By Laura Smith – University of New Mexico/Talk Radio News Service

Treasury Official Kenneth Feinberg testified on Wednesday before the House Oversight and Government Reform Committee about his review of the bonuses paid to executives at the seven largest TARP recipients.

According to Feinberg, the Special Master for Executive Compensation under the Troubled Asset Relief Program – also referred to by some as the White House’s ‘Pay Czar’ – those recipients include American International Group (AIG), Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC.

“For the last five months, I have a narrow mandate under the law, and that was to determine pay compensation packages for the top 25 officials in just seven companies that receive the most TARP assistance,” he said.

Feinberg explained that he received proposals from each of the seven companies on the matter of compensation, and after he reviewed them, he took specific actions to correct their flaws.

“I requested and received comprehensive submissions from each of the seven companies, explaining their view on what they thought they needed for their top 25 officials in the way of a comprehensive package. I examined those submissions with the utmost care and scrutiny, and I concluded that six of the seven submissions…were contrary to the statute, contrary to the regulations, and contrary to the public interest,” he said.

Feinberg clarified his remarks by stating that certain of the companies “wanted too much cash guaranteed salary…and made no mention of the perks that were part of their salary.”

Feinberg said that his office evaluated the submissions and made some material changes.

“First we greatly reduced the amount of cash that would be available to the senior officials. Second, they required that when they issue stock, that stock may not be cashed out for up to four years. Third, we said no more unlimited perks. Perks are limited to $25,000 per individual, and anymore than that would have to be approved by the Office of the Special Master,” he said.

Leah Valencia, University of New Mexico-Talk Radio News Service

U.S. Treasury Department Director for Consumer Protection Peggy Twohig said that establishing a far reaching financial regulatory agency could create a system of checks and balances for financial institutions, thus ensuring the strength of the U.S. economy.

“An agency would create uniform protection for consumers and make a level playing field for all types of financial services,” she said.

While discussing the Obama administration’s proposed Consumer Financial Protection Agency at the New American Foundation Friday, Twohig said it is necessary for all financial institutions to learn a sense of responsibility for the consumer by following base regulations

“The administration has supported that,” she said. “Part of the legislative proposal is for federal rules to be a floor not a ceiling that would apply to everyone.”

Twohig said there was not acceptable oversight of banking sectors in the past, adding that this caused a race to the bottom, where nonbank lenders offering aggressive products often steered consumers to unacceptable loans. As a result, banks who wanted to compete felt pressured and began to loan irresponsibly. Twohig said the proposed agency will prevent such an occurrence in the future.

“We need basic standards that will protect all consumers,” she said. “This will help the responsible players… who want to offer straightforward transparent products for consumers.”

By Justin Duckham-Talk Radio News Service

A high-ranking Treasury Department official says that the stimulus plan is not responsible for the August rise in unemployment and may in fact have mitigated it. Friday in a briefing with reporters, Alan Krueger, Assistant Treasury Secretary for Economic Policy and Chief Economist, said that there are signs that the economy is improving, but that employers are not hiring because of a lack of confidence. In August, the number of unemployed persons increased by 466,000 to 14.9 million and the unemployment rate rose by 0.3 percent to 9.7 percent. Nonfarm payroll employment rose to 9.7 percent, or 216,000 Americans without jobs.

“Without the steps (the Obama administration has) already taken, the pain would be much worse,” Krueger said, alluding to the American Recovery and Reinvestment Act, a two-year program which will provide $787 billion to jump-start local and state economies. “The typical pattern is that we see the job market recover more slowly. From employers’ perspectives, they want to be more confident that they are going to see an increase in demand before they hire.”

According to the U.S. Bureau of Labor Statistics: “Among the major worker groups, the unemployment rates for adult men (10.1 percent), whites (8.9 percent), and Hispanics (13.0 percent) rose in August. The jobless rates for adult women (7.6 percent), teenagers (25.5 percent), and blacks (15.1 percent) were little changed over the
month. The unemployment rate for Asians was 7.5 percent.”

Since December, 2007, employment has fallen by 6.9 million. In August, construction employment declined by 65,000, in line with the trend since May. Monthly losses had averaged 117,000 over the six months ending in April. Employment in the construction industry has contracted by 1.4 million since the onset of the recession. Starting in early 2009, the larger share of monthly job losses shifted from the residential to the nonresidential and heavy construction components. In mining, employment declined by 9,000 over the month.

In August, manufacturing employment continued to trend downward, with a decline of 63,000. The pace of job loss has slowed throughout manufacturing in recent months. Motor vehicles and parts lost 15,000 jobs in August, partly offsetting a 31,000 employment increase in July.

