President Obama said that he wants to cap executive pay at bailed out banks to $500,000 a year. Naturally, this would be a huge incentive for banks to avoid seeking any public funds.
“Executives of companies getting bailout money will also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends.
“The new rules would be far tougher than any restrictions imposed during the Bush administration, and they could force executives to accept deep reductions in their current pay. They come amid rising public fury about huge pay packages for executives at financial companies being propped up by federal tax dollars.
“Executives at companies that have already received money from the Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already received federal money may well be coming back.
“Under the Treasury’s $700 billion rescue program, most companies that have received money so far have been considered “healthy” rather than on the brink of collapse.
“But five of the biggest companies to get help — Citigroup, Bank of America and the American International Group, General Motors and Chrysler — were all facing acute problems. And top executives at those companies made far more than $500,000 in recent years.
“Kenneth D. Lewis, the chief executive of Bank of America, took home more than $20 million in 2007. Of that, $5.75 million was in salary and bonuses.”
This is just a big PR campaign to find a scapegoat. I’ve been talking with some of my friends at top banks and they’re already looking for loopholes. If there were no loopholes, investment bankers would flee to private equity, foreign firms or small firms.