Treasury Says It Will Agree To Cap Wall Street Executive Pay

One of the major sticking points of the inevitable Wall Street bailout was executive pay — but the New York Times says that Treasury Secretary and former CEO of Goldman Sachs, Henry M. Paulson Jr., has agreed to compensation caps for the executives of firms that benefit from the bailout.

Republican officials said Treasury Secretary Henry M. Paulson Jr. had agreed to demands from lawmakers in both parties to limit the pay of executives whose companies benefit from the bailout. The enormous pay packages of some Wall Street executives, coupled with the realization among nonwealthy Americans that the crisis could affect their financial foundations, have created an incendiary issue on Capitol Hill.

That’s a good term! It’s inclusive and condescending at the same time. “Nonwealthy Americans.” I’m a “Nonwealthy American,” how about you?

Paulson Said to Give Way on C.E.O. Pay; Bush to Speak [NYT]
(Photo: spinadelic )

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  1. crazyasianman says:

    I’m nonwealthy as hell!

    taking donations…

  2. mercnet says:

    Why do they receive any pay? They should have been a good american consumer and saved for situations like this…

  3. NitrousO says:

    So if I haven’t climbed on the backs of others in pursuit of the almighty dollar, I am a “Nonwealthy American”? Fine. I guess I am.

    • JollyJumjuck says:

      @NitrousO: Don’t forget the “stepping on heads” as well as climbing on the backs.

    • Ein2015 says:

      @NitrousO: Assuming all wealthy people backstabbed the poor is both closed-minded and harmful to others. The classics like Jobs (who gets paid $1/yr but is still weathier than most of us will ever be) or Gates or Dell, etc… who all started from hard work and an idea and rose to riches… they do not deserve your hate.

  4. SpdRacer says:

    Gotta love this politically correct world we live in, we are no longer poor, middle-class, or even upper middle-class just “non-wealthy”. The decline of American civilization will one day be traced back to the rise of political correctness.

    • upsidedownpaddle says:

      @SpdRacer: Yeah not offending people is totally going to cause world war 3.

      • Tiber says:

        @upsidedownpaddle: I think it’s more funny for the fact that less than 1% of Americans could be called wealthy, and yet we’re the “non”.

        Not to mention the fact that the issue is apparently limited to people who aren’t wealthy, as opposed to the people who have a lot of money in Wall Street, pay higher taxes which are going towards bailing these companies out, and tend to have free market leanings which are contradictory to this bailout in the first place.

  5. Bladefist says:

    eh. That’s extremely annoying. And I think most, ugh, nonwealthy Americans support the executives getting nothing, since they ran the companies into the ground.

    But Meg, call me an idiot and paint me pink, but isn’t the author of the piece using that term, not anyone in the government?

  6. lightaugust says:

    Somehow, I have a feeling King Henry’s idea of a limit and my idea of a limit are gonna differ slightly.

  7. blackmage439 says:

    “compensation caps for the executives of firms that benefit from the bailout.”

    Well, it’s a step in the right direction. Let’s hope one day the government can translate this to mainstream culture. No business should be able to raise prices/cancel health insurance plans/etc. just to give the CEO a sub-prime-clusterfuck-protection bonus (I’m looking at you, WACHOVIA!). You can whine and complain all you want about it being against the ideals of a free market and capitalism; CEOs who provide nothing to a company except wining and dining clients do NOT deserve sums of money as large as these bastards are making.

    • Jevia says:

      @blackmage439: Or the fact that companies are required to care more about pleasing their shareholders rather than their customers or employees. Its like I can’t fathom why our country allows health insurance to be ‘for-profit’ so that its more important to pay shareholders than pay for medical treatment and that’s why so many medical treatments are denied.

  8. 3drage says:

    If you or I did such a terrible job, you’d believe that we’d be fired without compensation. Yet here we are as taxpayers feeding money into the greed machine. Cap or no, this is idiotic.

  9. moore850 says:

    Nonwealthy definition: you weren’t CEO of a bank about to be bailed out by a guy who was also CEO of a bank being bailed out.

  10. Hey Cocaine is expensive, do we want all of these poor CEOs to have to start using crack?

  11. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    I prefer to think of myself as income challenged.

