Obama hits out at 'shameful' Wall St bonuses

PRESIDENT Barack Obama's attack on 'shameful' Wall Street bonuses may lead to new pay limits and management restrictions as the price for companies seeking more government aid.

Mr Obama called the estimated US$18.4 billion in bonuses that financial executives received for 2008 as the height of irresponsibility
Mr Obama was reacting to a report by the New York state comptroller which found that financial executives had received an estimated US$18.4 billion in bonuses for 2008, less than for the previous several years but the same level of bonuses as they received in 2004, when times were flush.

'That is the height of irresponsibility,' Mr Obama said during an appearance in the Oval Office with Treasury Secretary Timothy Geithner. 'It is shameful. And part of 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.'

'There will be time for them to make profits, and there will be time for them to get bonuses,' Mr Obama said. 'Now's not that time. And that's a message that I intend to send directly to them, I expect Secretary Geithner to send to them.'

Mr Geithner has already signalled a willingness to impose stricter compensation limits as part of a revamped approach to dealing with the banking crisis.

During his confirmation hearings, Mr Geithner said the administration is preparing rules that would require executives at companies receiving taxpayer money to agree that any compensation above a certain amount - he did not specify how much - be 'paid in restricted stock or similar form' that could not be liquidated or sold until the government had been repaid.

But with his strong words on Thursday, Mr Obama seemed intent on reassuring Congress and the public that he would step up the pressure on bankers before granting them additional assistance.

'You know it's coming politically,' said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia, predicting restrictions on further aid. 'You know it looks really bad giving someone US$10 million.'

Mr Obama's attack was a pointed - if calculated - flash of anger from the president, who frequently railed against excesses in executive compensation on the campaign trail.

He struck his populist tone as he confronted the possibility of having to ask Congress for additional large sums of money, beyond the US$700 billion already authorised, to prop up the financial system, even as he pushes Congress to move quickly on a separate economic stimulus package that could cost taxpayers as much as US$900 billion.

About half of that US$700 billion is still available, but the new administration has yet to announce how it will use it, and many analysts think it will take far more money to stabilise the banking system.

Should Mr Obama have to go to Congress to seek more money for the bailout fund to avert the failure of more banks, he would likely encounter opposition within both parties and demands for tighter restrictions on pay for executives of institutions that receive government assistance.

Banks and financial firms have fired 265,000 people since the collapse of the sub-prime mortgage market triggered the financial crisis. The Treasury Department has injected about US$200 billion into banks across the country through its Troubled Asset Relief Program.

Senator Christopher Dodd, chairman of the Banking Committee and a Connecticut Democrat, said of the bonuses: 'I'm going to be urging - in fact not urging, demanding - that the Treasury Department figures out some way to get the money back.'

The senator said he will summon executives whose companies received taxpayer aid to testify before his committee and explain their bonuses.

Mr Obama's stand also came just one day after he surrounded himself with well-paid chief executives at the White House. He had pulled in those business leaders and hailed them for being on the 'front lines in seeing the enormous problems in our economy right now'. The executives who appeared with Mr Obama are not leaders of the Wall Street financial companies but rather, heads of well-known manufacturing and technology giants.

Source:BT