Obama Admin To Issue New Wall Street Pay Limits

WASHINGTON — Nearly three months after American International Group bonuses provoked an angry reaction in Congress, the Obama administration is ready to issue broad new principles on how to compensate top financial sector executives.

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke want to give the Fed, which regulates banks, and the Securities and Exchange Commission, which oversees the financial markets, greater powers to set compensation guidelines across the financial sector.

In anticipation of the new guidelines, Geithner scheduled a private meeting Wednesday morning with SEC chair Mary Schapiro, Federal Reserve Governor Dan Tarullo and executive pay experts to discuss compensation policies.

The guidelines come as the administration also prepares to announce new regulations restricting bonuses to the most highly compensated employees at financial firms that obtained infusions from the $700 billion Troubled Asset Relief Program. The regulations, prompted by legislation passed by Congress earlier this year, would limit top executives to bonuses no greater than one-third of their annual salaries.

While 10 of the nation's largest banks got permission to pay back their share of the money, executives at several other high profile firms would still fall under the new restrictions, including Citigroup Inc., Bank of America Corp., American International Group Inc., Chrysler LLC and General Motors Corp.

Those regulation, expected later in the week, would replace the administration's restrictions that applied only to banks that receive "exceptional assistance" from the government. Those limits set a $500,000 cap on pay for top executives and limited bonuses or additional compensation to restricted stock that could only be claimed after the firm had paid the government back.

Executive pay is a politically charged issue. Bonuses totaling $165 million issued in March by insurance conglomerate AIG, which had received billions of dollars in financial assistance, set off a public and congressional outcry.

Obama and his economic team have been trying to temper the populist urge to cap salaries while at the same time harboring a belief that compensation practices contributed to the current crisis by encouraging high risk-taking.

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"I think boards of directors did not do a good job," Geithner said Tuesday. "I think shareholders did not do a good job in terms of discipline and compensation practices."

The financial sector has been pushing back, arguing that restrictions that are too stringent could drive away professional talent.

"This is the opening of Pandora's Box," said Tom Quaadman, an expert on financial institutions at the U.S. Chamber of Commerce.

Gene Sperling, a counselor to Geithner, is scheduled to testify Thursday about compensation practices before the House Financial Services Committee.

It was unclear Tuesday how much of its executive pay package the administration planned to detail this week and how much it would include in a broader list of regulatory proposals that President Barack Obama will announce next week.

"A centerpiece of sensible reforms will be to tie compensation to better measures of long-term investment and return and to adjust them to reflect the risk," Geithner told a Senate appropriations subcommittee on Tuesday.

The new regulations stem from legislation Sen. Christopher Dodd, D-Conn., inserted as an amendment to the economic stimulus package earlier this year. The legislation affects companies that have received assistance under the $700 billion Troubled Asset Relief Program. One of its provisions requires the treasury secretary to seek reimbursement of any compensation paid to a TARP recipient's top 25 employees if Treasury deems the payments contrary to the public interest.

To undertake that review, the administration plans to retain Kenneth R. Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks, according to people briefed on the selection.

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AP Economics Writer Martin Crutsinger contributed to this report.

Comments

[geithnertookmymoney]

Having said that, unless we rethink the way we use our wealth, this world is doomed. al-Waleed bin Talal, however he came by his wealth is in a position to make a difference. Instead he chooses conspicuous self-consumption.
next shoe to drop real soon...hyperinflation..market tanking..sell now

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[BurtonOerney]

I hope we can dispense with all the flowery sold-down-the-river pontifications soon. This kind of gives you a hint of how hard real system-wide change is going to be. Geithner quietly announced his intention last month of finding ways to tie long-term stability to compensation. He also wants an extra level of oversight that balances the effects the different regulatory agencies' actions. Next, I'd like to see good, solid definitions of types of trading that undermine stability, like short selling. I'd also like the COP to recommend that difficult to value holdings like securities be traded publicly and some kind of disincentive for banks to hold securities as assets.

[jdlund]

Well do you want bailed out companies to recover or not? It's the central question here, do you want to make certain that the money was wasted or do you want these companies to at least have a chance of paying back the investment we made into them? Hate the bail out if you want but is it your actual desire for all that money to have been spent for nothing?

My point is that if you cap salaries and bonuses too far, it will pretty much ensure that these companies have no ability to recover. Maybe they won't anyway but caps may very well make certain of their failure. Why? Well imagine if you will a system whereby half the teams in baseball or basketball had a very strict salary cap. I mean none of these teams can spend more than 50m for their entire roster(including coaches and GMs) and no one player or coach can get more than 4m a year for any period of time. Now the other half of the teams have absolutely no restrictions placed on them whatsoever. Where do you think the best players and coaches will go? Which teams do you think will do the best? Which teams do you think will get greater park attendance? Which teams are likely to sell more jerseys and other products?