  12. dragonfire81 says:

    How much you want to bet the cap will be so high that exec pay will still be a joke?

  13. nataku8_e30 says:

    I would like to see them apply these pay caps retroactively. Get some of that money back that these executives were receiving while they were running these companies into the ground.

  14. DashTheHand says:

    Stick it to the execs!!! Burn the golden parachutes and never let them return!

  15. Branan says:

    Everyone’s ripping on the executives (and with good reason), but they aren’t the only ones at fault. Where were the boards of directors? The shareholders? They should have stopped the executives from taking extraordinary risks. They didn’t, and they’re just as culpable for the final result.

    • RvLeshrac says:

      @Branan:

      Shareholders have no real power in a majority of companies. They do often hold some minor power over the board of directors from year to year, but they frequently hold no sway over the day-to-day decisions of a company, nor do they hold much sway over longer-term decisions.

      In principle, you’re correct – but that’s like saying that all of the individuals who were suddenly unable to pay their mortgages were 100% at fault, despite many of them being led to believe (by self-proclaimed ‘experts’) that their ARM packages were perfectly sound.

      The burden falls on those responsible for the daily operation of the companies, as well as the day-to-day changes in policy – the CEOs, CFOs, Presidents, and VPs.

  16. mergatroy6 says:

    So the taxpayers have to bail out the private companies, virtually no questions asked, and the C level executives still get a paycheck.

    I wonder what would happen if the taxpayers/consumers asked the private companies to bail them out of personal debt.

    I owe CitiMortgage a respectable sum. I’d like them to “bail me out” and allow me to keep the house. I didn’t make a slew of bad business decisions like the major companies, but it is worth a try. I’m pretty sure that Citibank would laugh in my face.

    I acknowledge that I have over-simplified the scenario.

  17. vladthepaler says:

    Too vague to be meaningful. Cap it at what? Are they reducing golden parachutes to only a million dollars, for example? That’s a lot less than the execs might be expecting, but it’s a lot more than the annual pay of people who aren’t responsible for this problem…

  18. BytheSea says:

    Depends on how the define the cap. Is it, “well, we’ll have to fly buisness class for Muffy’s sweet fourteen party in Tahiti”? or, “Well, we’ll have to sell Muffy’s jet and sing ‘Happy Birthday’ around a sheet cake on the Jersey Shore”?

  19. henrygates says:

    The annual salary cap will still be more than most Americans will see in their lifetime.

  20. dgsaunders says:

    Let me guess, executive pay will be capped at $50m? Or maybe a paltry $10m, with no limits on stock options? How ever will executives survive?!

    The former CEO of Bear Sterns, who I might add was FIRED, got a $200m payout. How does one negotiate that? “I’m sorry I lost our firm billions and billions of dollars. But not really that sorry b/c I walked away with $200 mil.”

  21. mac-phisto says:

    the way i see it, these guys (CEOs, CFOs, & your various BoDs) would basically become gs-13 or gs-14, which would set their pay range to $68,000-$104,000 (no bonuses, stock options, performance pay, etc.).

    oh, what’s the matter – a little too nonwealthy for you? won’t be able to afford that 4th vacation home on the ocean? pity.

    that’s the beauty of america – we all have choices. you can choose to forgo your ridiculous salaries & compensation packages & save your company, or you can forever be remembered by business scholars throughout the world as “the idiots that tanked american finance”. let me introduce you to a little thing us nonwealthians practice frequently – it’s called “sacrifice”. get used to it – you’ll be doing it a lot more lately.

    pipe dream

  22. incognit000 says:

    Gee, it’s glad to know that they realize that we’re Americans as well.

    Does money make you stupid, or do you need to be stupid to make that much money?

    Or did all the smart rich people see this coming and stand aside months ago?

  23. lightaugust says:

    At risk of redundancy, I think this is worth repeating… There is so much passionate feeling about this issue, and the bill hasn’t happened yet, so I hope everyone who has had time to comment or think or read about what we could do with a cool trillion has taken time to call their representative and/ or senator… My understanding is that most congresspeople are taking comments to heart on this issue and for once, you might feel like your voice is heard…

    (202) 224-3121.

