Bailout

Congress To Probe Geithner's "Special Purpose" Plan To Skirt Pay Caps On Bankers

Moe Tkacik | April 7, 2009, 2:53PM

Yesterday we puzzled over the mixed messages we were hearing from Obama officials over the veracity of a Washington Post report that it was using Enron-style "special purpose vehicles" to undermine executive pay restrictions on bailed out banks: senior adviser David Axelrod sheepishly defended the strategy on one Sunday talk show, while Tim Geithner denied it altogether on another. But newly-promoted House Oversight Chairman Ed Towns is getting to the bottom of it, reports the Post today, in a story that sheds some much-needed light on the conflicting stories: the strategy began with the Treasury Department's $1 trillion consumer and business lending initiative, which is in part an expansion of the Federal Reserve's Term Asset-Backed Securities Loan Facility, which is open to the American subsidiaries of foreign banks, which Treasury presumably wants to participate in the programs without having to deal with the added diplomatic headache of subjecting foreign bankers to rules designed to satisfy American voters. Unsurprisingly, not everyone in Congress is opposed to that.

A senior House aide said he agreed with the Treasury's policy and that he believed a recent vote by the House on another piece of executive compensation legislation showed that Congress did not intend the restrictions to apply to firms that did not receive direct capital injections. The aide spoke on condition of anonymity because he was not authorized to comment.

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Tim Geithner

Is The White House Helping Bailed Out Banks Skirt Pay Caps? Depends What Channel You're Watching

Moe Tkacik | April 6, 2009, 3:22PM

On Saturday the Washington Post reported that the administration was doling out federal bailout money via "special purpose vehicles" to help banks skirt restrictions on the funds imposed by Congress -- including, naturally, limitations on executive pay. In a move a former Justice Department attorney equated to "money laundering," the story further specified that the White House had concluded that the conditions ought not to apply in "at least three out of five initiatives funded by the rescue package."

The story quoted Treasury spokesman Andrew Williams defending the strategy, and on Sunday senior Obama adviser David Axelrod, despite his reported distaste for Treasury's lenience on the banks, went on Fox News Sunday and towed the Treasury line when Chris Wallace brought up the report.

But a bit later the same morning on Face the Nation the policy seemed to have changed -- if you believed Treasury Secretary Tim Geithner's unequivocal denial to CBS's Bob Schieffer that any such plan compensation-restriction avoidance plan existed:

Transcripts after the jump:

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