WaPo reports that Treasury and other administration officials are actively seeking ways around Congressional restrictions on the use of TARP and other extraordinary assistance funds for executive bonuses. And once again, the excuse for going out of their way to make sure execs get our their money is that they're concerned that firms won't participate in the free money giveaways unless their executives are allowed to skim fat wads of it right off the top and pocket them.
How does it work?
The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.
Sound strangely familiar?
In one program, designed to restart small-business lending, President Obama's officials are planning to set up a middleman called a special-purpose vehicle -- a term made notorious during the Enron scandal -- or another type of entity to evade the congressional mandates, sources familiar with the matter said.
Ah, what a perfect solution! Add Enron accounting to the already toxic mix of meltdown, bailout and bonus embarrassment.
Sigh.
Are we really going to have to put limiting instructions in the appropriations bills, now? Prohibit the use of funds in appropriations bills for use in establishing these work-around entities? Or perhaps we should take it out of the hides of the people who have such hardons for giving this money away. You want the bonuses paid? To these guys who make a hundred times what you make? Fine. No funds from the appropriations bills may be used to pay the salaries of any government official whose work involves establishing or administering such entities.
There's another good idea in the article, too:
Congress has exempted the Treasury from applying the restrictions in a fourth program, which aids lenders who modify mortgages for struggling homeowners.
That's an interesting approach. What about using bonuses as a carrot? You're exempt from the restrictions if you hold a significant number of residential mortgages, and agree to some formula whereby you agree to renegotiate them such that distressed homeowners are relieved. I think it's a fair bet that people would be a little less outraged about the bonuses if it wasn't also the case that the same execs pocketing the money are squeezing homeowners to death and driving them out of their homes.
And here's a random, but disappointing note:
At first, when the initiative was being developed last year, the Bush administration decided to apply executive-pay limits to firms participating in this program. But Obama officials reversed that decision days before it was unveiled on March 3 and lifted the curbs, according to sources who spoke on condition of anonymity because the discussions were private.
Ouch.
I understand but disagree with the argument that limiting executive compensation may discourage participation in the program. But there's simply got to be plausible position other than letting these guys simply dip into taxpayer funds and take chunks of it home with them in order to get them to participate. And if the only possible alternative is really to "prevent" their participation, then maybe this program isn't so brilliant after all. If these execs think it's a close call as between injecting this additional public capital into their firms and refusing it so that they'll be allowed to loot what private capital remains, I don't see why we'd want to make it impossible for them to make that decision. If they think the rational decision is to maintain the flexibility to hollow out and loot their firms for all they can, then they'll have to be satisfied with looting private dollars and private dollars alone, and private shareholders will have to be satisfied with whatever private rights of action they choose to pursue, if any.
If it's so important to us as a matter of policy that these firms take this public capital, then it's also important to us as a matter of policy that that capital be used for as public a purpose as possible as well. Going out of our way to make sure it's easy for these firms to let individual employees privatize that capital and take it right back out of the lending and credit markets it was meant to fix is just plain stupid.