Financial Crisis News Center

COP Report: Asset Guarantees Had Calming Effect, But Other Concerns Remain

In its November 2009 monthly report, the Congressional Oversight Panel (COP) studied government-backed guarantees under the Troubled Asset Relief Program.  The COP stated in the report that the asset guarantees from the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation helped calm panic in financial markets, with minimal cost to taxpayers to date. The report raised concerns about moral hazard created by the guarantees and recommended greater disclosure by the Treasury Department with regard to government-guaranteed assets of Citigroup Inc. COP Chair Elizabeth Warren commented on these issues in an interview on CNBC.

FSOB Quarterly Report Published

This story appeared in Bank Digest.

The Financial Stability Oversight Board has issued its fourth quarterly report to Congress, which covers the period from July 1, 2009, through Sept. 30, 2009. According to the report, “the accumulated effects of Treasury's actions under TARP contributed significantly to improved conditions in many financial markets during the quarterly period.”

Pay Czar Sees AIG Bonuses As Top Priority

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Reworking roughly $180 million in guaranteed bonus contracts that come due at American International Group’s financial products division next year is a “top priority,” Special Master for TARP Executive Compensation Kenneth Feinberg told Congress October 28. “We will see what we can work out with AIG going forward in an effort to satisfy the statute, satisfy the regulations, satisfy the American people. And I view that as a top priority,” Feinberg told the House Oversight and Government Reform Committee.

Dodd Comments on Executive Compensation Rulings

This story appeared in Bank Digest.

Senate Banking Committee Chairman Chris Dodd, D-Conn., issued a statement on the announcement by Kenneth R. Feinberg, Special Master for Executive Compensation under TARP, on executive compensation. Dodd noted, “In this country, you are supposed to be rewarded for hard work. But for folks on Wall Street to be giving out outrageous compensation packages, in the middle of a recession, as they are being propped up by taxpayer dollars is obscene.” He added, “Mr. Feinberg should keep the pressure on and Congress will revisit what we need to do when we take on financial reforms.”

http://banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases&ContentRecord_id=82e5e56a-ce05-ca61-0f4e-3dadb648d394&Region_id=&Issue_id

Executive Compensation Practices Tackled By Treasury, Federal Reserve

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The Treasury Department and the Federal Reserve Board made dual announcements October 22 concerning efforts to curb executive compensation in the financial industry, marking an unprecedented move by the Obama administration to tackle what it sees as the problem of unchecked risk-taking promoted by excessive pay.

Finance Committee Chairman Comments on SIGTARP Report

This story appeared in Bank Digest.

In response to the quarterly report of Special Inspector General for the Troubled Asset Relief Program Neil Barofsky, Senate Finance Committee Chairman Max Baucus, D-Mont., said that “we now have a good summary from the Special IG of how the Treasury Department is running the program every quarter.” He added that “I am also pleased that the Department decided to follow the Special IG’s recommendation requiring managers for the Public Private Investment Program (PPIP) to disclose all of their assets or exposures to related liabilities, including credit default swaps. I will follow up with the Secretary of Treasury on the Special IG’s ;request that his office be allowed to comment on any change in PPIP compliance rules, and that his office have access to fund manager information maintained by the Treasury Department.”

http://finance.senate.gov/press/Bpress/2009press/prb102109.pdf

Oversight and Government Reform Committee Plans Executive Compensation Hearing

This story appeared in Bank Digest.

Oversight and Government Reform Committee Chairman Edolphus “Ed” Towns, D-N.Y., has scheduled a hearing on executive compensation for Oct. 28, 2009. Kenneth Feinberg, Special Master for TARP Executive Compensation, will testify in connection with his report on pay proposals for the 25 highest paid employees of the top seven recipients of “exceptional assistance” under TARP.

http://oversight.house.gov/story.asp?ID=2645

TARP Executive Compensation Rulings Issued

This story appeared in Bank Digest.

Special Master for TARP Executive Compensation Kenneth R. Feinberg has released determinations on the compensation packages for the top executives at firms that received exceptional TARP assistance. The determinations were intended to: reform pay practices for top executives to align compensation with long-term value creation and financial stability; significantly reduce compensation across the board; require most of salaries to be paid in company stock held over the long term; require incentive compensation to be paid in the form of long-term restricted stock and to be contingent on performance and on TARP repayment; and require immediate reform of practices not aligned with shareholder and taxpayer interests. Treasury Secretary Tim Geithner said the determinations were “a commendable job of applying the strong compensation standards of the Congressional legislation to the companies that received exceptional assistance from the government.”

Report on TARP Warrant Valuations Issued

This story appeared in Bank Digest.

A report by Robert A. Jarrow on the valuation of warrants received by the government under the Troubled Asset Relief Program has approved the Treasury Department’s method. “[T]he Treasury’s modeling methodology for valuing the warrants is consistent with industry best practice and the highest academic standards,” the report concluded, noting that the financial model was only one part of “a robust valuation procedure.”

http://www.financialstability.gov/docs/Jarrow%20TARP%20Warrants%20Valuation%20Method.pdf

Pelosi Comments on Excessive Compensation for TARP Recipients

This story appeared in Bank Digest.

Speaker of the House, Nancy Pelosi, D-Calif., issued the following statement regarding news reports that the Obama Administration will order the companies that received large amounts of federal financial assistance to cut the compensation of their highest paid executives: “According to news reports, the Obama Administration will soon announce that companies receiving large amounts of TARP money will have to cut the compensation of their top executives. When it comes to these bonuses and excessive compensation, President Obama and Congress agree: enough is enough.”