The public comment period for this legislation has ended.

Dodd's Legislative Proposal From Treasury Department for Authority to Buy Mortgage-Related Assets

31 section comments

Title I - Authorizing the Treasury Department to Buy Mortgage-Related Assets

Sec. 17. Executive compensation.

The Secretary shall require that all entities seeking to sell assets through a program established under this Act meet appropriate standards for executive compensation and shareholder disclosure in order to be eligible, which standards shall include




  1. limits on compensation to exclude incentives for executives to take risks that the Secretary deems to be inappropriate or excessive;




  2. a claw-back provision for incentive compensation paid to a senior executive based on earnings, gains, or other criteria that are later proven to be inaccurate; and




  3. such limitations on the entity paying severance compensation to its senior executives as are determined to be appropriate in the public interest in light of the assistance being given to the entity.

General Comments on Dodd's Legislative Proposal From Treasury Department for Authority to Buy Mortgage-Related Assets

Eric Andrade on September 22, 2008

There should be an all out ban on paying any severance to any of these senior executives. We are now VCs, and I don't think that investing in a business that is a proven failure should entail paying severance compensation to the executives who brought the company into crisis. C. should be rewritten to eliminate all severance compensation.

d blevins, private citizen on September 22, 2008

The Secretary should not be the decider for executive compensation. Rather, "No executive [senior or otherwise] shall have total annual compensation exceeding that of the President of the United States's base salary, currently $200,000. No severance compensation for any employee shall exceed 2 weeks of their base salary. No executive shall be awarded bonuses of any kind including stock options."

Chuck Anderson on September 22, 2008

There should be a stipulation that this agreement is "cause" for termination at the Sectys descression and that any clauses that are currently enabled in executives contracts open up ...ie this can activate the no bonus and the other non compensation clauses that should already be there in the employment contracts. --getting the govnt to sign on should be a 'career limiting event' not a path to another promotion.

Sam (private citizen) on September 22, 2008

In section a, some person or group other than the treasury secretary should be responsible for determining appropriate/excessive risk. Also the first half of the sentence should be re-worded to eliminate ambiguity.

In b, it would be reasonable and just to extend the clawback to cover any incentive or other payments made over the past 5-10 years.

In c, determinations of what is appropriate needs to be made by a body that represents the taxpayers broadly, not by political appointees. Such payments should also be indexed to average U.S. severance pay, in both duration and amount.

Ian Welsh, Firedoglake (www.firedoglake.com) on September 22, 2008

while there is a claw back provision for executives who overstated earnings (that would be, oh, all of them) and the Secretary is allowed to set limits on executives of organizations which sell assets to the treasury, this is very much entirely at the Treasury's secretary's belief. That needs to be in there. As long as executives can pay themselves enough in a few years (heck, in one year) so that they never need to work again, they will have incentives to play games that cause disaster years down the line, while they make good now. Much of the current problem came from taking theoretical profits from years to come, and booking them as current profit. When those profits didn't happen, because the models were incorrect about what the future would hold, the system came crashing down. No system which does not limit executive compensation enough to make them need their job ten years from now, or twenty, will stop another such crisis from occuring.

Also, as written I'm told by a friend who has the legal expertise, it's probably illegal and unconstitutional.

Dr Anonymous on September 23, 2008

I don't understand what would legally prevent a company's management from giving massive bonuses to itself just before selling assets to the treasury (or a year before). The clawback only refers to such compensation based on inaccuracy, not choice, correct?

Jacob Zimmerman on September 23, 2008

Can a claw-back provision apply as well to any mortgage or security firm's fees paid to lobbying organizations over the past 5 years in return for decreased regulation?

Concerned Citizen on September 23, 2008

Limitations on compensation and bonuses should continue while the gov has control of shares so this will give incentive to quickly pay back the loan/losses that are incurred by the taxpayer. The firm has to buyback shares at either equal or greater value than when issued or buy back the assets at equal or greater if the gov still owns them... whichever price is higher in the market. The limitations should extend to all employees, not just the executives. I also agree, severance should be severely limited.

Gnossos Popadopalous on September 23, 2008

All senior executives and their direct reports in a company that received bail out money from the government must surrender all stock they hold in the company to the government.

No senior executive or direct report whose company received bail out money from the government will be bared from workin in the finanancial industry in the future.

All senior executives and their direct reports in a company that received bail out money from the government must return salary and bonuses received on or before Sept 1, 2007. If the funds are not returned, they will be added as a special provision to their tax liability.

