TARP's Compensation Caps Could Extended To All Businesses

Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.

“There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference on Tuesday, February 3.


Neil Roland of Financial Week writes:

"He also said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.

The provision will be part of a broader package that would likely give the Federal Reserve the authority to monitor systemic risk in the economy and to shut down financial institutions that face too much exposure, Mr. Frank said."

The bill, which the committee is working on in consultation with the Obama administration, also will require financial institutions that bundle mortgages into securities to share in potential losses. This would give banks and mortgage-specialists an incentive not to make bad loans, he said. Institutions that securitize loans improperly will incur tougher penalties.

“There have been too few constraints on major financial institutions incurring far more liability than they could handle,” Mr. Frank said.

Tim Geithner Blames Turbo Tax For His Tax Problem

From Michael McAuliff at theNYDaily News:

Let’s hope the economy is easier to figure out than TurboTax.

That’s the software that Treasury Secretary nominee Timothy Geithner used when he failed to pay about $34,000 in taxes, he admitted this morning in a confirmation hearing that was delayed because of his tax flubs.

“I used TurboTax to prepare my returns,” Geithner told the Senate Finance Committee, looking just a little embarrassed, and prompting laughs in the hearing room.

He wouldn’t blame the software for his errors, but he didn’t say it helped him spot them, either.

Asked if the program prompted him to report income and pay self-employment taxes on his work for the International Monetary Fund, he said, “Not to my recollection.”

Geithner is the departing New York Fed chairman who gets the most credit for crafting the opaque $700 billion bank bailout, and many think he’s the only one who understands it. Once confirmed, he’ll have the job of spending the $350 billion left in the fund.

And, oh yeah, he’ll head up the IRS.

Sen. Charles Grassley (R-Iowa)appreciated the honest answers, but seemed concerned.

“While I understand that the tax code is complex and sometimes even tax preparers get it wrong,” he said, “it would seem that minor due diligence on your part may have prevented the oversight.”

“It is deeply problematic if a U.S. citizen with your financial knowledge and expertise doesn’t consider whether he should be making a contribution to the Social Security Trust Fund,” Grassley said.