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President Barack Obama Wednesday clamped a half million dollar cap on pay for executives of stricken finance firms who ask taxpayers "hat in hand" for bailouts, in a new bid to tame Wall Street excess.
The president also promised that the Treasury would next week unveil a new strategy designed to free up frozen credit markets, in a bid to ignite lending and consumption as the worst economic crisis since the 1930s bites. "What gets people upset -- and rightfully so are executives being rewarded for failure, especially when those rewards are subsidized by US taxpayers," Obama said at the White House. "For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste -- it's a bad strategy and I will not tolerate it as president." Under the new rules, bosses of companies benefiting from support from the Treasury would be paid no more than 500,000 dollars a year, Obama said. Any other compensation would be in restricted stock that will not vest until taxpayers are reimbursed. Additionally, all banks must submit to tougher restrictions on "golden parachute" severance payments and new transparency rules on corporate jets, office renovations and entertainment and holiday parties.
"We're putting a stop to these kinds of massive severance packages we've all read about with disgust -- we're taking the air out of golden parachutes," Obama said with Treasury Secretary Timothy Geithner at his side. The president also promised a new sheaf of measures designed to spark economic activity as the economy suffers from thousands of job losses and lagging consumption. "Next week, Secretary (Timothy) Geithner will release a new strategy to get credit moving again -- a strategy that will reflect the lessons of past mistakes while laying a foundation for the future," Obama said. Shareholders meanwhile will be offered more input into how much top company executives are paid. The populist measures were announced as Obama tried to regain his balance after his fledgling administration was hit by the withdrawals of two high profile nominees for top government jobs Tuesday over tax problems.
They follow a string of press reports about executives who accepted bloated corporate compensation, spent millions renovating offices and abused of corporate aviation services as Americans stagger through the economic crisis. The president also took aim at Republican critics in Congress who are trying to slice spending on infrastructure and other projects from his stimulus plan, which is priced at nearly 900 billion dollars.
"In the past few days I've heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems. "That we can ignore fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive." "I reject that theory, and so did the American people when they went to the polls in November and voted resoundingly for change," Obama said in his most partisan public comments since he took office two weeks ago.
"I urge members of Congress to act without delay -- no plan is perfect, and we should work to make it stronger, but let's not make the perfect the enemy of the essential." Obama's ire at Wall Street excess was sparked last week when he read a newspaper article detailing the 18.4 billion dollars in bonuses collected by Wall Street firms last year, even as stock markets plunged and the economy slumped toward a recession.
Critics of the new White House regulations are likely to argue that they may make it more difficult for top Wall Street firms to attract top talent and may lead to reluctance from ailing companies to accept bailout funds.
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