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Grassley Pushes for Stricter CEO Pay Limits Under Bailout « The Washington Independent

Remember how the administration’s $700-billion bailout bill boasted provisions cracking down on the enormous pay packages for failed CEOs?

Remember also how it really didn’t do that, instead leaving open enormous loopholes allowing companies to pay their executives what they will?

Well, Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee, has a few questions for the Bush administration about how it plans to prevent taxpayer-funded windfalls for failed Wall Street tycoons.

In an Oct. 14 letter to Treasury Sec. Henry M. Paulson Jr. and Federal Reserve Chairman Ben Bernanke, Grassley says the bailout law’s pay caps are proving to be an unfair joke. He asks the agencies to explain why they opposed stricter limits.

Despite assertions to the contrary, the executive compensation provisions in H.R. 1424 are turning out to be window dressing rather than a legitimate attempt to prevent golden parachutes and multi-million dollar paychecks for failed leadership… Please describe, in detail, why you believe that additional limits on executive compensation would have caused [the bill] to fail.

Grassley points to the recent case of American International Group, the hobbled insurance giant, as evidence that even failed Wall Street firms have shown little interest in limiting compensation packages. Last month, taxpayers bailed out AIG to the tune of $122.7 billion. Yet former CEO Martin Sullivan — who won $5 million in performance bonuses last year and negotiated a $15 million golden parachute this year — left as a king, even as he helped lead the company to ruins.

Grassley also goes after AIG for its much-disparaged $440,000 executive getaway to the super-lavish St. Regis Resort in Southern California — a trip taken after Paulson had announced the first $85 billion loan to bail out the company.

The five-term Iowan asks the Bush officials to retrieve Sullivan’s bonus, as well as the cost of the seaside jaunt.

Mr. Sullivan’s response that his bonus was justified because of the great performance of the other divisions is similar to AIG’s response that its St. Regis Resort boondoggle was for high performers in a division unrelated to the failed Financial Products division. These responses are offensive. AIG should be putting all of its assets on the line – particularly those from its profitable divisions – before utilizing taxpayer dollars to save its non-profitable divisions. While Mr. Sullivan’s $20 million and the $440,000 tab for the retreat are drops in a bucket of $122.7 billion, it still frees up that much taxpayer money. Every penny counts.

Those aren’t the only concerns. Grassley also wants the administration to set limits on deductions claimed by employees of failed companies as they tally their travel and other business-related expenses for tax purposes. Grassley asks that the cap on those deductions be the same as those established for federal employees.

Taxpayers who are struggling to stay in their homes should not be subsidizing first-class travel or luxury hotel stays for any employee of a company that is being rescued with taxpayer money. Given the extraordinary regulatory authority Treasury has just exerted … for commercial banks, Treasury surely has the regulatory authority to impose such restrictions here.

Sure, this is just a letter. But at least we know someone in Congress is watching. And it doesn’t hurt that he’s the No. 2 guy on the Finance Committee.

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