Stimulus Slashes Bank Bonuses

Package bans cash bonuses for bailed-out firms' high earners
By Rob Quinn,  Newser Staff
Posted Feb 14, 2009 7:56 AM CST
In this Oct. 7, 2008, file photo, businessmen visit Goldman Sachs in New York's financial district.    (AP Photo/Mark Lennihan, file)
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(Newser) – A late addition to the stimulus package puts tougher restrictions on executive pay at bailed-out financial institutions, reports the Wall Street Journal. The rules go further than the Obama administration proposed, affect more employees, and could seriously crimp the culture of gargantuan bonuses. The big one: Bonuses can't exceed one-third of annual salaries. If banks don't play along, they have to return their bailout money.

The new rules—which are retroactive to when banks first started receiving funds—will ensure "taxpayer dollars no longer effectively subsidize lavish Wall Street bonuses," said Sen. Christopher Dodd, who inserted the limits. Larry Summers and Tim Geithner lobbied against the restrictions, fearing they will lead to banks returning TARP funds and opting out of the program, but President Obama is expected to sign them into law.