By JIM KUHNHENN
Associated Press WriterWASHINGTON (AP) -- President Barack Obama on Wednesday imposed $500,000 caps on senior executive pay for the most distressed financial institutions receiving federal bailout money, saying Americans are upset with "executives being rewarded for failure."
Obama announced the dramatic new government intervention into corporate America at the White House, with his new Treasury secretary, Timothy Geithner, at his side. The president said the executive-pay limits are a first step, to be followed by the unveiling next week of a sweeping new framework for spending what remains in the $700 billion financial industry bailout program that Congress created last year.
The move comes amid a national outcry over huge bonuses going to executives heading companies seeking taxpayer dollars to remain afloat. The desire for limits was reinforced by revelations that Wall Street firms paid more than $18 billion in bonuses in 2008 even amid the economic downturn and the massive taxpayer-dollar infusion into their industry.
"We all need to take responsibility," Obama said. "And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses. As I said last week, that's the height of irresponsibility. That's shameful."
The pay cap would apply to all institutions that have negotiated agreements with the Treasury Department for "exceptional assistance." Those would include AIG, Bank of America and Citi.
Firms that want to pay executives above the $500,000 threshold would have to use stock that could not be sold or liquidated until they pay back the government funds.
Generally healthy institutions would have more leeway. They also face the $500,000 limit if they're getting government help, but that cap can be waived with full public disclosure and a nonbinding shareholder vote.
"This is America. We don't disparage wealth," Obama said.
"But what gets people upset and rightfully so are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers."
Copyright 2009 by The Associated Press. All Rights Reserved.
