Posted on 02/03/2009 8:04:56 PM PST by AmyNeal7252
Barney Frank: TARP's comp curbs could be extended to all businesses Would be part of broader bill limiting hedge funds, credit-raters, and mortgage securitizers; 'deeply rooted anger'
By Neil Roland February 3, 2009 3:01 PM ET
Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.
“There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference today.
He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.
The provision will be part of a broader package that would likely give the Federal Reserve the authority to monitor systemic risk in the economy and to shut down financial institutions that face too much exposure, Mr. Frank said.
Also included in the legislation: registration requirements for hedge funds and proposals aimed at curbing conflicts of interest at credit-rating agencies such as Standard & Poor’s.
The bill, which the committee is working on in consultation with the Obama administration, also will require financial institutions that bundle mortgages into securities to share in potential losses. This would give banks and mortgage-specialists an incentive not to make bad loans, he said. Institutions that securitize loans improperly will incur tougher penalties.
“There have been too few constraints on major financial institutions incurring far more liability than they could handle,” Mr. Frank said.
The committee hopes to have a general outline of the legislation by early April, he said. It will be the panel’s first priority in its effort to restructure financial regulation in the wake of the worst economic crisis since the Great Depression.
Mr. Frank has summoned the CEOs of Citigroup, J.P. Morgan Chase and the seven other U.S. financial firms that got $125 billion from TARP to testify at a Feb. 11 committee hearing.
Mr. Frank seems to be in synch with the Obama administration in his plans for executive compensation.
Treasury Secretary Timothy Geithner said last month that he might try to extend to all U.S. companies a restriction that prohibits bailout banks from taking a tax deduction of more than $500,000 in pay for each executive.
The Troubled Assets Relief Program legislation enacted in October seeks to give companies receiving aid under the $700 billion bailout a number of incentives to curb what it calls excessive executive pay.
Mr. Geithner said he would consider “extending at least some of the TARP provisions and features of the $500,000 cap to U.S. companies generally.”
Under the legislation, banks receiving bailout money must limit golden parachute payments to senior executives to no more than three times the executives’ base pay. The companies also must subject any bonuses or incentives to clawbacks if the payouts are based on bank’s misleading financial statements.
In addition, bailout recipients can’t offer top managers incentives that “encourage unnecessary excessive risks that threaten the value of the financial institution.”
These limits apply to the chief executive officer, chief financial officer and the next three most highly compensated executives in a bank receiving rescue funds.
Mr. Frank said provisions on golden parachute payments and bonus clawbacks would probably be in the legislation, though he declined to provide more detail because “we’re early in the process.”
A congressional oversight panel headed by Harvard Law professor Elizabeth Warren also recommended last week that Treasury consider revoking executive bonuses at failed institutions getting federal aid.
Currently, these institutions must subject bonuses to clawbacks only if the payouts are based on banks’ misleading financial statements.
The top Republican on the committee, Spencer Bachus of Alabama, said last month he has reservations about giving the Fed new powers, such as the authority to monitor systemic risk.
Mr. Frank said today that after lawmakers address issues on systemic risk, they will consider how to bolster investor protection via changes at the Securities and Exchange Commission. The committee also will review proposals to assist struggling homeowners and expand the housing supply, and to strengthen international financial institutions such as the World Bank, he said.
Write to the editors at fw_editor@financialweek.com.
That's cute. Maybe we could get the lot to pay their taxes as well.
Where is this power in the Constitution?
Hadn't you heard? The Constitution is a quaint historical document. We really can't allow it to keep us from doing what needs to be done to save Socialism from the ravages of Free Enterprise. By merely asking that question you're demonstrating that you just don't understand the new spirit of unity that we will all need in order to allow our peerless leader to save us all from . . . well, us.
Three areas where it won't be applied: Lawyer compensation, payments to ex-Congressmen and their staffers who become lobbyists; Hollywood producers and other entertainers.
take it into professional sports. Those guys are way overpaid. The baseball commissioner made 18 million last year. Cap him...
What about those lousy entertainers like Barbara Striesand (oh wait, I think she’s dead my bad) or Sarah Sarandon, Tim Robbins, Alex Balwin...make them take pay cuts if their movies suck which they usually do ....
I’m sure all of these losers will agree to huge paycuts.
Nowhere.
The masks have come off.
L
Hah! This is rich, isn't it? The big-money boys went for Obama 2 or 3 to 1. Serves 'em right.
It's ludicrous populist grandstanding, of course, with little chance of passing, but I hope it makes the Madoff types sweat bullets.
“might be extended to include all U.S. companies.”
That little stipulation can be finessed. When government taxation gets too high, the taxed move to another country, see Sweden, England, etc. UAE, Cayman Islands, Bahamas, Switzerland, anyone? Brick and morter presence is becoming anachronistic.
After OObama’s order limiting the pay of CEO’s who run companies accepting the bail outs to $500k I think takers will tell him thanks but no thanks.
But you can cut me a check bawney fwank and I will promise you nothing.
Laughing at their idiocy. Did they really think they could get tax payer money without strings attached??
They misspelled the acronym. It’s called TRAP. They fell for it.
...oh, and the MSM.
...and Dem politicians, but I repeat myself.
Cheers!
Gee, on this “good” news the DOW should be up 500 pts today. Why O why is the DOW at 8000? Should be at 800........
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