Levin Letter to Paulson: Firms Must Be Held Accountable for Executive Compensation Levels

WASHINGTON – Sen. Carl Levin (D-MI) today sent a letter to Treasury Secretary Henry Paulson regarding the use of taxpayer funds for executive compensation under the Emergency Economic Stabilization Act. The full text of the letter [PDF] follows:

October 20, 2008

The Honorable Henry Paulson
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Paulson:

The enclosed article, “Wall Street banks in $70bn staff payout,” indicates that financial statements issued by a handful of financial institutions, Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, and Morgan Stanley, include $70 billion in compensation for employees, including funds for substantial bonuses and severance payments. The article asserts these payouts are being made by the same financial institutions scheduled to receive, under the Emergency Economic Stabilization Act, billions of taxpayer dollars in new capital.

As indicated in my letter to you last week, a key objective for providing $250 billion, at taxpayer expense, to U.S. financial institutions is to unlock the credit markets and revive the U.S. economy. Those funds are not intended to finance excessive executive pay. In fact, the Emergency Economic Stabilization Act states that Treasury “shall require that the financial institution[s] meet appropriate standards for executive compensation.” This requirement, which the Bush Administration initially resisted but later accepted, is aimed at ensuring that taxpayer dollars are used to strengthen financial markets, not subsidize outsized pay packages.

It is unacceptable for financial institutions that have generated billions of dollars in losses, damaged the U.S. economy, and accepted a taxpayer bailout, to maintain past levels of compensation. For each financial institution that accepts taxpayer dollars, Treasury should require it to detail its compensation plans publicly, prevent the payment of substantial bonuses or severance payments, and require use of taxpayer dollars to get credit flowing again.

Please describe your Department’s plans and timetable for obtaining compensation data from each of the financial institutions receiving taxpayer funds, issuing appropriate compensation standards, and requiring compliance with those standards.

Sincerely,
Carl Levin