A funny thing happened this weekend, after congressional Democrats surmounted a fierce lobbying effort and maintained one of three executive-pay limitation plans that were being eyed for removal from the final stimulus bill.
It turns out that Wall Street wasn’t the only opponent of more stringent limits on bonuses for bailed-out executives — Treasury Secretary Tim Geithner and White House economic adviser Larry Summers were leading the charge to keep CEO pay caps out of the stimulus.
Oops. Though Geithner and Summers wanted President Obama’s loophole-riddled executive compensation limits to be the only game in town, they ultimately lost that battle with Congress. Now what can they do to make sure eminently qualified leaders at companies like AIG and Merrill Lynch don’t have to forgo their lucrative pay packages?
President Obama could always issue a signing statement during tomorrow’s scheduled approval of the stimulus bill that exempts the Treasury Department from having to follow the new compensation limits.
That would amount to a massive thumb in the eye for Obama’s base, though he never made a campaign promise to stop using signing statements. And it would certainly piss off House Financial Services Committee Chairman Barney Frank (D-MA), who told CBS yesterday that
[White House spokesman Robert] Gibbs may not like [the new CEO pay limit], but it is going to be enforced …This is not, frankly, the Bush administration, where they’re going to issue a signing statement and refuse to enforce it. They will enforce it.
In fact, the Obama administration doesn’t need to use a signing statement to delay the congressionally mandated compensation limits. The language inserted into the stimulus bill gives Geithner a full year to release regulations on the implementation of the new law. That’s a long time for an opponent of the new pay caps to figure out the best way to circumvent them.
Late Update: Another option on the table for the administration is seeking legislation later this year that would relax part of the new compensation limits, as corporate governance expert Nell Minow suggested today in an interview with Bloomberg.
The AP also hinted at that possibility in its initial report on the Obama team’s opposition to extra pay caps:
Officials also said that it would be up to Geithner to implement the bill and cautioned that the administration might be able to work out a deal with leaders on the Hill to modify some of the rules later.
