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Blank check... AND cash salary?

Wall Street firms who have received (and not paid back) TARP funds are under some significant restrictions in terms of how they can compensate their top employees.  Cash salary is capped at $500k, and stock and options grants are subject to a minimum holding period - basically to incentivize long term sustainable behavior over short term risky behavior.

Fannie Mae and Freddie Mac have received significant amounts of federal bailout money - and the Treasury just lifted a $200b cap on the amount it was ready to pump into these mortgage companies which are already about 80% owned by the federal government...  yet they are apparently not subject to the TARP restrictions, and their CEOs both received $6m CASH salary in 2009, and their salary packages for 2010 are 100% cash.  In other words, their salary is not dependent on the success of the firms.  As long as they keep their actions legal, they get paid.

Now, I'm generally against government sticking its nose into corporate business.  I think corporations should be free to run themselves as their shareholders see fit.  After all, business exists to make money, not to serve the public.  But when a business asks for or accepts government (read: taxpayer) dollars to bail itself out of a bad situation it got itself into, that business MUST accept restrictions (read: terms) imposed by the government in exchange for the assistance.  This is one case where I feel it is wholly appropriate for the government to tell a business how to manage its internal operations.

Grumble.

Comments

( 5 comments — Leave a comment )
pathia
Dec. 29th, 2009 02:04 pm (UTC)
I believe this is because with a cap of 500k, they didn't think anyone worth a damn would come in and run the companies, which would just keep them underwater even longer. With the tarp companies, those would eventually get lifted, there's no real endpoint into when the government is going to let these companies go.
wolffit
Dec. 29th, 2009 02:06 pm (UTC)
It's not a hard cap of $500k - it's just a cash cap. The affected companies can still pay salary in stock and options (which are only worth something if the execs make the company profitable.)
pathia
Dec. 29th, 2009 02:16 pm (UTC)
They aren't likely to be profitable for a long, long time, no matter how well it's run. The toxic assets are still around, they don't just vanish
cerisewolf
Dec. 29th, 2009 05:11 pm (UTC)
I've never liked that argument, the individuals who only stick around for monster salaries like that are the same people who target massive budget expenditure for lobbyists. I suspect there are a whole plethora of competent people who would fill their shoes at a lower income.
pathia
Dec. 29th, 2009 05:23 pm (UTC)
Oh I'm not saying it's RIGHT, I'm just trying to speculate the government's reasoning.
( 5 comments — Leave a comment )

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Galen
wolffit
Galen Wolffit

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