Employment in the retail trade industry was little changed in August. Employment also was little changed in professional and business services over the month. From May through August, monthly employment declines in the sector averaged 46,000, compared with 138,000 per month from November through April. Job loss in its temporary help
services component has slowed markedly over the last 4 months.

Employment in health care continued to rise in August (28,000), with gains in ambulatory care and in nursing and residential care. Employment in hospitals was little changed in August; job growth in the industry slowed in early 2009 and employment has been flat since May. Health care has added 544,000 jobs since the start of the recession.

September employment figures will be released on Friday, October 2.

By Sam Wechsler – Talk Radio News Service

Secretary of the Treasury Timothy Geithner expressed support for the newly proposed Consumer Financial Protection Agency (CFPA) Friday at a hearing before the House Financial Services Committee. If established, the new agency would both regulate and enforce rules geared towards protecting consumers from risky financial products.

Geithner stated that “rules written by those not responsible for enforcing them are likely to be poorly designed, with insufficient feel for the needs of consumers and for the realities of the market. Rule-writing authority without enforcement authority would risk creating an agency that is too weak, dominated by those with enforcement authority.”

Oversight of the CFPA would extend to both banks and non-banking financial institutions such as mortgage brokers.

Geithner said that consumer protection failed in the years leading up to the current financial crisis in part because all federal financial regulators had higher priorities than consumer protection. Creation of the new agency would strip the Federal Reserve of consumer protection authority, and would require the Fed to receive written authority from the Secretary of the Treasury in order to exercise emergency lending authority.

Geithner stressed his desire to see innovation maintained in the financial product industry, and called for a system that produces less risk for damage. “Many of the practices of consumer lending that led to this crisis gave innovation a bad name. What [lenders] claim was innovation was often just predation,” he said.

In addition to the new CFPA, Geithner discussed a Financial Services Oversight Council that would be comprised of the heads of all major financial regulatory agencies, including the Fed and the Securities and Exchange Commission. The council would have the power to gather information from any firm or market to help identify risk, and would be responsible for recommending changes in laws and regulation that would safeguard against future crises.

Geithner hopes that Congress will pass financial reform by the end of the year. “Despite this crisis, the United States remains in many ways the most productive, the most innovative, the most resilient economy in the world. To preserve this, though, we need a more stable, more resilient system, and this requires fundamental reform,” he said.

By Mariko Lamb, Talk Radio News Service

Assistant Treasury Secretary for Financial Stability Herbert Allison, Jr. said that the Troubled Asset Relief Program (TARP) has been “key to stabilizing the financial system and preventing greater deterioration in the availability of credit,” in his testimony to the House Oversight and Investigations Subcommittee Wednesday.

“There’s also signs that the economy is beginning to mend,” he said. Indications of economic stabilization include an increase in the issuance of corporate debt, increase in consumer confidence, and higher housing starts.

Despite these improvements, “Our financial system and our economy remain vulnerable,” he said, as unemployment and home foreclosures remain high and strains in the commercial real estate market continue to build. “This is why Treasury must remain vigilant and press ahead with our financial stabilization efforts,” he said.

Allison attempted to assure members of the subcommittee that taxpayers can put their trust in the Treasury, and that the agency is dedicated to high standards of transparency.

“We feel a great obligation as responsible stewards of their money,” he said, assuring those at the hearing that the Treasury is committing every effort to ensuring an ample return for taxpayers.

“I will regularly update Congress on our progress. We have productive, working relationships with our four oversight bodies–Special Inspector General of the TARP, Government Accountability Office, Congressional Oversight Panel, and Financial Stability Oversight Board,” he said.

Information on lending activities of Treasury-invested banks can be found at www.financialstability.gov.

By Aaron Richardson-Talk Radio News Service

The House Financial Services Committee inquired today as to why, with the economy in recession, CEO’s are still receiving millions of dollars in bonuses. 

“What have you discovered about the $5 billion in bonuses given to Merill Lynch?” Rep. Maxine Waters (D-Calif.) asked the panel of witnesses, which included Brian Breheny, the SEC’s Deputy Director of Corporate Finance; Scott Alvarez, Federal Reserve System General Counsel and  Gene Sperling, the Counselor to the Secretary of Treasury.

Sperling ,who answered the majority of the questions, could not answer, and only replied, ” I would have to go back, and would be happy to do so, and get what our administrations best understanding of that dispute is.”

Rep. Gene Green (D-Texas) brought the Committee’s attention over to what was at stake for the citizens in his district if fiscally irresponsible behavior, including exorbitant salaries for the executives of flailing companies, continues.

“What they are losing is their money for education, money to pay their house notes and money to sustain themselves. I find it quite disenchanting to know that there are those who want them to receive cuts and not want us to look at the compensation these executives are receiving,” said Green.

