For Immediate Release: February 4, 2009
Charlie Cray, director, Center for Corporate Policy (202) 387-8030

The Center for Corporate Policy applauds Obama Administration’s Bailout Pay Rule as Solid Step Forward

The Treasury Department announced today that it will issue new rules on executive pay for financial institutions receiving government assistance under the taxpayer-funded program (TARP) created to address the current financial crisis.

The Center for Corporate Policy applauds the new announcement as a solid step toward protecting taxpayers outraged at Wall Street’s ongoing rapacity, while pointing out that unless it is extended further, it won’t be enough.

CCP urges the administration to extend the policy through these additional steps:

• CEO pay at any company receiving federal bail-out funds (not just those under the TARP program) should be capped at $400,000, as recently proposed by Sen. Claire McCaskill (D-MO) and other senators.

• Steps should be taken to ensure that executive pay limits apply to all of the companies that receive an estimated total $500 billion annually in taxpayer payments through federal contracts. The epidemic of waste, fraud and profiteering witnessed with the Iraq contracts and post-Katrina underscore the need for such measures.

• The administration should also ask the IRS and/or Congress to deny all corporate tax deductions for executive pay that run over the $400,000 standard, or an amount 25 times the pay of a company’s lowest-paid worker – a standard supported by J.P. Morgan and Peter Drucker.

“If the President is truly interested in corporate accountability and comprehensive financial reform, then he will push for these measures as well,” said Charlie Cray, policy analyst and director of the Center for Corporate Policy.

Cray also warned that CEO pay cuts “cannot substitute for a broad financial reform package,” and that additional measures are long overdue, including:

• A policy that immediately ends the epidemic of home foreclosures.

• Action to create a financial product safety commission to protect investors and taxpayers, as proposed by the TARP Congressional Oversight Panel.

• A new speculation tax on securitizers and others who engage in short-sighted transactions, placing the burden of funding financial bailouts falls upon those who create increased systemic risk, instead of Main Street taxpayers.

“It’s a good day when the White House responds to the growing backlash against Wall Street corruption and greed,” Cray said. “But unless it is followed by even deeper reforms, it will end up serving as a fig leaf for a failed financial policy.”