Today, the White House released a statement criticizing Congress’s potential plan to limit CEO compensation at the companies the federal government is bailing out, firmly standing against any “punitive measures”:
We certainly understand and are sympathetic to the sentiment regarding the pay of CEOs and senior management of these firms, but we have to focus on the problem, and the problem is that we need these firms to participate in the program and sell us this debt. Having punitive measures would provide a disincentive for firms to participate, and that would make the program much less likely to succeed.
CEO compensation and corporate governance in public companies are very important issues — especially when receiving taxpayer support — but we need to be focused on fixing this problem in our markets right now. We can and should return to those issues once we get this legislation passed.
President Bush also released another statement earlier today warning Congress against inserting any “unrelated provisions” — such as help for struggling homeowners — in the $700 billion Wall Street bailout.
The Bush administration’s position is unjustifiable. As ABC News reported:
In 2007, Wall Street’s five biggest firms — Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley — paid a record $39 billion in bonuses to themselves.
That’s $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns.
Those 2007 bonuses were paid even though the shareholders in those firms last year collectively lost about $74 billion in stock declines — their worst year since 2002.
In short, the Bush administration wants zero punishment for these wreckless CEOs who lost shareholder money and are now costing each person in the United States $2,000. In return for $700 billion, the White House has yet to name any ways that it will hold these corporations accountable or institute safeguards to ensure that this irresponsible lending and borrowing won’t happen again.
Furthermore, the White House is demanding that Congress give up its oversight powers for this deal and “place no restrictions on the administration other than requiring semiannual reports to Congress, granting the Treasury secretary unprecedented power to buy and resell mortgage debt.”
Rep. Henry Waxman (D-CA) is calling for a $2 million cap on CEO compensation.