Word: bailouts
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Part of the president’s decision should be understood as a well-timed political move. The month of January witnessed accumulating reports of multi-million-dollar bonuses, corporate retreats, and profligate spending in corporations either receiving or courting federal bailout money. Then it was confirmed that Wall Street employees had received $18.4 billion in bonuses for 2008, in spite of dismal performance for banks as a whole. Meanwhile, the Obama administration, riding on a wave of high ethical expectations, has faced embarrassing criticism for political appointees accused of tax evasion and misuse of corporate privileges. Between declining consumer...
Just four days after calling Wall Street bonuses “shameful,” the president had an even stronger message for financial executives: Going forward, no senior executives of a corporation receiving federal bailout money will be permitted to earn more than $500,000 a year. While taking note of the move’s limited potential impact and the political motives that likely underlie it, we embrace the president’s decision and hope it will foster both discussion and behavioral changes...
...restrictions on executive compensation are firm, with opportunities for additional compensation only through the unpalatable option of restricted stock. The total savings to taxpayers, however, cannot be immense, mostly because the Treasury provisions have a narrow application. First, the provisions will not apply to the $350 billion of bailout funds already spent or allocated. Second, the provisions bypass large-time traders, brokers, and consultants, whose salary and bonuses often surpass the half-million-dollar limit. Third, healthier banks receiving funds through the Troubled Asset Relief Program will be effectively exempted from the provisions. Finally, the Treasury’s directives...
President Obama has announced an executive pay cap at some companies taking federal bailout money. A wise move...
...Taiwan, which lost a combined $3.5 billion in 2008, according to the Taiwan government. Taiwan's firms are in especially rough shape because they lack the scale, financial resources and technical prowess of their larger Korean and American rivals. The companies' woes are pushing the Taiwan government toward a bailout of the industry. "We have the intention and the resolve to help the DRAM companies through difficult times," Taiwan President Ma Ying-jeou reportedly told electronics industry executives in early January. Aid is crucial, policymakers believe, because Taiwan's chipmakers are simply too important to the economy, which specializes...