Wednesday, February 18, 2009


Bad Omen of the Day: Signing statements ahead?

Facing a stricter approach to limiting executive bonuses than it had favored, the Obama administration wants to revise that part of the stimulus package even after it becomes law, White House officials said Sunday.

Obama press secretary Robert Gibbs, appearing on CBS's "Face the Nation," also said the administration would seek to "strike the right balance" on the compensation question by discussing changes in the provisions with House and Senate members. Asked if Obama would enforce the bill and was satisfied with it, Gibbs replied, "We will sign this bill into law on Tuesday."

—Douglass K. Daniel reporting in "White House wants changes in executive pay rules"

We've heard this sort of oblique response to a question before—just before the President presents a signing statement explaining why he doesn't intend to obey the law.

Representative Barney Frank is also familiar with it. Frank said frankly—

"Mr. Gibbs may not like it, but it is going to be enforced," Rep. Barney Frank, chairman of the House Financial Services Committee, said on CBS. "This is not an option. This is not, frankly, the Bush administration, where they're going to issue a signing statement and refuse to enforce it. They will enforce it."

Now I'm wondering if I should have titled this post Famous Last Words of the Day?

With respect to limits on executive compensation, there appears to be a great deal less in the stimulus package than meets the eye—

Under the administration's proposal, compensation restrictions applied only to banks that receive "exceptional assistance" from the government. Top executives could be paid no more than $500,000, with bonuses or other compensation coming as stock that could only be claimed after the federal money had been paid back.

The bill passed by Congress set executive bonus limits on all banks that receive bailout money. The amount of assistance will determine the number of executives affected, though top executives will be prohibited from getting bonuses or incentives except as restricted stock that vests only after bailout funds are repaid. Amounts also can be no greater than one-third of the executive's annual compensation.

The prohibition would not apply to bonuses that are spelled out in an executive's contract signed before Feb. 11, 2009.

That means that very few bankers will be affected by the provisions—unless, horror of horrors, the banks are nationalized and contracts must be renegotiated.

The law's restriction on executive pay is window-dressing. Chris Dodd, chairman of the Senate Banking Committee, said so—

Dodd argued that the restrictions were critical to gaining public support for more funding for the ailing financial sector, saying that the perception that executives were getting rich on bailout money would be an impediment.

In the alternate reality in which our rulers live, perception is everything.

Though the Obama administration and the Senate disagreed over some of the finer points as to how to go about "limiting executive pay," either position provided enough wiggle room to assure that most bankers can still pay their green fees. They are basically of one mind in recognizing that there must be adequate incentives to retain bankers with the acumen to produce this great a disaster.


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