CEOs blasted for taking almost same amount in bonuses as during boom
By
Bhagyashree Garekar, US Correspondent
Mr Obama intends to tell top US bankers to show restraint, discipline and some sense of responsibility. -- PHOTO: ASSOCIATED PRESS
WASHINGTON - UNITED States President Barack Obama has delivered a stern rebuke to Wall Street chief executive officers (CEOs), calling it 'shameful' that they had awarded themselves billions in bonuses at a time when taxpayers were having to prop up the financial sector.
Paycap for Wall St execs?
WASHINGTON - THE White House pledged action against 'irresponsible' bonuses for executives at bailed-out Wall Street companies as a Democratic senator unveiled legislation to limit their compensation to US$400,000 (S$604,140) a year.
Sen. Claire McCaskill proposed a law on Friday that would prevent executives from making more money than the US president until their companies no longer rely on the US$700 billion Troubled Asset Relief Program (TARP).
NEW YORK - AT&T Inc Chief Executive Randall Stephenson will forgo his 2008 bonus payment, and the company will freeze the salaries of 120,000 managerial employees this year, as the telecommunications company prepares for a grim year.
Mr Stephenson's decision, which he sent to employees in a memo on Friday, comes after the largest US phone company said in December that it would cut 12,000 jobs, or 4 per cent of its workforce.
WASHINGTON - THE Obama administration is not likely to impose tougher restrictions on executive pay on most firms receiving aid under the government's US$700 billion (S$1.06 trillion) financial rescue program, the Washington Post reported on Saturday.
Citing a source familiar with the administration's deliberations, the Post said officials are concerned that harsh limits could discourage some firms from asking for aid.
Wall Street firms handed out US$18.4 billion (S$27.7 billion) in bonuses as the US economy entered recession last year - about the same amount as in the boom of 2004.
Although last year's bonuses were 44 per cent lower than the previous year, they still amounted to the sixth-largest bonus payments ever.
'When most of these institutions were teetering on collapse and they are asking taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don't provide help, that the entire system could come down on top of our heads, that is the height of irresponsibility,' he said after meeting his economic advisers on Thursday. 'It is shameful.'
The President said he intends to raise the matter with Wall Street executives in the coming days.
'What we're going to need is for the folks on Wall Street who are asking for help to show some restraint, and show some discipline, and show some sense of responsibility,' he said.
'There will be time for them to make profits, and there will be time for them to get bonuses,' he said, with Treasury Secretary Timothy Geithner by his side.
'Now is not that time. And that's a message that I intend to send directly to them.'
He said Mr Geithner had had to pull back one institution that had gone forward with a multimillion-dollar jet plane purchase at the same time as it received bailout funds.
The reference was to Citigroup's now- aborted plans for a US$50 million 12-seat luxury jet, as it received US$45 billion from the US$700 billion Troubled Asset Relief Programme funds intended to stabilise the financial sector.
'We shouldn't have to do that, because they should know better. And we will continue to send that message loud and clear,' said Mr Obama.
Some analysts, however, warn that government intervention is unwarranted. 'Not to say that the bonuses are justified, but compensation decisions are best left to the individual firms,' said Mr James Gattusso of the Heritage Foundation, a conservative think-tank.
'I am wary of the increasing trend of the government taking control of business decisions.'
Mr Obama's ire at the bankers comes as he weighs seeking more money for the financial stabilisation programme to avert bank failures, while public outrage grows at the perception that the bailout was enriching company shareholders and executives.
Unconfirmed reports say that new strategies to stabilise the banking sector will be unveiled next week.
Mr Obama said his team was working on a comprehensive, three-legged plan to rescue the economy.
Its elements are the US$825 billion fiscal-stimulus package, which will be debated by the Senate next week, measures to beef up the financial system and a programme to address the housing and foreclosure crisis.
The stimulus plan is 'only one leg of the stool', Mr Obama said. 'These other legs of the stool will be rolled out systematically in the coming weeks, so that the American people will have a clear sense of a comprehensive strategy designed to put people back to work, reopen businesses and get credit flowing again.'
'There will be time for them to make profits, and there will be time for them to get bonuses. Now is not that time. And that's a message that I intend to send directly to them.'
