The Washington Post has a nice scoop today that the executive-pay provisions of the bailout law are basically unenforceable.
But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.
Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.
Something’s fishy with the Bush administration’s actions here. It says it wanted that provision because it needed to lure “healthy” companies to participate, and they would have been unlikely to with pay-restriction rules. But has the government really given capital to “healthy” firms?
Adding to the stench, the Post catches the Treasury Department lying to Congress, but for some reason buries it toward the bottom of the story:
Meanwhile, Paulson repeatedly told lawmakers that he did not plan to use bailout funds to inject capital directly into financial institutions. Privately, however, his staff was developing plans to do just that, Paulson acknowledged in an interview.
That’s it?
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.