Saturday, February 14, 2009

Sneaky Dodd Slips Bank Pay Limits Into Porkulus Bill

No wonder so many people detest Connecticut's Christopher Dodd. The guy who gets sweetheart mortgage deals for himself just can't accept the fact bank executives get paid more than he does. So what does he do? He sneakily slips a last-minute provision into the spendulus boondoggle capping pay for bank executives.
The economic stimulus bill passed by the Senate on Friday includes curbs on executive pay that go well beyond what Wall Street had been expecting.

Sen. Christopher Dodd (D-Conn.), the chairman of the Senate Banking Committee, slipped the provisions into the bill late in the process. The entire stimulus package now heads to President Obama for his signature.
Of course with so many banks teetering on the edge, all they need are for their top executives to jump ship now that this socialist has decreed how much they can be compensated.

Slick move.
Dodd’s move could backfire if it fuels another exodus of investors from battered bank stocks, which could weaken the institutions and force some to appeal for new government help.

The KBW index of 24 major bank shares plunged 14% this week to close at 26.11 on Friday, just above the 14-year low of 25.34 reached on Jan. 20. The index has dived 41% this year.

In a statement, Dodd said he was "delighted that my amendment to impose tough new limits on huge bonuses for executives working in firms that receive taxpayer funds will be included in the final economic recovery bill.
The man has a bottomless supply of gall. Making this even worse, it's retroactive.
The giant stimulus package that cleared Congress Friday includes a last-minute addition that restricts bonuses for top earners at firms receiving federal cash -- including those that already received it -- more severely than the Obama administration's previous pay limits.

The most stringent pay restriction bars any company receiving funds from paying top earners bonuses equal to more than one-third of their total annual compensation. That could severely crimp pay packages at big banks, where top officials commonly get relatively modest salaries but often huge bonuses.

As word spread Friday about the new and retroactive limit -- inserted by Democratic Sen. Christopher Dodd of Connecticut -- so did consternation on Wall Street and in the Obama administration, which opposed it.

The administration is concerned the rules will prompt a wave of banks to return the government's money and forgo future assistance, undermining the aid program's effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.
I doubt it'll happen, but perhaps Obama could veto it.

To compound the idiocy, this move will cost the Treasury much needed tax revenue.
Turns out there is a problem with limiting the pay of highly compensated bankers: the Wall Street high flyers pay taxes, too.

Imagine this: Capping top bank executives at $400,000 a year, as the Senate version of the $800-plus billion economic stimulus had called for, would have cost the government $11 billion in lost tax revenue by 2019. That's more than $1 billion a year, according to an estimate this week by the Congressional Budget Office.
More here.
Fearing any and all of these possibilities, the Obama Administration opposed Dodd's limits. Yet Dodd insisted on them.

Why, especially since so many of the bankers who will be affected are his wealthiest constituents living in Greenwich, Conn.?

Perhaps he's really angry at Wall Street types and wants to crack down on them. even though many are presumably his friends.

Here's another possibility worth considering. Though there are a lot of wealthy Wall Streeters in Connecticut, there are a lot more middle-class people there. And Dodd needs those middle-class votes next year in what could be a very challenging re-election bid.

Part of what makes it so difficult is Dodd, Senate Banking Committee chairman, was a "friend of Angelo" as in Angelo Mozillo, the former CEO of Countrywide. As such Dodd received mortgage loans at favorable interest rates.

Being a one-time friend of Angelo's has made Dodd seem much less a friend of the people. Quinnipiac University has a recent poll that suggested that Dodd could be vulnerable.
Dodd is clearly banking on the class-warfare card.

If this isn't shameless enough, there's a possible book deal in the works for Dodd. Hey, he's got to pay off those mortgages somehow.
Crown senior editor Sean Desmond has acquired a history of the congressional bailout of the financial markets by Sen. Christopher J. Dodd with Lary Bloom. Titled "Thirteen Days: How the Financial Crisis Changed the Politics of Washington," the book will provide an intimate look at how, over the course of 13 days last September, a financial crisis led to panic and meltdown. Dodd, the chair of the Senate banking committee, will also describe how he and others acted swiftly to try to save the American economy.

His friends on the other side of the aisle were quick to help. The National Republican Senatorial Committee quickly fired off a press release, suggesting a slightly different title... "13 Weeks: The Senate Banking Committee Chairman's Time in Iowa While the Housing Market Collapsed."

Linked at Instapundit. Thanks!

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