[BurtonOerney]

You can't really think from reading that article that anybody is considering salary caps. This is about bonuses and incentives that reward short-term profit at the expense of stability. I heard a whole To The Point show on NPR a few weeks ago about this administration's philosophy of pushing people to make choiced that are in the country's best interest through incentives. This was in the health care context. The administration guy interviewed also talked about reducing the complexity associated with redundant choice and more dangerous options.

[Youdontgetit]

Obama Admin To Issue New Wall Street Pay Limits......that is the title of the article and what Timmy said.
And I thought this country let us decide what is best for ourselves as individuals and not have to decide what is best for the country.

[Brute]

Right On!

Next they should look at capping Al Gore and Bill Clinton's salaries! The Goracle left office with a net worth of 2 million and now his personal weath exceeds 100 million!

Clinton gets $150,000 per speech for God sakes!

Hillary Clinton received 8 million for her book BEFORE it was even written!

Where is the justice in that?

Nancy Pelosi's personal wealth exceeds 78 million! Take it from her and her husband for running non-union vinyards and redistribute the money to the grape pickers!

The Kennedy dynasty, all those houses and personal millions! Take it from them and give it to their staff of underpaid overworked servants!

Mark Cuban! Ted Turner! Bruce Springsteen, Jane Fonda!!!!!!!!!!!!

Confiscate their ill gotten gains and redistribute it to the oppressed workers!

[jdlund]

Yikes. Seriously, take a deep breath or something. I kinda hope you are being sarcastic or else you are kinda frightening.

[Mike Keough]

Why are they all Democrats? Is there any difference between them and Reagan, Bush, Cheney, Rush, Gingrich? They are all bastards. Next you will be saying that it is the Unions which have driven our economy into the ground... Given the level of greed which exists within Humans, and given that we are selfish and self serving, this may just be the natural result of any economic system. Government which does not represent the People, but serves to enrich themselves is as old as history. There is a lot written about how workers need to re-educate themselves for the new economy. That is misdirection. We need to educate ourselves about what is in our best interest and stop voting for a'holes. How is it possible for a working person to think that it is better not to be a Union? Kindly explain that to me. It is better to have NO representation during employment negotiations? It is better to NOT to have health care benefits? It is better to vote for a man or woman who has sold you out to a foreign corporation? I gotta turn over and go back to sleep. This dream is really starting to bother me.

[henrywolff]

When is going to set the price for bread and vodka?

[BurtonOerney]

Clever. Black bread is more Russian than just regular old bread.

[FreedomAgain]

They should have some sort of calculation for maximum wage. Right now there are CEO's and executives that are sucking all the money out of corporations, while driving those corporations into bankruptcy and reducing the salary of everyday working Americans. Then the economy gets hit, and we all end up paying for it.

Also, maybe if we didn't have a few individuals in this country with billions of dollars (some have more than some nations), we would have more to go around. Who needs a billion dollars to survive? Why not put a cap on personal wealth of say 1 billion, and tax the rest at 100%? Who needs more than a billion dollars, and why? Who needs more than 40 million of personal wealth for that matter? Is there a point at which people should realize they have achieved "the American dream"?

If you have a few individuals that vacuum up all the money, of course there isn't anything left for workers. But they will try to blame it on Unions.

[Creeker11]

It is scary to think that there are people in this country that agree with you. Yes, lets put a cap on how rich someone should be ALLOWED to be.

[FreedomAgain]

I thought that would probably get a rise out of someone. I admit it was a bit out there. In fact, it was off topic since there is only talk of capping the salaries of executives that are accepting welfare money to keep their businesses going, and not on executives in general.

When I sit down to do my bills, I have to pay bills first, then put some money aside, and then what is left over can be divided among things I feel are important. In corporate america today, CEO's and executives are taking their huge amount first, paying bills second, and employees third, and not putting any money aside for tough times. I don't know the solution, but it seems to be a big problem.

[Youdontgetit]

You are really frightening and disgusting. Most people in this country do not want to live in the old Soviet bloc. If you do, please go to China or Venezuela. You are the antithesis of everything that has made this country great. Where do you think money and wealth come from? People earning it! With out people earning money there is none "to go around." Maybe you should try and work hard and see how much wealth you can earn rather than sitting around dreaming of some worker's paradise that hasn't, doesn't and will never exist. See, someone has to pay for it all and people like you will never earn enough to do that.

[PhilipTaylor]

Salary, bonuses, benefits, and luxuries were the methods of skimming or pilfering the profits of these companies for the benefits of a million Wall Street employees, especially the top 5% to 10%. Leaving the companies vulnerable to the slightest problems and taxpayer backfilling of their GREED!

This was NOT Capitalism it was mafia Oligarchy with the FED as a primary TOOL!

Like every mafia scheme it eventually self-destructs under its own weight of GREED!

