A couple of months after denouncing Wall Street pay as outrageous and mandating strict caps at the TARP banks, Obama may suddenly be afraid that he’s destroying taxpayer investments by driving talent across the street.
We applaud the realisation that capping pay is a terrible idea. But we’re not crazy about the speed of this flip-flop. Can we blame Geithner?
Bloomberg: Lenders such as Citigroup Inc. and Bank of America Corp. that obtained money from the Troubled Asset Relief Program have been waiting since February for Treasury Department guidance on capping bonuses for their 25 highest-paid employees. Speaking on condition of anonymity, the four executives said they expect the Obama administration may seek to substitute guidelines or otherwise ease the mandatory limits.
As some companies prepare to repay TARP funds and free themselves of limits on compensation, those that can’t argue they shouldn’t have to comply with limits on pay that will leave them unable to hire and retain their best employees.
“It is clear that the government’s going to have to come out with some guidelines on what will compensation be at the big institutions that have TARP,” Gary Parr, who advises financial companies in his role as deputy chairman of Lazard Ltd. in New York, said at a panel discussion on May 4. “There’s going to need to be something done so that there isn’t a picking off of certain institutions where they’re at a severe disadvantage to others.”