Despite the tough talk that was leaking out of the Obama administration yesterday about Barack’s meeting with the nation’s top bankers, behind the scenes the administration is structuring its latest bailout programs to skirt restrictions–especially pay restrictions–imposed by Congress.
It sounds like the administration is fearful that investors will hesitate to participate in bailout initiatives unless they can be insulated from rules and penalties established by lawmakers. Unfortunately, there’s little administration can do to ensure that any deal it makes with its investment partners sticks. Congress can always change the rules, and nothing short of a constitutional amendment can bind the hands of future lawmakers.
The Washington Post:
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.
Although some experts are questioning the legality of this strategy, the officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions, which would require recipients to turn over ownership stakes to the government, as well as curb executive pay.
The administration has decided that the conditions should not apply in at least three of the five initiatives funded by the rescue package.
This strategy has so far attracted little scrutiny on Capitol Hill, and even some senior congressional aides dealing with the financial crisis said they were unaware of the administration’s efforts.