Press Releases
Brendan Daly/Nadeam Elshami
202-226-7616
08/12/2009
Pelosi, Frank Urge Limits on Bonuses by Companies Owing Taxpayers Billions
Washington, D.C. - Speaker Nancy Pelosi and House Financial Services Committee Chairman Barney Frank sent the following letter today to Treasury Secretary Timothy Geithner, urging him to ensure that the executive compensation plans of companies that have received billions in taxpayer assistance are sound and do not disproportionately reward corporate executives at the expense of taxpayers.
Below is the text of the letter:
August 12, 2009
The Honorable Timothy F. Geithner
Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Mr. Secretary:
A central requirement of the legislation which provided federal assistance to troubled financial institutions was that taxpayers -- who granted hundreds of billions of dollars to the rescue effort – not only would be reimbursed as quickly as feasible, but also would receive a financial benefit for the risk they assumed. Recent reports appear to indicate, however, that some of these very institutions now intend to provide over $32 billion in bonuses to their executives while they still owe taxpayers over $200 billion.
Congress and taxpayers alike are rightly alarmed that companies would enrich their executives while deferring repayment of the federal financial assistance that helped them avoid financial catastrophe.
We applaud your appointment of Kenneth Feinberg as overseer of executive compensation. His appointment is key to ensuring that the intent and letter of the law are respected, and that taxpayers, not corporate executives, receive the financial benefits resulting from the taxpayers’ massive financial stabilization effort. On Thursday, August 13, Mr. Feinberg will receive 2009 compensation plans from seven companies that received federal funds to avoid a collapse in the financial markets. Some of these companies’ risky and profligate behavior made the financial rescue necessary.
News reports of 2009 compensation suggest how important Mr. Feinberg’s review will be. If accurate, compensation offers made to employees of several of the companies under review raise the troubling specter of a return to the same kinds of risky practices that led to last year’s financial crisis. Reports of substantial bonuses not based on performance by firms that still owe tens of billions to taxpayers appear to foster the same business behavior that created irresponsible risks but insulated executives from the consequences of their bad decisions. This dangerous imbalance between rewarding risk and forgiving mistakes is what Congress and the American people are determined to bring to an end.
Guaranteed bonuses clearly violate the basic principles of accountability and taxpayer protections set forth by Congress in the TARP legislation and reaffirmed by the House of Representatives in the Corporate and Financial Institutions Compensation Fairness Act. The American people expect the compensation review process to ensure that the plans of each of the seven companies meet sound financial and policy goals. The plans should reward long-term growth instead of short-term profit-taking; set standards for compensation planning that establish industry norms; and, most importantly, make absolutely certain that financial institutions will never again play Russian roulette with the American taxpayers.
Specifically, we expect all compensation decisions to take into account any excessive bonuses already paid to executives by companies that still have outstanding obligations to the taxpayer. To do otherwise would place the benefits accrued as a result of the taxpayer assistance in the hands of executives instead of the taxpayers.
Your work, along with the executive compensation legislation that passed the House and that we expect to become law, over the next two months will become a road map for future executive compensation planning in the financial services sector and other industries. We look forward to the results of your review.
Thank you for your consideration.
best regards,
NANCY PELOSI BARNEY FRANK
Speaker of the House Chairman, Financial Services Committee