WASHINGTON - Nearly three months after American International Group bonuses provoked an angry reaction in Congress, the Obama administration is ready to limit the compensation of top executives at financial institutions that have received government rescue funds.
The new regulations, expected as early as today, would apply to the 20 most highly compensated employees at financial firms that obtained infusions of $500 million or more in assistance from the $700 billion Troubled Asset Relief Program.
The government, however, is not stopping at federally assisted institutions. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke want to give the Fed, which regulates banks, and the Securities and Exchange Commission, which oversees the financial markets, greater powers to set compensation guidelines across the financial sector.
Executive pay is a politically charged issue. Bonuses totaling $165 million issued in March by insurance conglomerate AIG, which had received billions of dollars in financial assistance, set off a public and congressional outcry.
Obama and his economic team believe that compensation practices contributed to the current crisis by encouraging high risk taking.
"I think boards of directors did not do a good job," Geithner said yesterday. "I think shareholders did not do a good job in terms of discipline and compensation practices." *