The House of Representatives Financial Services Committee has endorsed a measure that would give the Treasury Department the authority to determine whether the public should become outraged over executive bonuses for TARP participants. Actually, the measure would give the Treasury Department the discretion to say whether executive compensation at bailed out banks was too excessive. But I suppose public (and media) outrage would closely track the Treasury Department's position on the issue. Although the measure would give the Treasury Department the authority to determine when executive compensation has gone too far, earlier this year, officials in the department pressured Senator Christopher Dodd to remove language from a provision he sponsored that would have prohibited highly controversial bonus payments made by AIG.
The measure would not apply to participants in the proposed trillion-dollar "toxic assets" purchase plan. Recently, White House economic advisor Christina Romer described potential investors in the plan as the "good guys," and media outlets reported that prospective investors had already warned the government not to limit their ability to compensate executives.
Committee Chair Barney Frank, reflecting arguments from the Obama administration, says that flexibility would encourage wider participation in the program. I guess this means that executives will not be subjected to random drug tests, as some states are considering imposing upon recipients of welfare and unemployment benefits.
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