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WASHINGTON (Feb. 4) - 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."

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Obama announced the dramatic new government intervention into corporate America at the White House, with 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 of the $700 billion financial industry bailout that Congress created last year.

The executive-pay move comes amid a national outcry over huge bonuses to executives heading companies seeking taxpayer dollars to remain afloat. The demand 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 infusion of taxpayer dollars.

"This is America. We don't disparage wealth. We don't begrudge anybody for achieving success," 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."

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The pay cap would apply to institutions that negotiate agreements with the Treasury Department for "exceptional assistance" in the future. The restriction would not apply to such firms as American International Group Inc., Bank of America Corp., and Citigroup Inc., that already have received such help.

"There is a deep sense across the country that those who were not ... responsible for this crisis are bearing a greater burden than those who were," Geithner said.

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 that get capital infusions from the Troubled Asset Relief Program in the future will have more leeway. They also will face the $500,000 limit, but the cap can be waived with full public disclosure and a nonbinding shareholder vote.

Obama said that massive severance packages for executives who leave failing firms are also going to be eliminated. "We're taking the air out of golden parachutes," he said.

Other new requirements on "exceptional assistance" will include:

The expansion to 20, from five, the number of executives who would face reduced bonuses and incentives if they are found to have knowingly provided inaccurate information related to company financial statements or performance measurements.

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An increase in the ban on golden parachutes from a firm's top five senior executives to its top 10. The next 25 would be prohibited from golden parachutes that exceed one year's compensation.

A requirement that boards of directors adopt policies on spending such as corporate jets, renovations and entertainment.

The administration also will propose long-term compensation restrictions even for companies that don't receive government assistance, Obama said.

Those proposals include:

Requiring top executives at financial institutions to hold stock for several years before they can cash out.

Requiring nonbinding "say on pay" resolutions - that is, giving shareholders more say on executive compensation.

A Treasury-sponsored conference on a long-term overhaul of executive compensation.

Compensation experts in the private sector have warned that intrusions into the internal decisions of financial institutions could discourage participation in the rescue program and slow down the financial sector's recovery. They also argue that it could set a precedent for government regulation that undermines performance-based pay.

"One of the big questions is whether it will make it more difficult to recruit and retain executives at these companies," said Claudia Allen, chair of corporate governance at the Chicago-based law firm of Neal, Gerber & Eisenberg.

The $500,000 cap "is a very tight limit," she said.

Timothy J. Bartl, vice president and general counsel for the Center On Executive Compensation, said the president's actions are a unique situation given the government's role bailing out troubled institutions.

"We do not view it as something that ought to be extended beyond this circumstance," he said.

On Capitol Hill, some lawmakers had been pushing for even stricter caps.

Sen. Claire McCaskill, D-Mo., and Sen. Bernard Sanders, I-Vt., have proposed that no employee of an institution that receives money under the $700 billion federal bailout can receive more than $400,000 in total compensation until it pays the money back. The figure is equivalent to the salary of the president of the United States.

Even some Republicans, angered by company decisions to pay bonuses and buy airplanes while receiving government help, have few qualms about restrictions.

"In ordinary situations where the taxpayers' money is not involved, we shouldn't set executive pay," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.

"But where you've got federal money involved, taxpayers' money involved, TARP money involved, and the way they have spent it, with no accountability, is getting close to being criminal."

Copyright 2009 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

2009-02-03 20:05:32

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Moliardee2 02:07:15 AM Feb 08 2009

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Most of you don't agree? Well then these companies shouldn't have their hand out asking for MY portion of taxpayer money to save them!! I'm glad Obama is doing this. These idiots ran their companies into the ground and are FAILURES and expect a pat on the back disguised as a huge bonus? You idiots who are complaining about the cap - - - pull out YOUR wallet and send it to these banks and Wallstreet to line a pocket of a loser who didn't do his job.

