Oh, you thought the evil $400,000 cap was history, right? You thought it was going to be limited in scope, and only in the amount of $500,000 this time right? You thought stock wasn't going to be included, right? Wrong.
SEC. 6012. LIMIT ON EXECUTIVE COMPENSATION.(a) IN GENERAL.--Notwithstanding any other provision of law or agreement to the contrary, no person who is an officer, director, executive, or other employee of a financial institution or other entity that receives or has received funds under the Troubled Asset Relief Program (or ''TARP''), established under section 101 of the Emergency Economic Stabilization Act of 2008, may receive annual compensation in excess of the amount of compensation paid to the President of the United States.
[...]
SEC. 6014. COMPENSATION.
As used in this subtitle, the term ''compensation'' includes wages, salary, deferred compensation, retirement contributions, options, bonuses, property, and any other form of compensation or bonus that the Secretary of the Treasury determines is appropriate.[...]
SEC. 6006. REVIEW OF PRIOR PAYMENTS TO EXECUTIVES.
(a) IN GENERAL.--The Secretary shall review bonuses, retention awards, and other compensation paid to employees of each entity receiving TARP assistance before the date of enactment of this Act to determine whether any such payments were excessive, inconsistent with the purposes of this Act or the TARP, or otherwise contrary to the public interest.
(b) NEGOTIATIONS FOR REIMBURSEMENT.--If the Secretary makes a determination described in subsection (a), the Secretary shall seek to negotiate with the TARP recipient and the subject employee for appropriate reimbursements to the Federal Government with respect to compensation or bonuses.
[...]
(c) DEFINITIONS.--As used in this section, the following definitions shall apply:
EXCESSIVE BONUS.--
(A) IN GENERAL.--The term ''excessive bonus'' means the portion of the applicable bonus payments made to a covered individual in excess of $100,000.
Cliff notes: You won't get over $400,000. Period. If you were paid a bonus over $100,000 you might be giving it back to the Treasury. Interestingly, I can't find a provision that defines how far back they can look.
That's ok, however. You can probably apply to Obama for mortgage assistance.
Update: Be aware, this is the Senate Bill's draft text, not the text of the bill that will weigh down the President's desk. What comes out of further negotiations is anyone's guess.
Posted by guest , Feb 12, 2009 5:58PM
Time to jam to some R.E.M.
Posted by guest , Feb 12, 2009 6:00PM
If the financial industry knew what was good for them they'd happily take the cap for a couple years and recover/repeal later before the government really starts to kick some ass and alters the climate/laws for 20 years. Remember what it was like being a broker after 1929-1933?
Of course wall street is filled with idiots so they will probably just end up shooting themselves in the foot. Again.
Posted by guest , Feb 12, 2009 6:03PM
Why not call the government's bluff on this. Citi and BAC are technically bankrupt so why not just file for liquidation and let the shtshow begin?
In 2 days we will all get to know who was actually getting bailed out. The bank or someone else.
Posted by guest , Feb 12, 2009 6:04PM
@2 - "Remember what it was like being a broker after 1929-1933?"
No.
Posted by guest , Feb 12, 2009 6:05PM
There are an awful lot of ellipses there. Methinks you left out some relevant sections.
Interestingly, the definition of "Compensation" is left up to the Secretary. But...as we have previously discussed, the President receives a number of valuable perks - including some substantial retirement benefits.
But, regardless, just jump ship for a non-TARP sucking institution.
Posted by guest , Feb 12, 2009 6:05PM
Hire lots of consultants and independent contractors to get around the "other employee" catch-all. Or have all employees be employees of a sub. I imagine the rulemaking authority will eliminate those routes.
Posted by guest , Feb 12, 2009 6:05PM
There are an awful lot of ellipses there. Methinks you left out some relevant sections.
Interestingly, the definition of "Compensation" is left up to the Secretary. But...as we have previously discussed, the President receives a number of valuable perks - including some substantial retirement benefits.
But, regardless, just jump ship for a non-TARP sucking institution.
Posted by guest , Feb 12, 2009 6:08PM
Knew this was in the Senate draft but couldn't figure out if this made it into the version to be signed by the Pres tomorrow. Anyone know?
Also, it can't possibly be constitutional to make it retroactive.
Posted by guest , Feb 12, 2009 6:15PM
It's as though a million bonuses cried out in agony then were silenced.
