Unanswered Question Watch: What On Earth Was Obama Talking About On Executive Compensation and the Bailout Bill?

By Julia Hoppock

Sep 25, 2008 12:50pm

Yesterday I asked just what policy proposal Sen. Barack Obama, D-Ill., could possibly have been talking about when he said, "the American people should not be spending one dime to reward the same Wall Street CEOs whose greed and irresponsibility got us into this mess."

What does that mean? Zero compensation for these executives? A firewall between the government aid and salaries/bonuses for executives?

It’s an issue because Democrats on Capitol Hill say such a proposal doesn’t make any sense.

So, it’s a day later and still no answer from Camp Obama as to what he meant.

- jpt

UPDATE: The Obama campaign responds with the following:

"The answer is the same type of oversight and authority to limit CEO compensation that was put into the Fannie/Freddie legislation this summer, and which Democratic lawmakers are currently working on in the context of the bailout package.

"*  The legislation passed in July gave the Fannie/Freddie regulator the authority to review CEO compensation packages. Specifically, Sec. 1114 allowed the director to ‘prohibit or limit’ any payments to CEOs that were ‘contingent on the termination’ of their affiliation (HR 3221).

"*  On Sept. 9, Obama wrote a letter to Paulson and Lockhart (Fannie/Freddie regulator), urging them to use this provision to eliminate the golden parachute payments to the outgoing CEOs of Fannie and Freddie (full text of the letter is below).  (On the same day, McCain/Palin wrote an op-ed in the WSJ praising the administration’s Fannie/Freddie plan, while not even mentioning the CEO comp issue).

"*  Now, Democratic lawmakers are working on provisions that would limit executive compensation in important ways. When Obama says we should not be spending any taxpayer money to reward CEOs, he is referring to ensuring that these types of provisions are in the final bill to avoid unjust enrichment.

"*  If you look at Sec. 17 of Sen. Dodd’s draft legislation, it includes a) authority to the secretary to limit excessive compensation packages; b) a clawback provision for performance-based compensation in circumstances of earnings restatements; and c) limits on golden parachutes.

"*  If you look at Sec. 9 of Rep. Frank’s draft legislation, it includes similar provisions, including a prohibition on severance payments."

The Obama campaign concludes: "Obama is closely working with congressional leaders to determine the exact parameters of these provisions. But he has clearly and consistently articulated the principle that such restrictions must be included to ensure that the taxpayer resources being put on the line do not go to unjustly enrich CEOs and management of these institutions."

None of that, by the way, is ensuring that "not one dime" goes to greedy CEOs. "Unjust enrichment" is a totally different thing.

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