    • orlo says:

      @lightaugust:

      Of course Congress is taking its constituents’ comments to heart! It is making scapegoats out of a few CEOs, and punishing them by paying them excessive salaries with taxpayer money, rather than paying them with disgustingly excessive salaries.

      The real issue is how long these CEOs should be sentenced to jail… which should be decided after we have impeached and recalled most of the government.

      We are the change we have been waiting for!
      –Barak Obama and this slogan were paid for by the American Subprime Mortgage Industry

  24. Zanorfes says:

    How does wall street or congress define “nonwealthy”?

  25. axiomatic says:

    Ashamed to be an American today…..

    Dear other countries,
    Which of you does not expect the taxpayer to bail you out when private sector CEO’s fail to run their businesses with acumen.

    -Ax

  26. What pay cap? It doesn’t mean a thing until we find out what they are limited to. I’m glad progress is being made, though.

  27. stevejust says:

    Caps? We should be talking about how big of pentalies the CEOS and others should be paying. Rather than “limiting the amount of compensation” they we should be talking about limiting their freedom as they sit in jails rotting for destroying our economy.

    This whole thing is insane. I was going to start writting a book about it about a year ago called The Currency Convergence. I wish I had.

  28. pal003 says:

    “nonwealthy” Americans? I get it, you mean us serfs – that only work to make you richer, King Overlord Paulson.

    We serfs should never question the King Overlords like Mr. Paulson. NO TO BAILOUT of Wall Street overlords!

  29. The only “cap” i think is reasonable under the circumstances is either:

    1. $0.00

    2. Minimum Wage

    3. Average annual US salary.

    It’s not like these guys will be hurting anyway even if they get zeroed.

  30. vdragonmpc says:

    Meanwhile in other news, I hear Virginia hasnt got enough money after the largest tax increase in the state’s history to fund VDOT.

    Why not skim a bit off that 700 BILLION to fund our REAL infrastructure?

    Why has it taken this long for the chickens to roost? We knew from basic econ that shipping the jobs overseas and cutting our productivity for ‘short-run gains’ would eventually catch up to us…

    Does anyone really think the banks REALLY need 700 billion? Where did that number come from? Perhaps the drop in oil prices caught a few and they deserve to pay.

    All I know is the fed should say no more. No more bailing out any company whose CEO makes more than 250,000$ per year anything more means they had the money to burn. Now let them burn.

  31. gliscameria says:

    Did they set a number? Is the cap a billion trillion dollars and not a penny more?

    McCain asked to postpone the debate because he needed to be in washington for this… Obams said no. Friggin awesome.

  32. admiral_stabbin says:

    I read speculation in some mainstream media that the dollar amount would be capped at the compensation of America’s CEO (i.e. P.O.T.U.S.)…which is ~$400K/year.

  33. Not me!!!!

    I am “Wealth Challenged”!

  34. starshard0 says:

    What exactly did these executives do besides make exhorbitant amounts of money?

  35. maztec says:

    I see no limitation mentioned on what the cap is. It could be a mere $10,000,000! Heh.

  36. upsidedownpaddle says:

    The Government is intentionally stacked with morons. Remember the “cool” babysitter that let you get away with stuff? Thanks Hank.

  37. MyPetFly says:

    A buck a year sounds fair.

  38. lockdog says:

    I’m going to suggest the cap I’d like to see applied to everyone, not just (soon to be) government entities. The highest paid executive cannot earn more (including values of all perks and benefits) that 100 times the lowest paid full time person, including all temps and subcontractors. Pay that janitor 20,000 with no healthcare and you can bring home a cool $2 million.

    Do your job well, make your company money and want a raise? Well you are going to have to bring the bottom up with you. It’s capitalism, because those who work harder still earn more and are rewarded for it, but with thins one simple restraint from greed.

  39. TMurphy says:

    Any money they get should be considered a forgivable loan. If they burn the money and come back asking for more, the government should sue them to get the money back. If they at least do something, they can pay it back over 5-10 years. If they meet certain, strict criteria, they don’t have to pay anything back.

    If they’re going to get our money, they better be forced to sit down and think very carefully how they are going to spend it. There have to be heavy enough terms on the bailout money that corporations have to actually decide if taking the money is in their best interest. No free lunch.

