The House is taking another, albeit weaker, stab at trying to keep bailed-out financial institutions from paying their employees hefty bonuses after lawmakers had second thoughts about their vote two weeks ago to tax the bonuses away.
A new bill, which passed 247-171 on Wednesday, would allow the bonuses if the Treasury Department and financial regulators determine they are not "unreasonable or excessive." . . .
Under the bill, Treasury Secretary Timothy Geithner and financial regulators would set standards for employee compensation at companies that accept bailout money, taking into account an employee's performance, as well as the stability of a financial institution.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said the bill would apply only to institutions that receive money through the government's $700 billion Troubled Asset Relief Program and would not automatically extend to others that participate in other TARP-related programs, including Obama's new public-private investment program.
The House Tries Again on AIG Bonuses:
Funny how bonuses are bad... unless they go to the guys who you need to support you.
I don't even mind if Congress gets itself to vote one of its members off the planet, so to speak, once per session, to vent its spleen constructively.
So Geithner is going to decide what's reasonable for bonuses. This is delegation again.
Also the jurisdictional limit, aside from the fact that it would slip if the public gets upset with its partners lumps those that could not survive without the TARP funds in with those who were forced to take them to 'disguise' the poor financial condition of other banks.
I do think the ad hoc firing of CEOs at GM and proposed bankruptcy may be appropriate, but they probably are appropriate at a few banks also -- although when your stranded costs -- i.e. bad debt -- cannot be shed through bankruptcy such as labor contracts or supplier agreements the forum would get less bang for its buck.
Still, the lack of transparency in how this is run and of course on how Geithner would decide on bonuses.
Folks I know on the parachuted management team at AIG after the bailout recently explained to me that the bonuses (including for those who have since left) were intended to secure the commitment of these executives to wind out and hand over complicated risk books so the fact that some are gone is not an indication of failure to retain them for the desired service. I can't say this was true globally of bonuses in the controversial unit, but if it is, I'm disappointed in both the 1$ CEO and Geithner (not to mention Dodd who probably understood also as part of the statutory language he later admitted altering on this subject) for not fairly articulating that -- instead giving the line that it was distasteful but contractually obligated.
Brian
That person works 12-14 hour days for a full year, and succeeds in his job, and when he goes to pick up his check the White House explodes in rage over his "bonus" -- as if he should turn down 99.9999% of his contracted salary and slink away with that single dollar bill.
They should all resign and let AIG default on everything.
Liddy has testified that the people hired to unwind the CDSs were not the ones who issued them.
In other words, your yearly bonus is not structured very similarly to the retention bonuses at all.
A particularly relevant quote:
If the plan is going to work, the government needs funds exactly like Dalio's to participate. But they aren't because of the political risk they saw in the clawback debacle.
Congress has severely weakened its own program, and therefore the road to economic recovery--all over what amounts to a dime per thousands of dollars contributed.
Good job boys.
As I'm hearing it, a fair number of them returned their bonuses -- with their immediate resignations. The guy who made the Times was only one of many.
Luckily, we don't need to assume anything. It's been widely reported by reasonably reliable sources.
This is such of a big deal because many corporations pay execs symbolic salaries and then pay bonuses to make up the difference. This is not limited to the financial sector. The major reason for this is that it affects financial accounting numbers used in projections, as well as offering a number of incentives to the business (i.e. what benefits come out pre-tax etc), allowing them to claim they are paying more than they actually are.
Now, we can disagree about whether execs get reasonable compensation in these cases, but the point is that the compensation is misrepresented in ways which affect both paid compensation and projected expenses. Really, at its root, this is the same sort of innovative accounting that lead AIG, Enron, and plenty of other companies into big messes. Of course absent a big FASB ruling to the contrary, I am sure this dishonest practice will continue.
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