By Courtney Ann Jackson-Talk Radio News Service

“The force of the economic storm is weakening a bit,” said U.S. Treasury Secretary Timothy Geithner yesterday. Geithner discussed proposed Fiscal Year 2010 budget for the Treasury Department and the Internal Revenue Service with members of the Senate Appropriations subcommittee.

“We’re working to repair and reform our financial system so that it works for, not against, recovery. We’re working to restore growth and meet our fiscal goals by redesigning our tax code, bolstering enforcement,” said Geithner. “We’re working to advance our interest globally, working with other countries to promote economic recovery and financial repair and to ensure more open markets for U.S. businesses.”

Geithner and the Treasury Department are seeking increases in multiple areas including an increase that will bolster the staffs of the U.S. domestic finance and tax policy offices. Other increases will contribute to community development institutions and IRS enforcement efforts. Geithner also said the increase in the budget proposal will allow the U.S. to “meet international obligations and to help us craft a global response to the crisis in this more integrated global economic system we live in today.”

A number of Congressmen have expressed ire with the Treasury Department’s management of the Troubled Asset Relief Program (TARP), citing a lack of oversight, a failure to mitigate the housing crisis and credit market, and an overall sense of deception over Paulson’s last minute decision to help successful financial institutions rather than failing ones.

“If there’s one thing I regret, I regret attempting to be cooperative in providing to treasury the flexibility to deal with out economic crisis,” said Rep. Maxine Waters (D-Calif.) during a House Financial Services Committee on “Oversight Concerns Regarding Treasury Department Conduct of the Troubled Assets Relief Program”.

“We don’t have any systematic way to help homeowners modify these loans, the treasury has refused to use the dollars to buy up the non performing assets, and the money has basically gone as equity investments in banks who are not putting the money back out so that our consumers can have access to credit,” the Congresswoman said.

Acting Comptroller General Gene Dodaro of the Government Accountability Office recounted recommendations from a recently issued report, including the need for the Treasury Department to limit executive compensation and confirming that the use of funds complies with the legislation “To date, Treasury hadn’t finalized their strategy for monitoring these very important initiatives.”

Neel Kashkari, the Interim Assistant Secretary of the Treasury for Financial Stability, appeared before the committee and defended many of the Treasury Departments decisions.

Essentially dismissing the allegations of a inadequate oversight, Kashkari discussed the formation of the Oversight Board the, the law required the first [Oversight] board meeting to take place within fourteen days. We moved very quickly, and the Oversight Board met within four days…The law requires the Board to meet once a month, but it has already met five times in the just two months since the law was signed.”

Kashkari also defended the choice to offer financial aid to healthy banks, “if we have a dollar, and we give this one dollar to a healthy bank or gave that same dollar to a failing bank, the healthy bank is in a much better position to turn around and make new loans…they’re the ones who are in the best position in this time of economic disruption to step up and make new loans.”

The Assistant Secretary said that this choice would help restore confidence overtime.

Acting Comptroller General Gene Dodaro of the Government Accountability Office discusses a reported recently issued by his office that judged the Treasury Department did not have a strategy to limit executive compensation or confirm that their spending complied with legislation (0:44).

 

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“The evidence is overwhelming. This crisis is a direct consequence of years of regulatory failures by government officials” said Senator Christopher Dodd (D-Conn.) Dodd continued, “the dominant players were not Fannie and Freddie, but the Wall Street firms and their other private sector partners; the mortgage brokers and the unregulated lenders”. At the U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing on “The Genesis of the Current Economic Crisis”, the overall consensus of Senators and panel members was that government regulation failures and Wall Street investors were to blame.

Dodd said, “no one can say that the nation’s financial regulators were not aware of the threats posed by reckless sub-prime lending to homeowners, communities, and indeed the entire country. That threat had already been recognized by Congress”. Senator Robert Casey (D-Pa.) said he was troubled by the fact the Treasury Department wants to commit $250 billion to aid banks without “planning to modify a single loan”. Casey suspects that banks are now holding back on modifying loans because they’re waiting to see if they can sell them to the Treasury Department first, which he believes is the worst things that can happen right now.

The Honorable Marc H. Morial, President and CEO of the National Urban League, said that he wanted to, “set the record straight about what I call the Financial Weapon of Mass Deception: the ugly and insidious and concerted effort to blame minority borrowers for the nation’s current economic straits”. Morial blamed a few conservative reporters such as Fox News’ Neil Cavuto and the Washington Post’s Charles Krauthammer for, “telling the world that this crisis in not the result of a failure of regulation, but the fault of minority borrowers who bit off more than they could chew”. Morial said, “while minorities and low-income borrowers received a disproportionate share of sub-prime loans, the vast majority of sub-prime loans went to white and middle and upper income borrowers.”