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Obama Limits Executive Pay for Firms Tied to Bailout

President Obama announced Monday new caps on executive pay for those firms receiving federal bailout aid. Analysts examine the new guidelines.

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    President Obama today ordered caps on executive pay under the financial rescue program, and he said that's only the first step. Judy Woodruff has our lead story report.


    The president sent a clear message to companies receiving help under TARP, the Troubled Asset Relief Program. He said, if they want the government's help, they're going to have to play by the government's rules.


    We all need to take responsibility, and this includes executives at major financial firms who've turned to the American people hat in hand when they were in trouble, even as they paid themselves customary lavish bonuses.


    Mr. Obama laid out the plan at the White House, joined by Treasury Secretary Tim Geithner. The new rules impose a cap of $500,000 a year on the salaries of senior executives.

    Banks and other institutions that want to exceed the pay limit would have to use stock that cannot be sold until the government is repaid its money.

    The limits apply to companies who make future requests for what is called "exceptional assistance" from the Treasury. But the plan is not retroactive. Firms that already received funds — including Citigroup, Bank of America, and AIG — would be exempt, unless they ask for more money.

    The president had insisted on Tuesday that he's not proposing a government takeover of the private sector, and he underscored that point today.


    This is America. We don't disparage wealth. We don't begrudge anybody for achieving success, and we certainly believe that success should be rewarded.

    But what gets people upset — and rightfully so — are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers, many of whom are having a tough time themselves.

    For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste, it's bad strategy, and I will not tolerate it as president.


    Mr. Obama also included benefits and severance packages under his plan. He said it's a matter of fairness and common sense.


    Companies receiving federal aid are going to have to disclose publicly all the perks and luxuries bestowed upon senior executives and provide an explanation to the taxpayers and to shareholders as to why these expenses are justified.

    And 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.


    The announcement coincided with developments at two major banks that got Treasury aid. Wells Fargo canceled a series of employee retreats at Las Vegas casinos, and Bank of America said it will sell some of its corporate planes.

    In Congress, the president's statement won support on both sides of the aisle. Democrat Dan Maffei of New York.


    I think that's totally justified and, in fact, sort of the least we can do. I'll tell you, my constituents in upstate New York, they clearly think that, if there's going to be this money from the federal government, then there has to be some sacrifice shared by the people who run these companies.


    Republican Jeb Hensarling of Texas.


    I don't want government to get in the business of setting compensation levels for anybody in our society. But, again, when taxpayer funds are involved, it is a completely different set of rules.

    These companies have come to the American taxpayer and said, "Give us help." I mean, for a schoolteacher in Mesquite, Texas, a small-business person in Athens, Texas, that I represent, to say that all of a sudden they have to sacrifice so that some Wall Street CEO who made $20 million bonus last year can get bailed out, that's simply unacceptable.


    On Wall Street, few executives spoke against the plan publicly, and they'll have more to digest next week. That's when the Treasury lays out a new framework for spending the second half of the TARP funds, some $350 billion.