White House To Unveil Strict Comp Rules For TARP Banks, Others

White House To Unveil Strict Comp Rules For TARP Banks, Others - 2/2/2009

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HEADLINE NEWS:

White House To Unveil Strict Comp Rules For TARP Banks, Others, Bonus Pools To Shrink, Severance To Be Nixed For Some; AIG Reportedly To Be Subject To Caps
Staff Writer

FinancialWeek . February 2, 2009
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EXCERPT: The Obama administration is expected to first unveil rules for banks receiving U.S. government help, including clarifications on lending and restrictions on executive compensation, a source with knowledge of the government’s thinking said on Sunday. Those rules are expected to be announced as early as this week and the administration’s plan to bolster the country’s banking industry is expected about a week later, the source said. President Barack Obama’s finance team is working on the second stage of a $700 billion financial services rescue package, which was enacted last year to prevent the financial system from collapsing. Under the Troubled Asset Relief Program (TARP), the Treasury Department has allocated about half to shoring up the banking system through direct capital injections. It also funneled money into troubled insurer American International Group and some for the auto sector. However, lawmakers and others have criticized the way the program has been run and have derided top executives for their lavish ways. The anger over executives’ compensation reached a new level when New York officials reported last week that Wall Street companies paid $18.4 billion in bonuses to employees even though the government had to save the companies from collapsing. TARP’s internal watchdog has said he would demand that companies receiving money explain how they are complying with restrictions on executive compensation. According to The Wall Street Journal, chief executives of firms that receive “exceptional” aid will be banned from receiving any severance payments. The CEOs along with the top 50 executives would also see their bonus pools shrink, the newspaper said. Citing unidentified government officials, the newspaper reported that the rules will apply to companies that have received significant funds in the likes of what has been provided to AIG and Citigroup Inc.

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