Executive Pay and the Bailout

In recent weeks, two legislative initiatives have aimed to crack down on profiteering from the financial bailout. Both were prompted by evidence that the pay restrictions in the original bailout bill have proven largely toothless. Some of the recipients — most notably AIG, Morgan Stanley, and Goldman Sachs — have doled out sizeable bonuses to high-ranking staff since receiving billions in taxpayer support. Wall Street firms as a whole handed out more than $18 billion in bonuses last year.

This memo analyzes both initiatives – Sen. Claire McCaskill’s proposal to set a fixed ceiling for all employees of bailed-out firms and Rep. Barney Frank’s broader reform of the original bailout legislation.