Today, Interim Assistant Secretary for Financial Stability Neel Kashkari — who is responsible for administering the $700 Troubled Assets Relief Program (TARP) — appeared before the House Financial Services Committee to testify about concerns that the TARP has insufficient oversight.
During the hearing, Rep. Brad Sherman (D-CA) pressed Kashkari regarding “appropriate standards of executive compensation,” which is one of the provisions that banks must accept before they can access TARP funds. Sherman pointedly asked Kashkari, “as to $30 million, is that appropriate or inappropriate, or you have no opinion?” Kashkari replied that he’s “not in a position to opine on a specific number, if it’s appropriate or not.” Watch it:
Kashkari’s hesitancy to condemn $30 million bonuses for bailed out bank executives is troubling, because “chief executive officers of the firms most responsible for causing the crisis collected hundreds of millions of dollars in pay last year.” And while many — like Wachovia CEO Robert Steel — have chosen to forgo this year’s bonus, some still think that they deserve the money.
Just this week, Merrill Lynch CEO John Thain “suggested to directors that he get a 2008 bonus of as much as $10 million.” Fortunately, Merrill Lynch’s board resisted, denying Thain and four other top executives any bonus for 2008.
AIG, though, has not seen the light, and has “offered cash awards to another 38 executives…with payments of as much as $4 million.” AIG’s defense is that it “would be doing a disservice to the taxpayer — and would place AIG’s asset divestiture plan at risk — if we did not act decisively to ensure that our key employees remain.”
Kashkari’s answer, meanwhile, shows that the Treasury is simply unwilling to do anything to curb this kind of behavior, even though companies like AIG are operating thanks to TARP dollars, and Treasury has the explicit ability — granted by the TARP legislation — to “require that [a] financial institution meet appropriate standards for executive compensation.”
Today, a congressional oversight panel, led by Harvard law professor Elizabeth Warren, released a report which noted that “Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify.” Thus far, it’s clear that Treasury has not verified much of anything.