Obama pledges curbs on Wall Street perks
Published 03/02/2009 | 10:11
The US administration is set to announce a new set of curbs on executive pay and bonuses at banks which have to be propped up by the American taxpayer.
With popular fury building over the bonuses and perks still being enjoyed on Wall Street, despite the financial meltdown, President Barack Obama's aides are signalling that he will this week follow up his declaration that bonus payments of some $18bn (£13bn) this month have been “shameful”.
The plan, however, stops far short of altering the bonus culture on Wall Street, and it will be limited to a handful of companies that receive “exceptional” aid from the US government. That would not include the hundreds of banks that have applied for money under last October's $700bn bailout package, known as the troubled asset relief plan (Tarp).
Nevertheless, the new administration is keen to be seen to be taking action on Wall Street excess, with new stories of rewards handed to bankers emerging every day.
Only those seeking additional assistance — as Citigroup and the insurer AIG were forced to do amid crises of confidence last year — would be affected, and the restrictions would apply to just the top 50 executives. Their bonuses will be capped at 40% of 2007 levels, according to one formulation of the plan being considered, while chief executives will be denied severance pay if they leave.
Mr Obama redoubled his con
demnations of Wall Street excess in his weekly radio and YouTube address at the weekend, and in an interview with NBC television that was broadcast just before Sunday night's American football Superbowl.
“The banks, because of mismanagement, because of huge risk-taking, are now very vulnerable,” the President told NBC. “If a financial institution is getting relief then they have got to abide by certain conditions.”
The new restrictions are due to be announced in the next few days, in an effort to calm public anger and smooth the way for more aid to the banks.
Tim Geithner, the Treasury Secretary, is expected to give details next week about how the remainder of the $700bn bailout fund will be used.
Treasury officials are still debating how to ringfence the toxic mortgage assets that have infected the financial system and brought banks to the point of insolvency, perhaps by creating a government-sponsored “bad bank” that would absorb the assets. The revised Tarp plan will also include some relief for homeowners.