Your Tax Dollars: Straight to the Executives of Bailed Banks?
Do you think Tim Geithner, President Obama’s pick for treasury secretary, is serious about reining in executive compensation under the Troubled Asset Relief Program?
In a written response to questions posed by Sen. Carl Levin (D-Mich.), Geithner, a Wall Street insider, vows to uphold the pay limits outlined in the bailout reform bill — called the Economic Emergency Stabilization Act (EESA) — that passed the House this week:
If confirmed, I will charge my staff at Treasury, including the Internal Revenue Service, with ensuring that the regulations implementing the executive compensation provisions of the [EESA] are fully complied with.
Trouble is, as critics have pointed out, that proposal puts limits on bonuses and compensation-based pay, but not salaries — a loophole that could allow executives to reap millions even as taxpayers pour billions into their firms.
Critics have also voiced concerns that, under EESA (which isn’t law, it never moved further than the House), companies might be able to continue offering unlimited stock options to executives — something Geithner seemed to confirm in his response to Levin:
One specific control we would plan to impose on TARP recipients is that executive compensation above a specified threshold amount be paid in restricted stock or similar form that cannot be liquidated or sold until government assistance has been repaid.
That could lead to an executive windfall if the firm rebounds due to the taxpayer-funded bailout.
Geithner also said the Obama team “would limit TARP recipients’ ability to pay dividends.” No specifics about what he means, but some critics of the EESA have said the better route would be to prohibit the bailed-out banks from paying dividends at all.
It isn’t easy for regulators to keep up with the finance industry — particularly when they don’t try.