TARP COMPENSATION CONUNDRUM

Senator Chris Dodd, Chairman of the Senate Banking, Housing and Urban Affairs Committee put an amendment in the recently passed so called “Economic Recovery Legislation” that could very negatively affect the banking system’s ability to effectively address today’s credit issues.  This could have the very opposite effect of the stated intention of the final action taken by Congress.

The amendment was put in the bill at the last minute without any debate.  It states that financial institutions who received $500 million or more in TARP money will not be allowed to pay “bonuses” to any of the top 25 earners in a company that exceeds one third of one’s total compensation, including benefits.  And the legislation is retroactive for companies receiving TARP funds last fall.  It turns out that the administration was opposed to the amendment but it was left in and President Obama signed the bill.  It is unclear if …