Fat Cats First
Tuesday, September 23, 2008; 12:47 PM
Looking back on the wreckage of the Bush era, there is one undeniable bright spot: It's been a very good time to be a fat cat. A consistent result of virtually every major Bush policy, from tax cuts to war, has been to enrich the already wealthy.
The pinnacle of Bush's legacy may turn out to be a $700 billion bailout of the high-flying Wall Street firms that made enormous fortunes -- and rewarded themselves with billions in bonuses-- leveraging risky mortgage-backed assets. Now that those firms are in deep trouble, the Bush administration wants taxpayers -- many of whom are facing their own financial troubles -- to come to the rescue.
And, in case there's any doubt that it's fat-cats-first with this White House, the news today is that Bush aides are balking at moves that would require companies accepting bailouts to cap executive pay, or give taxpayers equity for their contributions.
Lori Montgomery and Paul Kane write in The Washington Post: "The Bush administration is resisting changes to the measure being sought by Democratic leaders and many Republicans, including one that would grant the government authority to cut executive pay at firms that participate in the bailout and another that would guarantee that taxpayers share in the profits if those firms recover financially.
"Meanwhile, rank-and-file lawmakers -- returning to Washington after a weekend in their districts -- voiced outrage that taxpayers were being asked to pay for the excesses of Wall Street and that Congress was being prodded to rubber-stamp the biggest federal intervention in the private market since the Great Depression."
Here's the official White House position on CEO pay from spokesman Tony Fratto, via Thinkprogress.org: "We certainly understand and are sympathetic to the sentiment regarding the pay of CEOs and senior management of these firms, but we have to focus on the problem, and the problem is that we need these firms to participate in the program and sell us this debt. Having punitive measures would provide a disincentive for firms to participate, and that would make the program much less likely to succeed.
"CEO compensation and corporate governance in public companies are very important issues -- especially when receiving taxpayer support -- but we need to be focused on fixing this problem in our markets right now. We can and should return to those issues once we get this legislation passed."
Peter G. Gosselin and Richard Simon write in the Los Angeles Times: "The action now centers on bargaining between Treasury Secretary Henry M. Paulson and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. . . .
"Frank wants to give the government the power to cap the compensation of executives of the firms helped by the bailout.
"'I just think it is inconceivable . . . that the taxpayer should put money at risk because of bad decisions made by people who would then continue to be rewarded without any restriction,' Frank said.
"But administration officials said Paulson was 'dead set' against a compensation cap, fearing that it would discourage companies from taking advantage of the program."
From a statement by Rep. Henry Waxman, chairman of the House Oversight committee and an influential House Democrat: "The Administration's plan completely eviscerates the concept of moral hazard. It would enrich the Wall Street executives whose reckless investments caused the financial crisis. The taxpayer is being asked to risk billions to protect the bonuses of investment bankers. . . .