Top Dems Want Tighter 'Golden Parachute' Restrictions

The top Democrats who run Congress are calling on Treasury Secretary Henry Paulson to consider implementing stronger restrictions on the use of “golden parachutes” by financial institutions that receive taxpayer-funded capital infusions under the financial rescue package approved by Congress to deal with the ongoing economic meltdown.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid (D-Nev.) wrote Paulson a letter dated today raising the issue of such top-level compensation for executives of striken firms seeking bailout assistance.

The federal government is infusing U.S. banks with billions in taxpayer funds to thaw credit that has been frozen due the burgeoning credit crisis. The federal bailout has been highly controversial among Americans, according to polls.

"We were pleased that you decided to use your discretion to establish tougher compensation standards than were required by the terms of the new law for 'systemically significant failing institutions,'" the letter from Pelosi and Reid says. "For example, we understand that you will require such institutions to agree not to deduct compensation of covered executives to the extent that it exceeds $500,000. We commend you for this.

"At the same time, we continue to hear from constituents who are outraged at the level of compensation being provided to executives at institutions participating in the new Capital Purchase Program (CPP)," the letter adds. "News reports have suggested that six major financial institutions participating in the program have plans to pay their executives billions of dollars. Such reports understandably infuriate many Americans, who resent having their taxpayer dollars used to support such institutions, especially in light of the serious and growing economic pressures confronting working Americans."

Paulson's an interim final rule adopts limits on “golden parachutes” at CPP institutions, that appear to be substantially weaker than those applicable to “systemically significant failing institutions,” Pelosi and Reid complain.

"For example, under the interim final rule, we understand that Treasury could not block “golden parachutes” for top executives at CPP institutions unless they equal or exceed three times their base pay, whereas you proposed no such restriction for similar compensation packages at “systemically significant failing institutions,” the Democratic leaders say.

"While we understand that there may be legitimate reasons to distinguish between these two programs, we also would note that your interim final rule for the CPP still would allow very large compensation packages for many departing executives at institutions that will be receiving billions of taxpayer dollars," they add. "We are concerned that such lavish severance packages could weaken public support for your critical efforts to stabilize the economy."

Watch more breaking news now on our video feed:



Bookmark http://onthehillblog.blogspot.com/ and drop back in for more news from the nation's capital.