Reports

This memo critiques the executive pay provisions in the stimulus bill passed by Congress on February 13. It includes a chart comparing the stimulus provisions with the compensation restrictions in the original financial bailout legislation, as well as the Treasury Department rules announced by President Obama on February 4.

Efforts to rein in excessive executive compensation are facing fierce resistance in the U.S. Congress.  This fact sheet identifies and dissects eight common justifications against public policy actions on executive pay. Click here to download "Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay," an in-depth report on this issue.

Although many countries have used capital controls effectively to address financial market volatility, 52 national governments lack the power to control money flows across their borders as the result of U.S. trade pacts or bilateral investment treaties. The International Monetary Fund abandoned its blanket opposition to capital controls after the Asian financial crisis that erupted in 1997, but the U.S. government forged ahead, initiating agreements restricting capital controls with 22 more countries.

The report quotes numerous noted economists, including two Nobel prize winners and close advisors to President Barack Obama, in support of allowing governments to use capital controls. It also lays out five key opportunities for change, including renegotiating trade agreements and bilateral investment treaties, rolling back World Trade Organization commitments on financial deregulation, and reforming World Bank and IMF policies.

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.

The grassroots blowback against the Bush administration’s proposed Wall Street bailout is rooted in deep distrust. Americans recognize the need to act on our current crisis but detest the idea that ordinary taxpayers should bear the brunt of bailing out the kingpins of Wall Street.

The Bush administration, with its recent moves to begin purchasing bank equity, has essentially acknowledged the inadequacy of the original bailout plan. The administration’s new direction, even so, remains inadequate. We believe the program we outline in this report can far better address the root causes of our financial collapse and restore trust and confidence in our economic system.