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Huge: Obama's Treasury Dept vetos on bailout bonuses, pay





handfleisch
The White House is responding to all those top executives that gave themselves bonuses and huge salaries after the gov't bailouts. Turns out as part of the bailouts, the Treasury Dept has the right to veto such things, and vetoing they are, to the tune of 90% pay cut for some of these execs.

I think it shows a very patient and careful approach, since these bonuses etc have been in the headlines for weeks, but only now is Obama and team deciding to use the big stick. Most of the execs just refused to self-regulate, to be decent.

Prediction: The same right wingers who complained out the bonuses and high salaries after the bailouts will now complain this move is "socialism", an evil plan to micromanage all the banks...

http://news.bbc.co.uk/2/hi/business/8321435.stm
Quote:
Obama hails companies' pay cuts

President Barack Obama has welcomed plans to force some companies which accepted government aid during the financial crisis to cut executive pay.

Firms paying bosses vast bonuses while getting state assistance offended people's values, the president said.

Under Treasury plans, seven companies must slash the basic salaries of their 25 best-paid employees by up to 90%.

Separately the US Federal Reserve wants to prevent bank bosses from taking excessive risks while pursuing bonuses.

It proposes being able to veto the pay of any employee able to take risks that might threaten a firm's stability.

But the Fed said it would not set pay caps or outlaw specific practices.

'Offends values'

The Treasury plans apply to Bank of America, American International Group (AIG), Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial - the seven companies that received the most aid from the US Treasury.

As well as its top earners facing a 90% pay cut, the total paid to each firm's 125 top earners would be halved under the proposals.

"It does offend our values when executives of big financial firms that are struggling pay themselves huge bonuses even as they rely on extraordinary assistance to stay afloat," President Obama said.
deanhills
handfleisch wrote:
The White House is responding to all those top executives that gave themselves bonuses and huge salaries after the gov't bailouts. Turns out as part of the bailouts, the Treasury Dept has the right to veto such things, and vetoing they are, to the tune of 90% pay cut for some of these execs.
OK, so they cut the pay, but what about the Bank shares that they own and which the Government indirectly was responsible for increasing in value on the stock exchange? The cut in bonuses has to be a drop in the ocean relative to how those executives must have scored in the current rally and beginnings of yet another bubble.
ocalhoun
handfleisch wrote:
Turns out as part of the bailouts, the Treasury Dept has the right to veto such things,

Well, that 'right' is being disputed.
(And personally, I don't see any branch of the government having 'rights'. Rights are for individuals; government institutions only have authority that is delegated to them.)

And personally, though I approve of limiting the compensation of executives of failing companies (especially limiting bonuses for outrageously poor performance), I'm not sure about the way in which it is being done. I think it might be a dangerous precedent to say that the Fed can dictate actions to anybody who receives federal funds, ESPECIALLY if that power wasn't clearly stated in an agreement before receiving those funds.
If these companies signed agreements to give the government this power over them in order to get this money, I have no problem with it, but if the government is just assuming control because they've received government funds, that may be an immoral encroachment of government influence.
deanhills wrote:
handfleisch wrote:
The White House is responding to all those top executives that gave themselves bonuses and huge salaries after the gov't bailouts. Turns out as part of the bailouts, the Treasury Dept has the right to veto such things, and vetoing they are, to the tune of 90% pay cut for some of these execs.
OK, so they cut the pay, but what about the Bank shares that they own and which the Government indirectly was responsible for increasing in value on the stock exchange? The cut in bonuses has to be a drop in the ocean relative to how those executives must have scored in the current rally and beginnings of yet another bubble.

True, a lot of top executives receive most of their compensation not through 'pay' or 'salaries' as such, though those are substantial. A large portion of their compensation is from 'stock options' (where they receive free shares of stock from the company) and from other benefits (like all-expense-paid 'business trips' and private jets).
deanhills
ocalhoun wrote:
I think it might be a dangerous precedent to say that the Fed can dictate actions to anybody who receives federal funds, ESPECIALLY if that power wasn't clearly stated in an agreement before receiving those funds.
Well, if someone negotiates a loan with someone else, then obviously they can dictate certain terms, however the whole thing to me, including the bail-out was totally dangerous and unprecedented. The Fed should not get involved in the business of bailing out companies with federal funds. That is just completely wrong to me.
ocalhoun
deanhills wrote:
Well, if someone negotiates a loan with someone else, then obviously they can dictate certain terms,

Only if it is in the loan contract. If the borrower never signed an agreement giving the lender that authority, then the lender can't just assume that authority.

To determine if this is legal, I would like to see the actual agreement these companies signed in order to get funds.
deanhills
ocalhoun wrote:
deanhills wrote:
Well, if someone negotiates a loan with someone else, then obviously they can dictate certain terms,

Only if it is in the loan contract. If the borrower never signed an agreement giving the lender that authority, then the lender can't just assume that authority.

To determine if this is legal, I would like to see the actual agreement these companies signed in order to get funds.
Wow! I have wanted to see that right from the beginning. Exactly how all of that has been organized, what the outcome has been, what progress has been made and regular monthly updates. Talk about Obama's transparent Government!!!! Where is the transparency? Evil or Very Mad
handfleisch
deanhills wrote:
ocalhoun wrote:
deanhills wrote:
Well, if someone negotiates a loan with someone else, then obviously they can dictate certain terms,

Only if it is in the loan contract. If the borrower never signed an agreement giving the lender that authority, then the lender can't just assume that authority.

To determine if this is legal, I would like to see the actual agreement these companies signed in order to get funds.
Wow! I have wanted to see that right from the beginning. Exactly how all of that has been organized, what the outcome has been, what progress has been made and regular monthly updates. Talk about Obama's transparent Government!!!! Where is the transparency? :evil:


Oh yeah, you two have uncovered another massive illegal conspiracy by Obama. Either that, or you haven't bothered to read the articles at the links supplied, which clearly state that this all was a part of the deal (which some might say was very responsible and forward-thinking of the administration).
ocalhoun
handfleisch wrote:
this all was a part of the deal

1: Good, then this is legal.
2: Why did it take so long?
(3: Is this to be the full extent of the promised economic reforms that will prevent another bailout from being needed?)
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