well and you contributed to that so you get a percentage of that -- if the company didn't make money you get nothing. If your company lost money or had to sell you forego bonuses and roll back your salary 1% to go back into the company to make it successful so you can have a bonus again.

[arthur2008]

The are entitled to the same compensation as anyone else assigned to the prison laundry.

[dst1]

Oh I like this one best of all!!

[Utter]

I've only a small problem with people gambling with their own money; it's playing 'heads I win, tails you lose' with other people's pension funds that I find shocking.

My suggestions are (1) for investors to be paid good salaries & bonuses only if they earn over the average in the sector (i.e, an equities investor must beat, say the Dow), (2) performance and bonuses can only be evaluated over the long-term (ten years?), as any chump can be lucky, or run a scam, for a year or two; (3) if they want to take a high-risk, high-payoff investments, they can only do so with the specific permission from the person whose money they are playing with (i.e not pension money), AND, they must also be taking some sort of risk (e.g. that their bonus bank will be wiped if the investment fails to perform).

[Wheels76]

I like the idea of limiting the bonus pool IF a company signs up for bailout funds. Make it so that they can get out of the program, and award whatever bonuses they want, as soon as they pay back the bailout funds, plus interest. Since they're all about needing incentive to earn the company money, this seems to fall in line with their MO.

[Grit]

My question is why are these jerks that got these companies and the country into this mess still even have a job. Why are the republicans still spouting the same old crap, tax cuts and deregulation, still have jobs. Why does the gutless democrat leadership that stood by with their thumb up their butts and even helped the republicans enable this mess still have jobs. Why aren't Bush, cheny and most of that cabinet in jail? Why aren't we taking the 350 B left and putting it into infrastructure and creating jobs and telling the banks etc. "up yours" .