Executive Compensation - Feb 4, 2009

Transcript Text

  • SEC. GEITHNER

    At 00:27
    2 minutes

    Mr. President, financial systems are built on
    trust and confidence. They depend on trust and confidence. This
    economic crisis was caused in part by a loss of confidence in our
    financial institutions, and it was made worse by a loss of faith in
    the quality of judgments made by some executives and some boards of
    directors.
    Those failures have caused great damage. You can see this across
    our economy and around the world, as workers lose their jobs,
    homeowners fight to stay in their homes, families worry about their
    retirement savings, and businesses struggle to find the credit
    necessary to survive.
    Economic recovery will require restoring confidence in the
    leadership of these institutions, and in the ability of our financial
    system to provide the resources necessary to get our economy back on
    track.
    The previous administration, working with the Congress, invested
    substantial resources in our banks to hold the financial system
    together. Those actions were absolutely necessary to prevent much
    greater damage than what we have seen today, and we will have to do
    more -- substantially more -- to fix this crisis.
    Next week, we are going to outline a comprehensive program for
    financial recovery. This program will be directed at supporting the
    flows of credit that are essential for our economy to begin growing
    again, and this program will begin -- will bring substantial reforms
    to improve transparency, provide greater accountability and measure
    results.
    There is a deep sense across the country that those who are not
    -- who -- who are not responsible for this crisis are bearing a
    greater burden than those who were. So today, I'm pleased to join the
    president in announcing a set a reforms to the way companies receiving
    taxpayer dollars reward their top executives.
    Nothing is more important to me than earning the confidence of
    the American people that every policy we embark on is motivated not by
    privilege or by private gain, but by the public interest in
    strengthening our economy and creating shared prosperity.
    The executive compensation policies we are announcing today are
    designed to strengthen the public trust that our financial recovery
    programs will get credit flowing again and get job creation moving
    once more. This will not be easy. It will take time. But the
    American people can be confident that this president and his economic
    team will bring every ounce of energy and commitment possible to
    moving our nation to an economic recovery that is as swift and
    widespread as possible.
    Thank you.

  • PRESIDENT OBAMA

    At 03:18
    7 minutes

    Thank you, Tim, for your hard work on this
    issue and on the economic recovery.
    The economic crisis we face is unlike any we've seen in our
    lifetime. It's a crisis of falling confidence and rising debt; of
    widely distributed risk and narrowly concentrated reward; a crisis
    written in the fine print of subprime mortgages, on the ledger lines
    of once-mighty financial institutions, and on the pink slips that have
    upended lives of so many people across this country, and cost the
    economy 2.6 million jobs last year alone.
    We know that even if we do everything that we should, this crisis
    was years in the making, and it will take more than weeks or months to
    turn things around. But make -- make no mistake: A failure to act,
    and act now, will turn crisis into a catastrophe; and guarantee a
    longer recession, a less robust recovery, and a more uncertain future.
    Millions more jobs will be lost. More businesses will be shuttered.
    More dreams will be deferred.
    And that's why I feel such a sense of urgency about the Economic
    Recovery and Reinvestment Plan that is before Congress today. With
    it, we can save or create more than 3 million jobs doing things that
    will strengthen our country for generations to come. It's not merely
    a prescription for short-term spending; it's a strategy for long-term
    economic growth in areas like renewable energy and health care and
    education.
    Now, in the past few days I've heard criticisms of this plan is
    somehow wanting, and these criticisms echo the very same failed
    economic theories that lead us into this crisis in the first place:
    the notion that tax cuts alone will solve all our problems; that we
    can ignore fundamental challenges like energy independence and the
    high cost of health care; that we can somehow deal with this in a
    piecemeal fashion and still expect our economy and our country to
    thrive. I reject those theory, and so did the American people when
    they went to the polls in November and voted resoundingly for change.
    So I urge members of Congress to act without delay. No plan is
    perfect and we should work to make it stronger. No one's more
    committed to making it stronger than me. But let's not make the
    perfect the enemy of the essential. Let's show people all over our
    country who are looking for leadership in this difficult time that we
    are equal to the task.
    At the same time, we know that this recovery and reinvestment
    plan is only the first part of what we need to do to restore
    prosperity and secure our future. We also need a strong and viable
    financial system to keep credit flowing to businesses and families
    alike. And my administration will do what it takes to restore our
    financial system. Our recovery depends upon it. And so, in the next
    week, Secretary Geithner will release a new strategy to get credit
    moving again, a strategy that will reflect some of the lessons of past
    mistakes while laying the foundation of the future.
    But in order to restore trust in our financial system, we've
    going to have to do more than just put forward our plans. In order to
    restore trust, we've got to make certain that taxpayer funds are not
    subsidizing excessive compensation packages on Wall Street.
    We all need to take responsibility. And this includes executives
    at major financial firms who turned to the American people, hat in
    hand, when they were in trouble, even as they paid themselves
    customary lavish bonuses. As I said last week, this is the height of
    irresponsibility. It's shameful. And that's exactly the kind of
    disregard of the costs and consequences of their actions that brought
    about this crisis: a culture of narrow self-interest and short-term
    gain at the expense of everything else.
    This is America. We don't disparage wealth. We don't begrudge
    anybody for achieving success. And we certainly believe that success
    should be rewarded. But what gets people upset -- and rightfully so
    -- are executives being rewarded for failure, especially when those
    rewards are subsidized by U.S. taxpayers, many of whom are having a
    tough time themselves.
    For top executives to award themselves these kinds of
    compensation packages in the midst of this economic crisis isn't just
    bad taste, it's bad strategy. And I will not tolerate it as
    president.
    We're going to be demanding some restraint in exchange for
    federal aid, so that when firms seek new federal dollars we won't find
    them up to the same old tricks.
    As part of the reforms we're announcing today, top executives at
    firms receiving extraordinary help from U.S. taxpayers will have their
    compensation capped at $500,000, a fraction of the salaries that have
    been reported recently. And if these executives receive any
    additional compensation, it will come in the form of stock that can't
    be paid up until taxpayers are paid back for their assistance.
    Companies receiving federal aid are going to have to disclose
    publicly all the perks and luxuries bestowed upon senior executives,
    and provide an explanation to the taxpayers and to shareholders as to
    why these expenses are justified. And we're putting a stop to these
    kinds of massive severance packages we've all read about with disgust;
    we're -- we're taking the air out of golden parachutes.
    We're asking these firms to take responsibility, to recognize the
    nature of this crisis and their role in it. We believe that what
    we've laid out should be viewed as fair and embraced as basic common
    sense.
    And finally, these guidelines we're putting in place are only the
    beginning of a long-term effort. We're going to examine the ways in
    which the means and manner of executive compensation have contributed
    to a reckless culture and a quarter-by-quarter mentality that in turn
    helped to wreak havoc in our financial system. We're going to be
    taking a look at broader reforms so that executives are compensated
    for sound risk management and rewarded for growth measured over years,
    not just days or weeks.
    We all have to pull together and take our share of
    responsibility. That's true here in Washington. That's true on Wall
    Street. The American people are carrying a huge burden as a result of
    this economic crisis: bearing the brunt of its effects as well as the
    costs of extraordinary measures we're taking to address it. The
    American people expect and demand that we pursue policies that reflect
    the reality of this crisis and that will prevent these kinds of crises
    in the future.
    Thank you very much.
    (Cross talk.)

  • Question


    President Obama, are you worried that banks won't
    participate?