Obama Announces Executive Pay Caps
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It's MORNING EDITION from NPR News. I'm Steve Inskeep in Tehran.
RENEE MONTAGNE, host:
And I'm Renee Montagne in Washington, D.C.
What with all the griping about Wall Street executive pay in Congress, on the editorial pages and among taxpayers, yesterday, President Obama set new limits on pay at financial firms getting government assistance. CEOs at companies getting the most help from the government could see their salaries capped at a half million dollars a year. This comes after President Obama described the huge bonuses and perks on Wall Street as shameful.
President BARACK OBAMA: This is America. We don't disparage wealth. We don't begrudge anybody for achieving success, and we certainly believe that success should be rewarded. But what gets people upset, and rightfully so, are executives being awarded for failure, especially when those rewards are subsidized by U.S. taxpayers, many of whom are having a tough time themselves.
MONTAGNE: The salary caps were unveiled as the government prepares to announce plans for additional help for banks. NPR's Scott Horsley reports.
SCOTT HORSLEY: The federal government has already devoted hundreds of billions of dollars to shoring up the shaky financial sector, and Treasury Secretary Tim Geithner says the bailouts aren't done yet.
Secretary TIM GEITHNER (Department of Treasury): We will have to do more, substantially more, to fix this crisis. Next week, we are going to outline a comprehensive program for financial recovery. This program will be directed at supporting the flows of credit that are essential for our economy to begin growing again.
HORSLEY: But no matter how essential that credit is, devoting more taxpayer dollars to the banking system won't be an easy sell. Neither lawmakers nor the general public feel like they've gotten much in return for the huge sums already spent. Loans haven't gotten any easier to come by, and news that Wall Street paid out $18 billion in bonuses last year only added to the bad feelings.
Pres. OBAMA: In order to restore trust, we've got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street.
HORSLEY: President Obama joined the chorus of critics last week, calling it shameful that executives would consider spending money on bonuses, office remodeling or corporate jets at a time when their companies are getting multi-billion-dollar bailouts.
If shame alone won't control executive pay, Mr. Obama says new regulations will.
Pres. OBAMA: For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste, it's bad strategy, and I will not tolerate it as president. We're going to be demanding some restraint in exchange for federal aid so that when firms seek new federal dollars, we won't find them up to the same old tricks.
HORSLEY: The new rule set the strictest limits on companies getting what the government calls exceptional help. Top executives at those firms will be allowed to earn just $500,000 a year. Anything above that would have to be in the form of restricted stock, which could only be sold after the government's paid back.
But the rules are looser for companies getting somewhat less help from the government. They can waive the half-million-dollar salary cap. And while they might be asked to submit pay packages to shareholders, the vote would be nonbinding. None of the rules is retroactive for banks that have already gotten help.
Economist Robert Miller of Carnegie Mellon University says he's not sure taxpayers will really see much benefit.
Mr. ROBERT MILLER (Economist, Carnegie Mellon University): Well, it certainly does seem to be a kind of political opportunity here to blame greedy managers. But I'm not sure that the more we focus on that, that part of the story, if it's true, the less focused we will be on trying to be think more constructively about how to revive the economy.
HORSLEY: Mr. Obama says the rules announced yesterday are only the first step in examining executive pay. He wants to know if Wall Street's rewards for short-term performance may have encouraged excessive risk taking that contributed to the financial meltdown.
Pres. OBAMA: We're going to be taking a look at broader reform so that executives are compensated for sound risk management and rewarded for growth measured over years, not just days or weeks.
HORSLEY: For Mr. Obama himself, the next few days are a big test. He's laying the groundwork for another round financial rescues, or what he calls the second leg of the economic stool. At the same time, he's still lobbying hard in the face of some skepticism to get the first leg - the massive economic stimulus bill - through the Congress.
Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.