CYates357 09:31:02 AM Feb 05 2009

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OBAMA IS RUNNING AROUND SCREAMING.............THE SKY IS FALLING.........THE SKY IS FALLING.......THE SKY IS FALLING........WAKE UP PEOPLE........HOW MANY USED CAR SALESMEN TRY TO PRESSURE YOU INTO BUYING RIGHT NOW?.......HURRY UP.......DEAL WON'T LAST.......HOW'D THAT WORK OUT FOR YOU?.......CHANGE........IS.........HAVING LOBBYISTS, A TAX CHEAT, AND THE OLD GUARD WASHINGTON DEMOCRATS IN THE OBAMA CABINET........................OBAMA PLAYED THE AMERICAN VOTERS...............................

Dboggsey1956 08:33:24 AM Feb 05 2009

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WHEN A CITIZEN IS HIRED TO DO A JOB ,HE IS GIVEN A RAISE BASED ON HIS PERFORMANCE , WHY IS IT THAT EXECUTIVES ARE NOT TREATED THE SAME WAY ? IF THEY ARE AFRAID IT WILL DISCOURAGE TOP PEOPLE FROM WANTING TO HIRE IN AT THESE FIRMS THEN THEY ARE NOT AS GOOD AS THEY THINK THEY ARE,IN OTHER WORDS THEY WANT COMPENSATION BEFORE THEY PROVE THEIR MERIT. EVERYBODY WANTS TO BLAME BUSH FOR THE STATE OF THE ECONOMY,BUT HAVE YOU BEEN PAYING ATTENTION TO THE NEWS AT LEAST 3 PEOPLE WHO HAVE BEEN APPOINTED FOR OFFICE BY OBAMA HAVE HAD SHADY RECORDS WHEN IT COMES TO PAYING TAXES OR RECIEVING COMPENSATION FROM OTHER SOURCES,IT GOES TO SHOW YOU THAT WASHINGTON IS FULL OF CORRUPTION AND GREED,WHOEVER IS DOING THE RESEARCH ON THESE NOMINATIONS HAS MY PRAISE FOR BRINGING THIS TO OUR ATTENTION WE NEED A LOT MORE BACKGROUN CHECKS ON MANY NORE WHO ARE ALREADY HOLDING OFFICE,ITS TIME TO CLIP THE WINGS IN WASHINGTON AS WELL AS IN CORPORATE AMERICA,THE LEAST THAT IS OWED TO THE PEOPLE WHO ARE STRAPPED BY TAXES AND

Warren a g 08:30:00 AM Feb 05 2009

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It's becoming very clear now Obama is no leader and letting the likes of pelosi reid dodd schumer frank call all of the shots and walk all over him he better take charge now or take the blame for every thing that goes wrong

JNussJSS 07:45:24 AM Feb 05 2009

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give every person in the united states a check for 1000000 dollars to pay off thier home and other debts. that would be alot cheaper than 700 billion dollars to big corporations that don't know how to run a buisness!

LADEEKMS 07:43:36 AM Feb 05 2009

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They all need to be fined and fired. How dare they use TAXPAYERS money to pay bonuses!!! Every taxpayer should be outraged. I also strongly feel Geither needs to step down. A tax evader as head of the Treasury department? Outraged....

TRFIGG 07:21:28 AM Feb 05 2009

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How about capping Pelosi's $5.6 milliion a year new jet or the Congressional limosine fleet. I do not think Obama would take them on.

dterraman 07:12:13 AM Feb 05 2009

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it is all about total centralized control over every facet of your life...and so many go along obligingly

lakawag 06:58:16 AM Feb 05 2009

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Well if they don't like the $500 K cap they can do one of two things. Find another job or Don't take bailout money. I think we need to get the $12 billion in tax payer money that was used for bonuses already back. The rest of us have had to tighten our belts, so should they.

K4JLP 06:20:01 AM Feb 05 2009

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THATS WHY WALL STREET LOSERS GRABBED AS MUCH MONEY AS POSSIBLE BEFORE G.W. LEFT OFFICE...THEY KNEW THINGS WOULD CHANGE...DO THEY THINK WE ARE THAT STUPID????

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