Sunday, April 12, 2009
While bank leaders publicly clamor about returning federal bailout funds to avoid restrictions on executive pay, the Obama administration is working on ways to quietly allow financial institutions to avoid the salary rules. On Friday, following a meeting between President Obama and his senior economic advisers, the talk was about signs of growing tensions between the White House and the nation’s banks over the next phase of the bailout. Some banks want to pay back their bailout loans to avoid executive pay restrictions. New Jersey-based Sun Bancorp recently became the sixth bank to return its federal loan and avoid any strings attached. Goldman Sachs, Wells Fargo, and Northern Trust have threatened to do so as well.
Meanwhile, the Washington Post reported that the Obama administration is crafting new bailout rules that will allow banks participating in the federal rescue to avoid restrictions imposed by Congress, including limits on lavish executive pay. The way it would work is that the White House will allow the federal government to create special entities that act as middlemen that provide the loans to banks, thus allowing financial institutions to ignore limits on executive pay. Some experts have questioned the legality of this strategy.
-Noel Brinkerhoff
Showdown Seen Between Banks and Regulators (by Stephen Labaton and Edmund L. Andrews, New York Times)
Administration Seeks an Out On Bailout Rules for Firms (by Amit R. Paley and David Cho, Washington Post)
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