Shelby, Frank Back Pay Cap; Will Obama Balk?

By: Michelle Levi
Topics: In The News

Congress' inclusion of a stringent pay cap for executives of companies receiving government aid in the stimulus legislation passed Friday was a major topic on CBS News' Face The Nation Sunday.

(CBS)

Alabama Republican Richard Shelby, ranking member of the Senate Banking Committee, admitted for probably the first time that he supports this provision in the stimulus bill, even though he voted against the legislation.

"I believe this provision in the stimulus bill is going in the right direction, as far as protecting the taxpayer," Shelby told host Bob Schieffer. "I am totally against us being involved in private companies … but where taxpayers' money is involved, Bob, we better make sure that this money is spent wisely."

(CBS)

Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, also said he supports the cap on executive pay — inserted into the bill at the insistence of House Democrats — and that the White House has no choice but to support the provision.

Frank differed with Shelby, who said he believed the government should interfere with private companies' executive compensation only when taxpayer money (such as the billions in TARP funds that have gone to teetering banks) is at stake. Frank said that such unstable situations (where private companies come for handouts of public money) should be prevented from happening by changing the ethos of no-risk rewards, which Frank said provide "perverse incentives.

"You know, this problem didn't start in September," he said. "The way the compensation is structured for a lot of these companies, if they take a gamble and it pays off, the top people get a lot of money. If they take a gamble and it backfires, they don't lose any money. Heads they win, tails they break even."

Frank supported rules to reduce risk-taking that puts government money (such as funds insured by the FDIC) at risk, which he believes would reduce incentives for companies to take unnecessary gambles.

Earlier on the program, White House Press Secretary Robert Gibbs did not seem to wholeheartedly support the bill's executive compensation provision. However, he was adamant that the President will sign the legislation Tuesday.

"Many of the provisions in this bill are modeled after things that the president outlined in his plan," Gibbs said when Schieffer asked why the White House had contacted Members of Congress asking them to back off on this part of the bill. When asked by Schieffer if the president planned to modify the legislation before signing, or would choose not to enforce any of its provisions, Gibbs replied, "We will sign this bill into law Tuesday."

Shelby later said that Gibbs "seemed to me that he was waffling a little bit" in his response.

Frank predicted the Obama administration would not try to avoid carrying it out the bill's provisions. "This is not an option. This is not frankly the Bush administration where they are going to issue a signing statement and refuse to enforce it. They are going to enforce it."

More from Face The Nation (2.15.09):

Gibbs: Obama Will Still Reach Out To GOP

Bank Failures: For Or Against?

Read the full "Face The Nation" transcript>

31 Comments Have Your Say
Email Story Send to a Friend
Share This Tell Your Friends
Tweet This Tweet This
More Share It

Add a Comment

See all 31 Comments


by national4321 February 16, 2009 4:08 PM EST: If you were a black person, and grew up a Muslim, then spent 20 years in a church learning how to hate Americans..whites, and Jews, then ran for President of a country and win..why can''''t you acknowledge that this person , who has no experiance to lead, with only 2 years in the corrupt Chicago Senate has the possibility of resentment? If you don''''t see that I don''''t know what else to tell you.; Reply to this comment


by berniew4 February 16, 2009 2:15 PM EST: I will make you guranteed 10 Million per year in your business,.. GUARANTEED,.. I will work for an employer who will pay me one Million per year for results. All of you who limit pay to $400,000 can hire others but I will make your competitor the profits. Makes sense !!; Reply to this comment


by jake796 February 16, 2009 12:09 PM EST: This is really simple. Limit all compensation to 400K, same as the US President. This would only apply to CEOs running corporations that they were hired to run, not owners of companies who really have a stake in the success or failure of the company they own.
Banks CEOs are cockroaches. They won''t tell you that have credit cards that are paid by the banks, expense accounts up the yen-yen, and other hidden compensation perks that don''t show up in the ledgers. So big deal when they say they are only getting a dollar in pay a year, what about the hundreds of thousands or millions in "hidden" benefits they get which is the real scam here.; Reply to this comment


by antoniof123 February 16, 2009 10:46 AM EST: Alabama Republican Richard Shelby, ranking member of the Senate Banking Committee, admitted for probably the first time that he supports this provision in the stimulus bill, even though he voted against the legislation.

Translation:

I am coming out in favor in the event that this works I don''t want to come over as being a spiteful hateful conservative.; Reply to this comment


by harbinger09 February 16, 2009 7:29 AM EST: Alabama Republican Richard Shelby, ranking member of the Senate Banking Committee, admitted for probably the first time that he supports this provision in the stimulus bill, even though he voted against the legislation. "

We really don''t need anyone saying they support any measure in a bill that they did not even have the ballz to support.

If they could not even impact a bill by voting on it, they should **** when it comes to what they like or don''t like about the bill--that "no vote" is a signal that whoever votes is--has NO SAY in the content--right or wrong--the no vote negates that right.; Reply to this comment


by fahren451 February 16, 2009 3:46 AM EST: The finger of accusation still points at the GOP, the party which heedlessly deregulated banking, and made all this mutant, super-leveraged risk almost inevitable without adult supervision from the SEC.

The CRA is not the culprit, despite what Faux News claims. Bernanke, himself, commented to congress in 2007 that CRA loans offered normal profits without undue risk. Bernanke was GOP by appointment after Greenspan retired, and held no particular affinity for the CRA or Democrats, so his testimony stands as a remarkably objective endorsement of the function and effect of the CRA.

The CRA was involved in fewer than half the subprime loans issued by banks. Clearly, the banks, themselves, hotdogged through the subprime market and created their own toxic paper circus. Even O''''Reilly blames Bush for not acting against bankers who knew they were scamming the public.

All because, on a playing field without referees, the banks knew they could get away with anything. After all, that was the whole idea-- DEregulation is never having to say, "That''''s illegal."

Posted by alphaa10000 at 10:54 PM : Feb 15, 2009

Bump, you are preaching to the choir.; Reply to this comment


by endeavor40 February 16, 2009 2:47 AM EST: Sorry Reb''s the Publish button got stuck.; Reply to this comment


by cbsblogger February 16, 2009 2:27 AM EST: Why aren''t we demanding that the compensation that the CEOS and others took in earlier years was ill gotten, and thus should be clawed back and used as capital in these banks.; Reply to this comment


by riverratt5 February 16, 2009 2:03 AM EST: q; Reply to this comment


by tincup356 February 16, 2009 1:34 AM EST: Shelby made the statement about the bill that it needed the salary and bonus caps included to protect the taxpayers money.........That is a 180 degree turnaround from the bailouts republicans passed for bush before the elections,,,when the let 118 billion dollars got to executives.......give us a break ,,,EVERY stinking one of you criminals from BOTH parties are committing TREASON........how you have forgotten we outnumber you,,,,,,and for our freedom, rights, our country,,,,we will fight you tooth and nail to the death,,,,,Keep right on destroying the middle class and you will find out. We will revolt.; Reply to this comment