Kate Duffy on September 23, 2008

All provisions of the bankruptcy bill that apply to consumers seeking relief under bankruptcy should apply to them, including the requirement for credit counseling. Why should consumers be the only ones publicly shamed by the government for getting into debt?

Elyce Ellington on September 23, 2008

I refuse to have my taxpayer money pay the golden parachutes of multimillion dollar a year executives who have driven these businesses to this point while banking millions in their own personal accounts. It is absurd to the point of incredulity. How is it that food stamps are evil but this is appropriate use of my money? It is impossible to fathom or accept. There must be some form of punitive reparations by all top paid executives. They cannot be allowed to take their toys and go home after destroying our economy.

James Whiting on September 23, 2008

The fund could be opened up to investors. Then executives could be required to sell all their other assets and invest entirely in the bailout fund. If the debt they sold the government was overpriced, they lose out. If it was underpriced, they get to share in the earnings. A nice, simple way to force the executives to keep the taxpayers interests in mind when pricing their assets.

Anonymous on September 24, 2008

I am very much against any goverment bail out of these companies. If I get in trouble for unwise decisions financially, it is up to me to fix the problem, So be it for them, and Sen. Dodd who got his share.

Paul Barbin, a livid US taxpayer on September 24, 2008

`Where's the accountability? No CEO or any other top management person of AIG, Fannie, Freddie and any other company that has to be bailed out by the US taxpayer should receive a dime of severance pay. These bums take these huge risks to make more millions that they really don't need and we have to cushion their downside? Ridiculous. If true justice takes place, they should be made to pay back all of their ill gotten gains and made to forfeit a portion of their net worth to help pay for the bailout. These CEOs and others responsible for this mess have to suffer consequences or they are apt to repeat their stupidity at some point in the future.

Rick, outraged taxpayer on September 24, 2008

Several items should be included for the protection of the taxpayer.

1) No institution participating in this plan may pay dividends, issue bonuses or issue or redeem stock options until the United States Government and taxpayers are fully reimbursed for the cost of the institution’s aid. 2) At participating institutions, no employee or board member may be compensated above that of the highest paid US Civil Servant until the United States Government and taxpayers are fully reimbursed for the cost of the institution’s aid. 3) No aid may be rendered in any state that provide for no recourse mortgages and loans.

I believe these three simple insertions will protect the tax payers. Wall Street has been so focused on immediate profits and bonuses that they knowingly engaged in unsound business practices for huge short term gains.

anonymous lawyer on September 25, 2008

This entire section is worthless.

a. This subsection is entirely in the discretion of the Secretary. Further, it only addresses bonuses (not base pay) based on "excessive" or "inappropriate" risktaking. What kind of risk is "inappropriate" or "excessive" in the context of Wall Street? Also, if, as is typical, a bonus is based on share price, or "earnings", then by definition it doesn't incentivize "excessive" risk.

b. The clawback provision here is probably a standard part of any comp package anyway. Also, any "inaccurate" or falsified earnings probably would constitute securities fraud anyway. There are already laws against that!!

c. This subsection is entirely in the discretion of the Secretary. Again, what the heck is "inappropriate" in the context of Wall Street?

anonymous lawyer on September 25, 2008

Just to reiterate, this Section is meaningless. This does not provide any meaningful curb on executive pay for these companies at all. I predict that it will not result in a single executive receiving a single dollar less than he or she would have otherwise received.

If they use this provision to sell this bill ("hey, taxpayer, look! we included limits on executive compensation!"), it will be an absolute snowjob. Very similar to the snowjob the execs pulled on the American economy in the first place.

I would prefer they remove the whole Section so that they don't have any cover, no fig leaf to use to lie to the low-info taxpayer.

shameful investment banker on September 25, 2008

I follow "anonymous lawyer" on this. If you think investment banking pay is outrageous, the only way to address that is to suppress investment banking altogether ! Barring that, I suggest a more flexible approach that must apply to ALL employees, not just executives : annual pay above the one of the highest paid civil servant must exclusively be in common shares, only vested once all the assets that are "dumped" have been resold. It can take a long time, but investment bankers are quite young after all...

As a positive aside, considering that 40 to 50% of an investment bank goes to employee's pay, it would give a big boost to banks capital and would therefore be supportive of the economy by allowing more lending

Anonymous on September 25, 2008

It's hard to belive they're only talking about "limiting" (and oh so arbitrarily) compensation and not ELIMINATING compensation.

