The three page proposal by Henry Paulson was clearly written. There was no misunderstanding of the language. It was an improper proposal because the plan put too much authority in the hands of the Treasury Secretary. In just two weeks the House of Representatives rewrote the proposal into a 110 page law that is not understandable by most people. I have read 12 pages of this bill entitled ‘‘Emergency Economic Stabilization Act of 2008.’’ I know you have to write law in proper legal form but this law has been written to hide its true purpose and provide political coverage. Even the candidates for president (Obama is a Harvard law graduate) have given mediocre support for this law.
An example is the section on executive pay. This was written to obfuscate the issue. It obviously is not intended to prevent golden parachutes to incompetent executives. Apparently Chris Isidore of CNNMoney.com agrees.
SEC. 111. EXECUTIVE COMPENSATION AND CORPORATE
GOVERNANCE.
(a) APPLICABILITY.—Any financial institution that sells troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and (c) and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable.
(b) DIRECT PURCHASES.—
(1) IN GENERAL.—Where the Secretary determines that the purposes of this Act are best met through direct purchases of troubled assets from an individual financial institution where no bidding process or market prices are available, and the Secretary receives a meaningful equity or debt position in the financial institution as a result of the transaction, the Secretary shall require that the financial institution meet appropriate standards for executive compensation and corporate governance. The standards required under this subsection shall be effective for the duration of the period that the Secretary
holds an equity or debt position in the financial institution.
(2) CRITERIA.—The standards required under this subsection shall include—
(A) limits on compensation that exclude incentives for executive officers of a financial institution to take unnecessary and excessive
risks that threaten the value of the financial institution during the period that the Secretary holds an equity or debt position in the financial institution;
(B) a provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior executive officer
based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; and
(C) a prohibition on the financial institution making any golden parachute payment to its senior executive officer during the period
that the Secretary holds an equity or debt position in the financial institution.
(3) DEFINITION.—For purposes of this section, the term ‘‘senior executive officer’’ means an individual who is one of the top 5 executives of a public company, whose compensated is required to be disclosed pursuant to the Securities Exchange Act of 1934, and any regulations issued thereunder, and non-public company counter parts.
If Congress refuses to go along with this bill I will totally understand. If this law is adopted I fear that it may be a wasted effort.
Coast Contact 