Obama caps executive pay tied to bailout money

President Obama on Wednesday announced compensation limits for senior executives at firms receiving substantial federal bailout funds, saying that it is basic common sense that CEOs tighten their belts like the rest of the country.

The senior executives, who have been targeted for excessive spending despite seeking taxpayer money, cannot collect more than $500,000 per year, the president announced from the White House grand foyer with Treasury Secretary Tim Geithner at his side.

“We certainly believe that success should be rewarded,” Mr. Obama said. “But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”

Mr. Geithner, former leader of the New York Federal Reserve Bank who helped craft the bailout, said every financial policy from the Obama administration will be about the public interest and shared prosperity.

“Nothing is more important to me than earning the confidence of the American people,” Mr. Geithner said.

Mr. Obama said the plan was part of an effort to restore trust as he attempts to pass a nearly $900 billion economic stimulus plan.

“In order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street,” the president said. “We all need to take responsibility and this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves customary lavish bonuses,” he said, adding that excessive bonuses are the “height of irresponsibility.”

He said lavish compensation is in bad taste but also is bad strategy, “and I will not tolerate it as president.”

Mr. Obama said executives paid in stock will not be vested until the taxpayers are paid back the bailout money.

In addition, banks getting money must disclose senior executives’ perks and luxuries and explain why the expenses are justified, he said.

Mr. Obama said his administration will take “the air” out of golden parachutes. The policy change came amid growing outrage over lavish office perks and travel benefits for some banking officials and after a report revealed Wall Street executives earned more than $18 billion in bonuses in 2008.

Mr. Obama had called the bonuses “shameful” last week.

Such restrictions will make it easier for members of Congress to support the stimulus plan as their constituents complain about greed on Wall Street.

The Treasury “guidelines” will make sure the bailout billions are not used for “inappropriate private gain,” the White House said.

It applies to banks seeking “exceptional assistance,” such as AIG, Bank of America and Citi, the White House said.

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