Treasury secretary Henry Paulson on Wednesday, September 24, told a House committee that he was open to considering limits on executive compensation in the Bush administration’s proposed $700 billion bailout package for the nation’s financial institutions.
But in a statement before the House Financial Services Committee the same day, Paulson did not explain how the provision would work.
Many lawmakers have called for limits in the compensation of executives whose companies benefit from a federal bailout. Paulson opposed the proposal as recently as Tuesday, September 23, but in opening remarks to the House panel Wednesday, Paulson said he had changed his mind.
“The American people are angry about executive compensation, and rightly so,” Paulson said. “Many of you cite this as a serious problem, and I agree. We must find a way to address this issue in this legislation without undermining the effectiveness of this program.”
Among the other legislative changes that lawmakers are seeking are those that would roll out the Treasury’s spending authority under the program in stages, with an initial authorization of $150 billion, and requiring large financial institutions to contribute premiums to a new federal agency similar to the Federal Deposit Insurance Corp. in the banking industry. The premiums could be used to help with any future bailouts.
Also Wednesday, Federal Reserve chairman Ben Bernanke warned Congress’ Joint Economic Committee of “great threats” to the U.S. financial system and economy, which required extraordinary measures.
Various money market rates continued to rise as banks shied from lending amid uncertainty about the U.S. rescue plan. But markets got some comfort from billionaire Warren Buffett’s decision this week to invest $5 billion in Goldman Sachs Group Inc., which is planning to convert into a bank holding company. Buffett described the current situation as a financial “Pearl Harbor.”