Pelosi: Congress’ Taxpayer Protections in Financial Rescue Paying Dividends
Washington, D.C. – Speaker Nancy Pelosi issued the following statement on news reports that taxpayers are seeing profits from the federal rescue of financial institutions:
“Congress tightened the Bush Administration’s TARP financial rescue plan last year by insisting that taxpayers be protected and that financial institutions reimburse the American people first. Today, these requirements are paying dividends.
“With the economy stabilizing and the financial sector stepping back from the brink, some of our biggest banks have already paid back the government for its capital investment, resulting in a profit of nearly $4 billion for this country’s taxpayers. That represents a 15 percent annual return on our public investment – and a healthy dose of good news in the face of skepticism.
“Other financial institutions with outstanding financial commitments to the government should work to fulfill a key principle of the law: maximizing overall returns to the taxpayers.
“Our vigorous oversight of this process has been critical to ensuring the recovery of our financial system, and we will continue to take all steps necessary to protect taxpayers.”
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TAXPAYER PROTECTIONS AND OVERSIGHT OF TARP
THANKS TO CONGRESSIONAL INSISTENCE, BUSH BAILOUT INCLUDED TAXPAYER PROTECTIONS AND PUBLIC ACCOUNTABILITY: In September 2008 in response to an impending financial meltdown, the Bush Administration proposed a three-page, $700 billion bill granting unprecedented, and expansive authority to Secretary Paulson with no taxpayer protections, no oversight or transparency measures, and no authority for courts to review the Secretary’s decisions. Because Congress insisted, the Emergency Economic Stabilization Act was written to maximize the returns to the taxpayers for this investment and provide some public accountability for the exercise of the authority.
- Taxpayer Protections, including providing taxpayers a share of the profits from appreciation in the value of assets purchased and requiring a plan to ensure taxpayers are repaid in full–with Wall Street responsible for any shortfalls
- Oversight and Transparency, with an independent outside oversight board appointed by bipartisan leaders of Congress, ongoing GAO oversight, an interagency oversight board, an independent Inspector General and transparency measures –such as requiring posting of transactions online
- Tough Executive Compensation Restrictions
- No multi-million dollar golden parachutes for top executives
- No tax deduction for executive compensation over $500,000
- For TARP-assisted financial institutions, impose limits on CEO compensation to prevent unnecessary risk-taking
OVERSIGHT ON TARP
- House Committees and the Congressional Oversight Panel for Economic Stabilization, established in the Emergency Economic Stabilization Act, have held at least 16 oversight hearings on TARP – in which Congress has raised concerns about executive compensation practices, luxury expenditures, and the unpaid taxes of companies receiving TARP Funds.
- New Law Strengthening Oversight of TARP, to expand the authority of the TARP Special Inspector General, to help ensure taxpayers’ funds are effectively used to get credit flowing to businesses and families. (Signed into Law)
ADDITIONAL FINANCIAL REFORMS AND CONSUMER PROTECTIONS
- Credit Cardholders’ Bill of Rights, providing tough new protections for consumers–including banning unfair rate increases, abusive fees, and penalties–and strengthening enforcement. (Signed into Law)
- Fraud Enforcement and Recovery Act, providing tools to prosecute mortgage scams and corporate fraud that contributed to the worst financial crisis since the Great Depression; creating an outside commission to examine its causes. (Signed into Law)
- American Recovery and Reinvestment Act, imposing new limits on compensation for top executives at financial institutions and other corporations that receive funds through the Troubled Asset Relief Program (TARP), including limiting bonuses for executives to one-third of their annual pay and prohibits cash bonuses, for example. (Signed into Law)
- Executive Compensation Reform, to put an end to the perverse compensation practices that encourage executives to take excessive risk at the expense of their companies, shareholders, employees, and ultimately the American taxpayer–risks that contributed to the recent financial collapse. This is the first step towards enacting President Obama’s comprehensive financial regulatory reform plan. (Passed by House)
- Financial Services Appropriations, investing in key efforts to crack down on runaway financial excesses and rebuild regulatory protections for homeowners, investors and consumers by federal agencies such as the Securities and Exchange Commission, the Federal Trade Commission, and Consumer Product Safety Commission. (Passed by House)
- Pay for Performance Act, to prohibit unreasonable or excessive compensation and non-performance-based bonuses for executives at companies receiving TARP funds. (Passed by House)