  40. BrianDaBrain says:

    Unless the limit is $0, I say it’s a step in the right direction, but still not enough. These CEO’s, well most of them anyway, ran their companies into the ground with bad at best, predatory at worst, practices. Give them nothing, and don’t let the door hit ‘em in the ass on the way out.

  41. HIV 2 Elway says:

    To all those suggesting a buck a year, zero, or minimum wage…
    How are you going to force someone to work for that? Slavery? These guys made a mess but we still need qualified people at the helm to try and correct the problem. You’re not going to attract any talent unless the pay is respectable. Not obscene but respectable.

  42. Subliminal0182 says:

    They should get the average paycheck of a walmart or McDonald’s worker for one year, and they aren’t allowed to dip into their savings from their prev CEO/exec positions. That’ll show em

  43. cccdude says:

    capping pay should be the least of their worries. They should be tossed in jail.

  44. Quatre707 says:

    A company CEO should have a salary which is entirely commission, a commission pay which is determined by a performance score, judged by either the company’s employees anonymously, or by a non-profit organization which grades CEO performance across the industry.

  45. azntg says:

    Ahhh… Paulson. He’s the epitome of corporate America (and the State/Federal Government) in the 21st Century: Absolutely no shame on anything. Not even a single attempt (not even thinly veiled ones) to disguise connivery, greed and pure malice.

    “Ethics, responsibility and everything else be damned. I want nothing but the money and it’s mine, damn you!”

    > an ingenious anti-review, explicit “no ex post facto” provision = perfect for slush funds, golden and a matching platinum parachutes for the CEOs. Not to mention other abuses that most of us would never think of.

    > making threats that Wall Street won’t participate if there are penalties and if Congress doesn’t act fast = Why not let the companies die outright if they won’t voluntarily seek help? We might actually end up living better and richer without them after all.

    > An ambiguous agreement to a pay cap for CEOs = a large percentage of the $700b for each CEO?

    Just who is he trying to fool? The working and the middle class? The intellectuals?

    F*ck you Paulson and Bernanke. May all of you burn in hell indefinitely for selling the backbones of your country for money.

  46. INsano says:

    This just in–Executive pay capped at 700 billion.

  47. RvLeshrac says:

    The only acceptable plan would cap the executive pay at these companies to 3-4x the average salary for their primary residence, as well as eliminating all non-performance-based benefits packages.

    Executives DO deserve more money – they just don’t deserve anywhere near the 30-40x they currently receive. Capping these salaries to 3-4x sets them in line with pre-’golden parachute’ salaries, while still providing them with far more money than any individual can reasonably spend.

  48. RvLeshrac says:

    @azntg:

    Agreed on all of the above. The “no-review” provision borders on the illegal, the “Wall Street won’t like this” threat borders on the terroristic, and the “ambigious pay-cap” borders on the unethical.

    Sadly, most of the US isn’t really paying attention.

  49. bohemian says:

    Congress needs to flatly refuse the bail out. Paulson said the other day after much arm twisting by a few Senators that the horrible outcome he keeps referring to would be that businesses would lose access to credit lines they use to operate resulting in businesses closing and people losing jobs.

    So then why don’t we use that 700 billion to directly provide some lines of credit to businesses or small banks & credit unions for now. Then let Wall Street sort out their mess themselves. When we refused to bail out Lehman bros. they eventually found a buyer. AIG rejected a couple of offers hoping they would get a better deal from US.

    This whole emergency no questions asked give us all your money stunt sounds way too much like the run up to the Iraq war.

    Not all of the economic experts think we even need the bail out at all and are saying it won’t work and we will never get the money back.

  50. Jon Mason says:

    Common Sense Rule 131:
    Your own bonus should not be decided on something that you yourself can manipulate.

  51. chartrule says:

    the people in charge of these companies that need to be bailed out – shouldn’t get huge paycheques – they are the reason these companies need to be bailed out

  52. mackjaz says:

    It’s all window dressing… even the most lavish bonus won’t amount but to a tiny percentage of the $700 billion. It’s just designed to placate the average citizen.

    The real injustice is the $700,000,000,000. It’s inconceivable. I grieve for what this country has become these last eight years.

  53. Doormouse says:

    it’s a joke– cash will go down, but stock options are going to sky rocket; they’ll earn as much now as before.