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Executive Pay Limits May Prove Minimal
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Banks that sell stock to the Treasury would fall somewhere in the middle. The limits on bonuses and incentives for risky behavior would apply, but severance packages of less than three times annual earnings would be permitted.
Several lawmakers seemed confused about that decision. After meeting with Paulson yesterday, Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee, said he understood the capital purchase program would have "stringent executive compensation requirements," including a ban on severance packages.
"The idea that we would allow golden parachutes or excessive compensation at a time when taxpayer money is being used to inject confidence in these institutions and to provide confidence, I think, would be a tragic mistake," Dodd said.
Lawmakers were able to claim a small victory yesterday. As recently as this weekend, Treasury officials were planning to apply the less stringent standard for asset sales to their new capital purchase program.
Key lawmakers objected. Senate Finance Committee Chairman Max Baucus (D-Mont.) spoke to Treasury officials over the weekend, while Frank and House Speaker Nancy Pelosi (D-Calif.) spoke to Paulson on Monday.
"Treasury hates any limits on executive compensation," said Sen. Charles E. Schumer (D-N.Y.). "But [Paulson] is learning political realities the hard way, and he realizes this is very, very important to not just the Senate and the House, but to the American people. And he's going to have to swallow some things he doesn't like."
Staff writers Paul Kane, Amit Paley, David Cho, Binyamin Appelbaum and staff researcher Julie Tate contributed to this report.
