Obama Administration Caps Wall Street Exec. Pay....Greed Is No Longer Good

(Michael Douglas as Gordon Gekko in "Wall Street". "Greed is good.")



Huffington Post----

WASHINGTON — Nearly three months after American International Group bonuses provoked an angry reaction in Congress, the Obama administration is ready to issue new regulations limiting the compensation of top executives at financial institutions that have received government rescue funds.

The regulations, expected as early as Wednesday, would apply to the most highly compensated employees at financial firms that obtained infusions from the $700 billion Troubled Asset Relief Program.

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, Bank of America, the American International Group, Chrysler and General Motors.

The government, however, is not stopping at federally assisted institutions. 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.

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.

"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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