Obama Takes Aim at
Wall Street Bonuses, Remodeling (Update1)
By Julianna Goldman and Roger Runningen
Jan. 23 (Bloomberg) -- President Barack
Obama took aim at Wall Street for using taxpayer
money on bonuses and office remodeling, vowing to
attach more strings on any future bailout money.
There’s been a “lack of accountability and
transparency in how we are managing some of these
programs to stabilize the financial system,” Obama
said before a meeting with congressional leaders at
the White House.
Obama cited “the reports that we’ve seen over
the last couple of days about companies that have
received taxpayer assistance then going out and
renovating bathrooms or offices or in other ways not
managing those dollars appropriately.”
While Obama didn’t mention any individuals or
companies, his comments followed reports that John
Thain, the former Merrill Lynch & Co. chief
executive officer ousted yesterday, spent $1.2
million redecorating his downtown Manhattan office
last year as the company was firing employees.
Thain oversaw the sale of Merrill Lynch to Bank
of America Corp. last month. Merrill’s $15.4
billion fourth-quarter
loss forced Bank of America to seek additional
aid from the U.S. government, which last week agreed
to provide $20 billion in capital and $118 billion
in asset guarantees.
New Restrictions
Press secretary Robert
Gibbs later said the president has directed his
economic team to come up with new restrictions on
the second half of the $700 billion financial-rescue
plan, saying the money won’t go to “line the
pockets of people” who’ve gotten financial
assistance.
“The American people need to be greatly assured
that their hard-earned money is not going to the
bonuses or the remodeling of an office at a bank
that’s in trouble,” Gibbs said at a briefing.
Gibbs wouldn’t say today whether the government
would attempt to recover money spent on bonuses or
projects not related to stabilizing the financial
system and unfreezing credit markets.
“I’m not going get ahead of the
recommendations” being put together, he said.
The Obama administration has been cleared by
Congress to tap the second half of the $700 billion
TARP fund to stabilize the financial system.
Lawmakers criticized how the former President George
W. Bush’s administration used the money, and
demanded any further release of funds require
greater accountability.
Assurances for Congress
The restrictions would follow principles already
outlined to Congress by Lawrence
Summers, director of the White House National
Economic Council, and Timothy
Geithner, Obama’s nominee for Treasury
secretary, Gibbs said.
Summers told Congress in a Jan. 15 letter that up
to $100 billion of the remaining funds will be used
to ease the housing crisis. He also promised the
administration would restrict executive pay and
dividends for financial institutions that get the
money.
“Those receiving exceptional assistance will be
subject to tough but sensible conditions that limit
executive compensation until taxpayer money is paid
back, ban dividend payments beyond de minimis
amounts, and put limits on stock buybacks and the
acquisition of already financially strong
companies,” he wrote.
Senator Bill
Nelson, a member of the Finance Committee, said
he talked today with Geithner and was told the
administration would increase oversight of the TARP
money.
“I have received direct assurances today from
the nominee for Treasury secretary that he will
support disclosures and transparency including for
money already spent,” said Nelson, a Florida
Democrat.
Nelson is co-sponsor of legislation that would
require firms receiving the money to disclose how
it’s spent and bar companies from using funds to
lobby or make political donations.
To contact the reporters on this story: Julianna
Goldman in Washington at Jgoldman6@bloomberg.net;
Roger
Runningen in Washington at rrunningen@bloomberg.net
Last Updated: January 23, 2009 16:00 EST
