Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) on Wednesday called on Treasury Secretary Henry Paulson to use his broad new authority to further restrict chief executive officer pay at the financial institutions being aided by the $700 billion bailout package.
In a letter to Paulson, the top Democratic Congressional leaders point to news reports suggesting that six major institutions receiving federal bailout funds still plan to pay billions to their top executives. Congress tried to prevent “golden parachutes,” or severance packages, for those CEOs when lawmakers approved the bill earlier this month.
“Such reports understandably infuriate many Americans, who resent having their taxpayer dollars used to support such institutions,” the leaders write in the letter. “We hope you will seriously consider strengthening the restrictions on executive compensation that apply to institutions participating in the [bill]. We would urge you, in particular, to consider the possibility of further restrictions on the use of ‘golden parachutes’ at such institutions.”
Pelosi and Reid noted that Paulson has proposed a rule that puts some limits on the “golden parachutes” but that the limits “appear to be substantially weaker” than those applied to firms deemed “systemically significant failing institutions.”
While there may be legitimate reasons to distinguish between these two programs, the rule allows for “very large compensation packages for many departing executives at institutions that will be receiving billions of taxpayer dollars,” the leaders wrote. “Such lavish severance packages could weaken public support for your critical efforts to stabilize the economy.”
The Democrats aren’t the only ones with worries about how the bailout funds are being allocated.
Paulson will also be getting a letter today from House Minority Leader John Boehner (R-Ohio), who has concerns that some institutions are planning to use money for purposes “never discussed” with Members of Congress.
Boehner points to news reports indicating that PNC Financial Services Group Inc. is acquiring Ohio-based National City Corp., with some of the funds received from the Treasury Department. He also expressed concern over reports that Treasury funds meant for troubled asset relief may be used for employee raises and executive bonuses.
“Funds made available under the economic rescue package should not be used to pay for bank acquisitions, raises and executive bonuses,” Boehner wrote. “These are not the types of expenditures you described during your many discussions on Capitol Hill earlier this fall, and these certainly are not the types of expenditures Members of Congress envisioned when the plan was sent to the president earlier this month.”
Boehner calls on Paulson to confirm whether the news reports are accurate, and if so, to explain what the Treasury Department will do to ensure that these types of expenditures do not occur.