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The $700 Bailout Bill Proposed By the Senate is Not Good Enough

This article was written by in Economy. 15 comments.

In the original version of this article, I was under the impression that the Senate had passed this bill already. It hasn’t; they have only just released the details to the public. A vote will come later.

Over the weekend as I watched the Mets end a frustrating season with a disappointing final series, the details of the Senate’s bill to bail out the financial industry, and presumably the economy, were released to the public. I understand that passing a bill requires compromises to be made, but there is one interesting point that reduces the effectiveness of the bill.

Curbs would be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000. They also will not be allowed to write new contracts that allow for “golden parachutes” for their top 5 executives if they are fired or the company goes belly up. But the executives’ current contracts, which may include golden parachutes, would still stand.

The executives in charge of the bailed-out companies will be replaced if they haven’t been already. Those being replaced will not have to face any penalties for driving their companies into the ground by acquiring risky debt. While fully aware of the risks involved, they did not have to bear any personal financial risk. While these executives should be commended for being able to negotiate ridiculous contracts allowing them to fail and still be paid massive bonuses, this should be eliminated for any company that requires “rescuing” with taxpayer money.

President Bush, Treasury Secretary Paulson, and the Democrats and Republicans in Congress are tied to the financial firms on Wall Street. They don’t want to make enemies now, particularly when some individuals currently in government may look for financial jobs in the private sector in the near future.

Let’s hope that the bill presented by the House of Representatives curbs bonuses for executives who mismanaged their businesses to the point that the government needed to enact the biggest market intervention in the history of market interventions.

Will financial executives refuse to allow their companies to participate in the bailout if they don’t receive their multi-million dollar “golden parachutes?” It would be a dumb, selfish move to put the health of the economy on the line until they receive their bonus for driving their companies into the gutter.

Rescue bill unveiled, Jeanne Sahadi, CNN Money, September 28, 2008

Updated February 6, 2012 and originally published September 29, 2008.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 4 comments… read them below or add one }

avatar 1 Anonymous

To “OUR” Representatives,
There are approximately 138 million taxpayers in the United States, so there are approximately 138 million voters. “YOU” who “WE” elected are willing to “GIVE” 700 BILLION DOLLARS to corporations who do not “VOTE” individually. But, do put dollars in “YOUR” pockets, so it must be “GREED” on your part and not “LOYALTY AND HONOR” that drives “OUR” government officials. If I am wrong, than give each taxpayer “ONE MILLION DOLLARS – FREE OF TAXES FROM FEDERAL, STATE AND LOCAL”, that is 138 million dollars plus processing – so rounded maybe 200 million dollars. What would I do with that money, not declare bankruptcy for one, pay my house off for two, pay all my debts, put some into savings and buy stocks. Speaking of BK’s aren’t those really up, so if you gave $1 million to each taxpayer and stipulated Bk’s to be blocked for up to say 5 years and that say 25,000 is taxable unless invested in stocks or bonds. Wow, this is so easy… but I am sure that “OUR” government officials can make it more complicated, I have faith. I am, always have been and always will be a capitalist – so it makes more sense to pay less and push the money through the capitalist market in “True” capitalist manner, let the market (people = demand, market = supply) process the money. The loser’s will be the companies that are not run properly and the winner’s will be the American Taxpayer/Voter. Your Not So Happy United States Taxpayer.

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avatar 2 Anonymous

Thats right. Why dont we fix the job drain which is at the root of all this mess? With this 800 billion bailout, Bush has picked our wallets for 4 times as much as the tax rebate he gave us. With politicians like this, we just have to make sure that the Billion they are talking about is the one that a thousand million, not million millions.

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avatar 3 Anonymous

OK before anyone says anything, I’m stupid. I guess I let my being upset get the best of me, I didn’t do the math. I’ll crawl back in my hole and shut up.

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avatar 4 Anonymous

Business as usual.

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