- ISIL creates all-female brigade to terrorize women into following Sharia law
- ISTOOK: Obama wants to be impeached
- Obama to Latin leaders: Help with border
- Military bans troops from Baptist church event honoring ‘God’s Rescue Squad’
- ‘Pocket drones’: U.S. Army developing tiny surveillance tools for the next big war
- Belgian cafe posts sign: Dogs allowed, but Jews stay out
- Gen. Dempsey: Pentagon studying Russian readiness plans not viewed ‘for 20 years’
- John McCain: Botched, two-hour execution of murderer is ‘torture’
- House GOP ready to move border bill
- Bomb squad called after live WWII artillery washes on Cape Cod beach
Executive pay limits in bailout
Question of the Day
Treasury Secretary Henry M. Paulson Jr. Wednesday agreed to congressional demands to limit the pay of bank executives in one of his biggest concessions to date to try to secure quick passage of a $700 billion bank bailout.
The Treasury gave ground on the politically potent executive pay issue after Republicans and Democrats questioned why taxpayers should pay for multimillion-dollar “golden parachutes” and other perks for executives who got their banks into trouble with toxic mortgages.
“The American people are angry about executive compensation and rightfully so,” Mr. Paulson told the House Financial Services Committee Wednesday.
“Many of you cite this as a serious problem, and I agree. We must find a way to address this in the legislation, but without undermining the effectiveness of this program.”
The remarkable shift showed how increasingly desperate the administration has become to get a bill — not only reversing its previous stand that penalties on executives would make the bailout program less effective by making banks less willing to participate, but also reversing long-held ideological views against government meddling in private corporate matters.
But in eleventh-hour negotiations over the bailout that looked increasingly in danger of faltering, the administration continued to hold fast against a proposal from congressional Democrats to give taxpayers an equity stake in banks that seek aid.
Treasury has been even more adamantly opposed to that proposal, saying it would undermine the bailout program as well as the nation’s free-market economic system.
Many economists agree with the administration on the need to avoid too much meddling in the private banking system.
“It´s imperative that lawmakers not interfere too much with the free-market system that America was built on,” even though lawmakers are being forced by circumstances to act on a highly unpopular bailout, said Anthony Sanders, professor at the W.P. Carey School of Business at Arizona State University.
“Congress needs to learn from this situation and start better oversight of Wall Street,” he said. “Even in a football game, we have referees to determine what´s fair, but not to determine the outcome of the game. Regulation shouldbe used … to protect the free market.”
Graef Crystal, an analyst who writes a newsletter on executive compensation, said he is “philosophically opposed to both the government bailout of banks and the imposition of executive pay controls.”
“I’ve been on the scene a long time, and I am here to tell you that clumsy attempts by Congress and the bureaucrats to rein in executive pay have for the most part aggravated the problem, not lessened it,” he said.
President Clinton’s attempt to limit executive pay to $1 million in 1993 backfired and helped produce the astronomical compensation that executives enjoy today, he said, by limiting only executives’ yearly salary — not compensation that is deferred until after retirement or comes in the form of stock options and grants.
The result was an “explosion” of stock-related compensation that now dwarfs a typical executive’s nominal salary and has greatly widened the gap between executive pay and ordinary workers, he said.
Mr. Crystal noted that Mr. Paulson naturally opposed pay limits demanded by Congress because he was among the most highly paid executives in the nation when he headed Goldman Sachs Group Inc. before joining Treasury, earning on average $27 million a year.
About the Author
- Energy Department eyes regional gas reserves for emergency use
- Economists see signs of another market bubble
- Crude oil will head north of the border to Canada
- S&P: Boeing to suffer if Ex-Im Bank killed
- U.S. job gains, unemployment dip push markets into record territory
Latest Blog Entries
By Mark Davis
The nation founders, the Lone Star State thrives
- Rahm Emanuel: Send illegal immigrant shelter kids to Chicago
- 'Pocket drones': U.S. Army developing tiny spies for the next big war
- Tactical advantage: Russian military shows off impressive new gear
- CURL: Obama, staffers not even pretending any more
- Pentagon running out of time to find mass of missing weapons in Afghanistan
- Family of Marine killed in Afghanistan pushes back against cover-up
- NAPOLITANO: What if our democracy is a fraud?
- Military bans troops from Baptist church event honoring 'God's Rescue Squad'
- WEST: Those who would rather join the jihadi army than their own nation's army
- Obama orders Pentagon advisers to Ukraine
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world
Fighting in Iraq