We thought Kennedy defeated the mafia but it simply went underground into finance and surfaced as this High Level Employee Skimming of illegally generated profits form every unimaginable scheme the mafia could invent using its Ivy League Talent base of PhDs, MBAs, and PhD Financial Engineers that were indoctrinated into the ways of the clan!

It took time but the mafia is alive and well controlling Congress with its ill-gotten loot!

[Hank10303]

Now here is where the real waste in corporate America is. It festers in the board rooms and the executive suites. The average shareholder has no say in the salary of the CEO and his cohorts in crime. Yes, crime. We often wonder why every year the price of goods and services go up so much; we assume its because things cost more and its more expensive to produce. Well not exactly.

Sure production cost increase and the size, weight and amount of the product packages shrinks. Workers get annual increases of what 3-7%. Those things would mostly balance out, reduction in size and packaging verses salary and cost increases. But, executive pay no one seems to pay much attention to.

Just think if a CEO gets a raise of 2 million dollars; and the CFO gets one of 1 million dollars and the rest of the executive staff and VP's get increases of 500,000 to 1 million dollars wouldn't that impact the overall cost of operation and expenses more than a mere 5% that the workers get.

Run away executive pay is the major impact on inflation and increase in the cost of living for all Americans. When the utilities get a rate increase we need to begin to question how much of that increase is attributable to the executive salary increases. SERIOUSLY

[scooperss]

Yep. I found out last month that AEP has asked for an increase over the next 3 years that will amount to 47%. And they just received 1 for 13?% this year.

[Youdontgetit]

No Hank, it would not. I guess you went to a good old government school
GM has roughly 350000 employes is you give them all a 5% raise every year based off of a $50,000 salary, which is on the low side of their average, you would be looking at about $850,000,000 in pay outs. That seems like a little more than the amount you are talking about. Hundereds of millions more. Not to mention that the idea of staff and VPs getting a million dollar raise every year is absolutely ignorant.

[SomeOtherDude]

These people do not own these companies; you and I do. Anyone with a 401k or IRA does and we have no say in the compensation of these criminals who rob us blind while running the companies that we actually own into the ground. We can't even sue! Tort reform to save the stock holder now!

WE NEED A MAXIMUM WAGE FOR *PUBLIC* COMPANIES!

If you want to pay yourself rediculous amounts of money out of a corporation, then own it outright yourself and don't try to sell me or my mutual funds any stock!

[QuietLightTraveler]

Yea, they should impose salary caps on sports stars instead of worrying so much about steroids.. It's prohibitively expensive for people to go to see a live ball game. These guys don't need to make 20 million a year. They would do the same job for 1 million a year. Where else could they get that kind of pay anyway ??

[Youdontgetit]

"greater powers to set compensation guidelines across the financial sector."

Great. I know somewhere in the Constitution this is one of the government's jobs. I am sure it is in there. Why else would red, white and blue Barry do it?.........unless he is an absolute socialist.
Does this not make all you pacifist lefties at least a little uncomfortable? The government setting pay scales? And look at the article. It doesn't say TARP companies specifically. It says "across the financial sector." Well done commrade Barry.

[Jazzman323]

When are they going to put limits on Hollywood's and sports figure's incomes??

[Obamawinsman]

Considering these companies don't generate enough revenue to actually pay these ridiculous salaries, compensation and bonus plans (We will have a "Global Economic Crisis" every bonus season I'm afraid) and the tax payers are on the hook to make sure the unimagineably ultra filthy rich get all their salary/Bonus and compensation even if they drive the company off a cliff, I think there should be stiff restrictions, excessive regulation and a whole new agency and set of laws created for oversight. It's WE THE PEOPLE now on the hook for funding these excessive payouts to the SOBs so we should be able to set the pay.

[Wiseup2Day]

You mean like GM and Chrysler? Why did we save these companies? They were run terribly and weren't profitable. Why did we throw our money out the window to save them..it couldn't be jobs..because they have closed down dealerships without thought to jobs, they can't even explain what criteria they used, the hearings were a joke, if not, how is it that Barney Frank was able to make a phone call and get a dealership reinstated. No, it was to pay back the Union..we have allowed the federal government to pay to play, this is the most corrupt administration and Congress we have ever seen certainly since Harding.

[VOTERremorse]

I agree, Joe Biden is a joke. To think he is second in line scares me. Every tough question he gets he says oh thats above my pay grade.

[conniedogs]

With each passing day, I am more convinced....Obama has been bought.

[Wiseup2Day]

No..he is just one of the politicians who are more loyal to his party than to the country or it's people.

[MNTom]

Just like Bush was.

[obamanomics]

Nope, he just believes the government knows more then the people, and he is wrong.

[ko2ko2]

This is not our major problem, we get focused on the small "passionate" things in life, while the nation is going down the tubes...