Posted by Equity Private , Feb 12, 2009 6:17PM
"There are an awful lot of ellipses there. Methinks you left out some relevant sections."
Since I've left you the entire document, why don't you look through and fill in the gaps then, Matlock?
Posted by guest , Feb 12, 2009 6:19PM
I don't think this provision survived...
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/11/AR2009021104488.html?hpid=topnews
Posted by guest , Feb 12, 2009 6:19PM
Let the thieves suffer. Bet they will work around it through its many loopholes.
@8
The final version is not available until this weekend, at the earliest. So this is EP making noise.
Posted by guest , Feb 12, 2009 6:19PM
Hm...yes, just throwing out there, the President gets a pension equal to the yearly salary of a Cabinet member.
Let's call that $190k per year. It is earned over four or eight years and starts immediately after his term is over.
What is the compensation value of that? I'd be willing to exchange some cash bonus for a US obligation to pay me an inflation-protected $190k/yr for the rest of my life.
Posted by guest , Feb 12, 2009 6:22PM
this is an outrage!! wage controls, subsidized housing, large redundant public works projects....whats next? Giant oil paintings of Chairman Obama's head on the National Mall in washington? Food rationing? Curfews?
This wave populist sentiment that the congress is stirring up to appeal to their constituency is appalling and needs to be stopped now before any more damage is done. They are whipping these ill-informed peasants into a frenzy, its disgusting and getting way out of hand. I'm just waiting for the day i am greeted by an angry mob w/ torches and pitchforks on the way out of my office building.
Posted by guest , Feb 12, 2009 6:27PM
@11
Don't come here with facts buddy. You are going to kill this thread.
Posted by guest , Feb 12, 2009 6:28PM
You own an office building?
Posted by guest , Feb 12, 2009 6:34PM
The bill has been changed in the most recent Congressional version. Most has remained untouched; however, stock or interest in a "Troubled Asset" are not considered part of the "excessive bonus" definition. The bill will effect bonuses decided upon or paid for work in the taxable year of 2008 or for the period between January 1, 2008 - January 31, 2009.
Equity-Private: a little late in the day to be posting the old Senate version of the bill...
Posted by a lord , Feb 12, 2009 6:40PM
why not also limit compensation for members of congress?
Posted by guest , Feb 12, 2009 6:51PM
EP is sounds like Rush Limbaugh
Posted by Equity Private , Feb 12, 2009 6:56PM
"The bill has been changed in the most recent Congressional version. Most has remained untouched; however, stock or interest in a "Troubled Asset" are not considered part of the "excessive bonus" definition. The bill will effect bonuses decided upon or paid for work in the taxable year of 2008 or for the period between January 1, 2008 - January 31, 2009."
I've only seen the Senate Draft dated Feb 10. Have you seen something else?
If there is a more recent text, rather than rumor and the like, I should enjoy seeing it, and updating this entry. Do you have a citation?
Posted by guest , Feb 12, 2009 7:06PM
"Stock...in a troubled asset" or "stock OR an interest in a Troubled Asset"?
Difference is somewhat important.
Posted by guest , Feb 12, 2009 7:08PM
@3
If Citi/BAC file for BK I think that their directors would be liable for failing to act to avoid a preventable loss since TARP funds are readily available even though there are strings attached. The burden of fiduciary duty is that you gotta do what is in the best interest of the corporation, not yourself.
Posted by guest , Feb 12, 2009 7:17PM
Obama gets to use a private jumbo jet. That sounds like a form of compensation.
Posted by guest , Feb 12, 2009 7:23PM
@21 "...stock OR an interest...." Not stock in a "troubled asset." Sorry, I should have been clearer.
Equity Private: I found the Congress and Senate agreed upon version on THOMAS.
http://thomas.loc.gov/cgi-bin/bdquery/z?d111:h.r.00001:
There are 7 versions. The 7th is the most recent. Much of the good stuff was struck (like the SBA guarantee increase to 95% and the new FHA conforming loan and HECM limits).
If the link fails: you can navigate to THOMAS through House.gov -> Find a Bill. The stimulus is in red at the top of the page.
Posted by guest , Feb 12, 2009 7:24PM
@20
The Senate and House bills were not identical. So a Conference was convened to resolve the differences. The official Conference report is not circulating yet but is supposed to be available soon. The report will detail the changes that will become part of the final bill.
The House will vote on this again. They don't have a version of it yet but what they will get is the final version. Not clear they can get one tomorrow. It will pass in the House Friday if lucky.
