"Small" Change in Bailout Language Preserves Executive Pay

When Congress drafted the $700 billion financial bailout bill, they intended to limit Wall Street executives' sky-high pay. To do this, they included a process for reviewing executive pay, recovering bonuses based on unrealized earnings, prohibiting "golden parachutes" and punishing firms that break the rules. But just before the bill passed, the Bush administration insisted Congress make one little change in the bill's wording that pertained to that provision. The change said that penalties would only apply to firms that sold their troubled assets at an auction, since that was how the Treasury Department originally said it planned to use the money. But auctions have not been used to dispose of bad assets after all, and Bush's change effectively created a loophole allowing companies that take bailout money to circumvent restrictions on top executives' lavish pay. Senators on the Finance Committee are considering whether they should amend the law to assure the enforcement mechanism applies to firms that participate in the bailout.