The White House wants to rewrite a provision in the massive economic-stimulus plan that caps executive salaries and bonuses at institutions receiving federal bailout money — posing the possibility of an early showdown between President Obama and leaders of his own party on Capitol Hill.
Although the president agreed that some limits in executive compensation were needed, the caps inserted into the $787 billion Democrat-crafted stimulus that Congress passed Friday are too restrictive and could be counterproductive, administration officials said on Sunday’s political talk shows.
Mr. Obama, who is scheduled to sign the measure in Denver on Tuesday, will seek changes to the government’s approach to executive compensation as spelled out in the measure, senior Obama adviser David Axelrod said.
“He’s announced his own guidelines for how we should restrict that,” Mr. Axelrod said on “Fox News Sunday.” “In some ways, they’re tougher than the ones that the Senate passed.”
Mr. Axelrod said that while “we all have the same goal … we want to do something that’s workable, and we’ll work with [Congress] to get to that point.”
The administration worries that excessive limits on executive earning will put American companies at a competitive disadvantage, leading to “brain drain,” where top financial talent leave for foreign banks. Caps also could cause failing banks to reject bailout money.
White House press secretary Robert Gibbs warned Sunday that the strict limits on bankers’ pay spelled out in the package could be particularly harmful to small and regional banks, credit unions, and saving and loans.
“We think we can strike the right balance,” said Mr. Gibbs on CBS’ “Face the Nation.” “We look forward to working with Congress as we go forward on all measures of executive compensation, to ensure that there’s not any waste or fraud in this.”
But one of Capitol Hill’s most senior and powerful Democrats, House Financial Services Committee Chairman Barney Frank of Massachusetts, fired back at the administration Sunday, saying that rewriting the executive-compensation provision “is not an option.”
“Mr. Gibbs may not like it, but it is going to be enforced,” Mr. Frank said. “This is not, frankly, the Bush administration, where they’re going to issue a signing statement and refuse to enforce it. They will enforce it.”
Sen. Charles E. Schumer, New York Democrat and a key architect of the stimulus package, said the executive-compensation provision in the bill is “strong and tough” and effectively written.
“I disagree with the administration in this sense” that the provision should be amended, Mr. Schumer, vice chairman of the congressional Joint Economic Committee, said Sunday on ABC’s “This Week.” “I have no problem if companies want to get out of this [bailout] program and get out of the program quickly. That’s their business and that’s their right.”
Sen. Christopher J. Dodd, Connecticut Democrat and Senate banking committee chairman, pushed for stricter executive-compensation limits than the administration wanted, arguing that they were needed to gain public support for funding for the ailing financial sector.
Under the administration’s proposal, compensation restrictions would apply only to banks that receive “exceptional assistance” from the government, according to the Associated Press. Top executives could be paid no more than $500,000, with bonuses or other compensation coming as stock that could be claimed only after the federal money had been paid back.
The bill passed by Congress on Friday set executive bonus limits on all banks that receive bailout money.