Then it goes to the Senate again. It will pass in the Senate Saturday if lucky.
Obama signs it as soon as he get his hands on it.
Posted by guest , Feb 12, 2009 7:31PM
Bank CEOs couldn't pay their monthly maintenance with $400k total compensation. Manhattan real estate will soon be at Chicago and LA prices.
Posted by guest , Feb 12, 2009 7:40PM
@24
The 7th version is not the version that will come out of conference. It's the House version as amended by the Senate, dated 2/10.
We can't find the conference report yet, and that's what matters. That's why there's no House vote tonight, AFAIK.
Posted by prince , Feb 12, 2009 8:57PM
I'm confused, I'd expect dealbreaker of all places to be the bastion of capitalism. The question is who should set compensation policy, the workers or the owners of the business?
As a strong believer in the tenets of a free market I think there are three points/questions that spring to mind:
1) No one is forced to work for anyone they don't want to. If you are the worlds top IB CEO, you are welcome indeed compelled to sell your talents as dearly as the market can handle. Just as you wouldn't take your skills to McD's why take them to a bank that pays poorly? Further I have to ask are the objections to capping compensation as concerned taxpayers or as future employees who worry they gravy train has left?
2) The banks aren't being forced to take the loan( ahem investments). If they can raise capital in the open market then by all means go for it. As a real estate investor, I'm not obliged to take the money of any bank, but when I do, I certainly expect provisions. Why should it be any different when it's taxpayer money? In her old blog Equity Private would point out that the first thing her company did after a takeover was fire employees and cut costs.
3) To those who say that lower pay will drive people away and that everyone goes to wall street for money. Holy crap the vast majority of people have jobs they loathe, working with people they despise and making a pittance.
If the govt owned banks fail because the talent they get at 500K is mediocre well then those are the breaks of creative destruction. There are claims that 9000 banks failed during the great depression.
Posted by guest , Feb 12, 2009 9:41PM
26 Duh... For the duration, they'll take money out of the bank to pay their maintainence. The bonuses they earned for the last few years should cover it, wouldnt you say?
Posted by guest , Feb 12, 2009 9:43PM
hasn't the president "office" overseen all this shit happening so shouldn't the presidents office be capped to some lower office's wages? and shouldn't that lower office be capped also because, well, that office was overseeing all this shit also? (these are rhetorical questions!) and so on? (i think you see where i'm going with this)or were all these fucks just as happy as the CEO's of the banks to sit back and watch the deneroes ($'s) roll in when the times were good because shareholders were smiling and joe the fucking plumber and all his fat fuck family members and friends were borrrowing more and more money based on inflated asset prices to buy more goods that made the economy "look" good.
i know i'm ranting, but please, is everyone going mad!
Posted by guest , Feb 12, 2009 9:47PM
400k still too high
bring it down to McDonalds manager level until they're profitable and have paid back my taxes
on second thought, most McDonalds franchisees are probably profitable, even without being able to speak english
so maybe fry-man's level
TRB
Posted by guest , Feb 12, 2009 10:45PM
28, I think you are mixing up 2 different issue.
Does the majority owner/shareholder/creditor have the right to dictate terms of employment and compensation to the firm? Absol-fuckin-lutely. No one is arguing against that. The employees od Citi/BoFa/AIG etc have lost all 'right' to demand any employment as they are working for a firm which should not have existed. So yes, the government has a right to set their salaries.
However, there are 2 problems with the way they are going about it. First, the point of having a functioning and running bank (and not driving it into bankruptcy) is that is should be run with profit maximization as the primary objective. If you are indeed a believer in capitalism and free markets then I do not think that you will deny that.
Now the main expenses of running a bank are funding costs and employee costs. So if an investor had profit maximization in mind, he/she would set a compensation structure that would be in line with market practices so that the best people are retained and the bank actually makes money.
In this case the government has become the main investor but it does not seem to have any profit objective in mind. They are trying to use it as some kind of social policy tool. So your very basic assumption about capitalism breaks down right there. This is not an investor trying to maximize wealth. This is a bunch of moochers who perchance have come to control something which they think they can utilize to further their agenda. So given the absence of capitalistic intent on the side of the investor, it is incorrect to expect similar arguments from other sides.
In most of these places, 20% of the folks probably bring in 80% of the revenue. Capping at some arbitrary number simply means that the best will leave and the mediocre masses will stay behind. NOT a particularly profitable strategy I would think.