I haven't been working my butt off to maintain an 800 credit score so I can 'compensate' other people for their arrogance and stupidity. Here's a better clause regarding compensation...

a. any company that is so poorly managed and run down such that the only two options left are bankruptcy or bailout shall only be considered for bailout if the CEO, Boardmembers, and all officers resign and accept zero "additional funds" from the company they just bankrupt.

Doug on September 25, 2008

Compensation for the Executives shall not exceed 20% less than the compensation of the President of the United States.

Anonymous on September 26, 2008

This is pure BS! All these executives, and their minions for that matter, shuld be forced to work for $0 as penalty for trashing the economy while they got rich at our expense.

This section gives too much power to the Secty.

Since we taxpayers have to foot the bill, no executive or manager should be paid more than we pay our own President. I am taking BASE pay - they deserve NO fringes or benefits or bonuses or stock options of any kind.

Actually, they should all be sent to jail with truly hardened criminals for at least a year. Let them actually experience getting screwed like they screwed the country!!

Mark Mecum on September 26, 2008

I believe all Executive compensation, including severance should have similar limitations placed upon it to 401k participation that is designed to insure that the top executives of the company do not receive a disproportionate amount of the benefits (in this case bonuses which are effectively supposed to be profit sharing for performance).

This would either limit Executive compensation, or improve compensation for the rank and file.

Thalia's Bark on September 27, 2008

I really like the idea of finally getting at executive compensation, love the sound of clawbacks, etc., but this section is so toothless and the critiques are so right on, that I am convinced there are way better ways to spend $700 billion that pouring money into bad paper. If the G-men can go this far, they can claw back oil company profits, claw back the no-bid contractors in Iraq and collect billions to follow Barack Obama's plan to get Main Street moving again. Bernanke likes the idea of dumping buckets of money to deter depressions. Why here of all places? Dump it somewhere else for a change already.

D Edwards - Citizen on September 27, 2008

This section gives the Secretary far too much latitude to determine what is appropriate. Why not allow the shareholders to determine appropriate compensation for executives who have mismanaged/stolen their investments?

Judith Weller on September 28, 2008

This is way too vague and once again gives too much authority to Paulson and his successors. We the taxpayers should set the amount to no higher than the salary of the US President. This is a poorly written provision which contains too many loopholes that will allow for multi- million dollar salaries to executives.

Craig Bryant, Citizen on September 28, 2008

The Secretary has too much uncontrolled power with no checks and balances. Since the Secretary is the "decider", will this be George W. Bush?

The Secretary should not be the decider for executive compensation. Rather, "No executive [senior or otherwise] shall have total annual compensation exceeding that of the President of the United States's base salary, currently $200,000. No severance compensation for any employee shall exceed 2 weeks of their base salary. No executive shall be awarded bonuses of any kind including stock options."

Chris in Phoenix on September 28, 2008

EXECUTIVE COMPENSATION!!!

Thats one of the things that got us here in the first place. Bonuses will be rewarded after us shareholders get our money back not before.

NO STOCK OPTIONS.. They lost them when we stepped in to bail out this mess.

FAIR COMPENSATION nothing more.

Larry Bonorato on September 28, 2008

While I agree that there be safeguards to prevent any executive from profiting from this legislation, we need to remember that government intervention in the mortgage business is part of why we are here. The Community Reinvestment Act in the 70's was well intentioned in that it helped to eliminate "redlining". However, it also required that a governmental agency mandate that banks be forced to extend mortgage credit to very risky customers in order to be able to expand and grow their businesses. If the banks wanted additional branches etc. they had to put unqualified customers in mortgages. The same agency then decided, with pressure from various legislative & executive politicians, that Fannie Mae & Freddie Mac be required to buy ever increasingly larger numbers of risky mortgages in the secondary markets. The percentage mandated at times reached 50% of their portfolio.

Everything was great as long as real estate values continued to increase. When the bubble burst and values decreased rapidly both the banks who issued the risky mortgages, other institutions who bought them in bundles, Fannie Mae, and Freddie Mac incurred huge liquidity problems. So here we are with the same people who brought us into this mess promoting a bailout plan to fix a crisis they had a major part in creating. We all need to keep this in mind as we review their recommendations.

Chapped citizens on September 29, 2008

The same republican "conservatives" that brought you an "unregulated financial system" are going to rip us again and bail out the rich. Has anyone bailed out the middle class? The way I heard it was you take responsability for yourself and what you do. Maybe that's just an 'ol Republican slogan. As always they say one thing and do what fills their pockets. Amazing!!!