Paulson Agrees To Pay Cap

Treasury Secretary Hank Paulson has caved into demands that a bailout be coupled with limits to executive pay. From the New York Times:

Republican officials said Treasury Secretary Henry M. Paulson Jr. had agreed to demands from lawmakers in both parties to limit the pay of executives whose companies benefit from the bailout. The enormous pay packages of some Wall Street executives, coupled with the realisation among nonwealthy Americans that the crisis could affect their financial foundations, have created an incendiary issue on Capitol Hill.

We’re told by sources in Washington DC that the situation remains fluid but right now it looks as if the limits on executive pay would apply only to those firms who sell securities and other assets to the Treasury under the bailout plan. As we explained this morning, this could wind up undermining the effectiveness of the plan.

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