WASHINGTON, February 5 – President Barack Obama launched a new bid to tame Wall Street excess, clamping a half million dollar salary cap on executives of stricken finance firms who plead for taxpayer bailouts.
Striking a populist note, the president warned he could not tolerate huge "bad taste" bonuses paid out to fat cat corporate bosses and big spending on luxuries, while job losses and economic woes stalk ordinary Americans.
The president also promised the Treasury would next week unveil a new strategy designed to free up frozen credit markets, in an effort 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 various kinds of Treasury support 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" payoffs 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.
Shareholders meanwhile will be offered more input into how much top company executives are paid.
The 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 also follow a string of press reports about executives who accepted bloated corporate compensation, spent millions renovating offices and abused corporate aviation services as Americans stagger through the economic crisis.
The measures will require affected companies to publicize large expenditures in an effort to shame them into halting such extravagance.
"When you are putting forth the kind of luxury items completely inappropriate for the circumstances we\’re under, you know, million-dollar offices, 45-million (dollar) jets, you have to disclose that and you have to put that out for the public," said an Obama administration official.
There was some dismay at some of the new measures on Wall Street.
Douglas McIntyre at the financial website 24/7 Wall Street said the limits could make it difficult for troubled banks to retain their top executives.
"Wall Street may keep most of its bankers if they face pay cuts, but it is the top five or 10 percent who make these companies really profitable, and they will soon be on their way to greener pastures if this measure is enacted," McIntyre said.
US Chamber of Commerce spokesman Tom Quaadman meanwhile agreed there should be accountability for taxpayer dollars but said no measures should be taken that harm the vitality of big firms.
"There is intense competition for talent, and if draconian rules are put into place that talent will go elsewhere, and that will deprive companies of experienced executives at the precise moment they need them," he said.
Democratic senator Chris Dodd meanwhile said he would try to amend the 700-billion-dollar finance industry bailout to legally enforce executive compensation to all firms which take the money.
"There is absolutely no reason why hard-working American taxpayers should be financing, directly or indirectly, excessive compensation for corporate executives whose decisions, in many cases, have crippled their firms and weakened the broader economy," Dodd said.
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 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.