Missing in this populist rhetoric is also the fact that there are still people in those places who are making millions of dollars. Clamp down on them and they will move elsewhere. So in the end, taxpayer dollars will go down the drain to support the parochial agenda of some politicians.
Should the true shareholders (taxpayers) thus not demand an effective comp structure rather than an assfaced one?
Posted by guest , Feb 12, 2009 10:57PM
Treasury permits these insolvent banks to continue operating, so they can continue managing their OTC derivatives portfolio. Treasury's retaining bank officers and staff is similar to its retaining Meriweather and his staff in managing LTCM. Should Treasury have let insolvent banks fail and operate under bankruptcy protection, terror would've been injected into international financial markets. Only fools credit that these banks will ever again be profitable without defaulting.
Posted by guest , Feb 12, 2009 11:04PM
@32
Enough of this shit. Nationalize the banks in trouble so they can be sold when they are sound again. Yes, wipeout the shareholders, fire the management, clean the assets and if it doesn't work, fine, there's plenty of room for creative destruction in this moribund economy.
The government is playing to these bankers and not to the interests of the US Taxpayers. Geithner is no different than Paulson and whoever is surprised has been asleep.
Salary caps is not going to do anything because if it ever gets into law, it will have holes as big as the Grand Canyon.
Again, stop the nonsense and start the real solution now. This is a distraction.
(Who wants to bet that C and BAC will end up this way in a few months?)
Posted by guest , Feb 13, 2009 12:01AM
34, I do not disagree.
Also, folks like Barney Frank, Chris Dodd and Chris Dodd are much more to blame than anyone else.
100 spirit points to he who get the right answer to why nationalization needs to be avoided. Have you seen how sundry illiterate retarded government folks have also started behaving as if they own the banks and can dictate policy EVEN though they government doesnt fully own the banks? FNM/FRE are also not fully nationalized and yet they are operating like government departments without any care in the world for beinf profitable.
Do you think those GSEs will have any value in the private market if the government guarantee is completely and irrevocably taken away?
No. What do the GSEs have other than government funding? Smart people? Good products? Efficient operation? Nada, nothing, zero. So why do you think would they have any value in the market place. And what makes u thing that Citi/BAC will be any different from them once they completely go under the government?
The fact is that these institutions are dead and they need to let be so. Unfortunately the government has set up a structure where that cannot happen (because the market was always certain that the government wud not let these banks fail, and the belief has been reinforced.)
The government needs to first decide what it wants. Supporting a financial institution to prevent the broader financial system from collapsing and using a financial institution to spur credit growth are two wholly different objectives.
They should take over Citi and BAC, gurantee whatever existing positions they have, put most portfolios in runoff/sell mode and hir some low cost staff to man the most basic operations of a bank and fire the rest. This takes care of bonuses and also helps the financial system. The smart people - who will thrive on complex stuff - can go elsewhere and make their buck. The target should be to tide over this storm and end these institutions once that happens.
However, nowhere in this process can you ALSO try to 'increase lending.' That is what you do through healthy institutions, not bankrupt ones. And therein lies all the trouble. The government has NO IDEA about what it is trying to do. It is trying to do everything at once. Also, the bank executives and investors are using their influence/money to make sure that the greedy politicians keep this situation in limbo instead of a clear cut solution. Murky water help these folks make their buck.
So there you have it. The only long term solution is to have as little government as possible. Anywhere they step in they simply complicate and mess things up in an unbelievable number of ways.
But we are talking fairies and unicorns here. We all know what will actually happen, dont we?
Posted by guest , Feb 13, 2009 3:30AM
you're a fucking liar, Equity Private.
congratulations- you now have less credibility than freerepublic.com
and a lower-class readership.
congratulations.
Posted by guest , Feb 13, 2009 5:54AM
Wow, DB has truely jumped the shark!
Posted by guest , Feb 13, 2009 9:35AM
I wonder if these caps will/should apply to any other business that received bailout funds...AIG, Freddy and Fannie...?
Posted by guest , Feb 13, 2009 9:42AM
@32 - the government holds preferred equity, not common equity. As such, they do not get a say, even if they are the major investor.
Posted by guest , Feb 13, 2009 12:42PM
Where are these socialists coming from? Everyone that reads the NYT regularly should be banned from posting on this site. IE 36