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Welch calls on bank executives to skip bonuses, bypass Bush administration loophole

December 21, 2008
Press Release

WASHINGTON, DC - Rep. Peter Welch is calling for top banking executives to abide by strict compensation limits Congress intended for recipients of federal bailout money, despite a last-minute loophole orchestrated by the Bush administration.


WASHINGTON, DC - Rep. Peter Welch is calling for top banking executives to abide by strict compensation limits Congress intended for recipients of federal bailout money, despite a last-minute loophole orchestrated by the Bush administration.

During last-minute negotiations leading up to the passage of the $700 billion Emergency Economic Stabilization Act in October, Treasury Secretary Henry Paulson insisted on a one-sentence change that effectively mooted any caps on executive compensation to banks receiving money through the Troubled Asset Relief Program, according to the Washington Post. Additionally, the Associated Press reported Sunday that TARP recipients doled out nearly $1.6 billion in salaries and bonuses to top executives last year.

In response, Welch has rallied 22 members of Congress to insist that banks receiving federal bailout funds curtail executive spending.

"It is unacceptable for banking executives to pad their pockets with massive bonuses and benefits after mismanaging their companies and coming to the American taxpayer for aid," Welch said. "The American people acted in good faith during the financial industry's time of need, and now it's time for banking executives to take responsibility for their actions and curtail their outrageous compensation practices."

A letter Welch sent today to CEOs of eight top banks receiving bailout funds is attached and copied below. Twenty-two members of Congress signed on to the letter.
 

December 16, 2008                                                                 
 
Mr. John J. Mack
Chairman and Chief Executive Officer                                
Morgan Stanley                               
1585 Broadway                                
New York, NY 10036-8200

                                
Dear Mr. Mack,                                                                 

As Members of Congress acutely concerned with taxpayer protection, we were shocked to learn that companies currently participating in the Troubled Asset Relief Program (TARP) are able to skirt executive compensation limits included in the Emergency Economic Stabilization Act (EESA) using a loophole inserted into the legislation by the Bush administration late in bill negotiations, as detailed in the 12/15/2008 Washington Post.                                                                 

These taxpayer protections are essential to ensuring balance in and the success of the TARP, and we urge you to voluntarily abide by the executive compensation limits contained in the EESA, starting by renouncing bonuses for all your top executives.                                                                 

The people we represent vehemently object to the use of their taxpayer dollars, directly or indirectly, to pay bonuses to executives at institutions receiving federal bailout money.                                                                 

We note that Goldman Sachs, the recipient of $10 billion in bailout funds, recently renounced bonuses for its top executives.                                                                 

We urge you to do the same, voluntarily and immediately.                                                                 

Reviving our economy will take hard work, cooperation, and shared sacrifice. It would be a very good signal to the American taxpayers that you agreed, which you can demonstrate by following the Goldman Sachs example.
                                
                                Sincerely,

                                Peter Welch
                                Member of Congress
                               

Other members who have signed on include:

John Olver
David Wu
Peter Visclosky
Carol Shea-Porter
Peter DeFazio
James McGovern
Bruce Braley
Lois Capps
Steve Cohen
Maurice Hinchey
Gabrielle Giffords
Donald Payne
Ellen Tauscher
Janice Schakowsky
Michael Michaud
Donna Edwards
Phil Hare
Linda Sanchez
Rosa DeLauro
Patrick Kennedy
Rush Holt
Timothy Bishop


Recipients of the letter include:

Vikram Pandit - Citigroup
James Dimon - JP Morgan Chase
John Stumpf - Wells Fargo
Kenneth Lewis - Bank of America
John Mack - Morgan Stanley
John Thain - Merrill Lynch
Ronald Logue - State Street
Robert Kelly - Bank of New York Mellon