Letter to Nancy Pelosi, Speaker of the House, Ellsworth to Leadership: No "Golden Parachutes" for Wall Street Executives

Letter

Ellsworth to Leadership: No "Golden Parachutes" for Wall Street Executives

In a letter to Speaker of the House Nancy Pelosi and House Financial Services Committee Chairman Barney Frank, Reps. Brad Ellsworth, Patrick Murphy (PA) and Heath Shuler (NC) urged the negotiators to include provisions that hold Wall Street executives accountable in the Congressional economic rescue plan.

"If these executives are going to have their firms bailed out by the American taxpayer, then they must be held to account by placing some limitations on the executives' pay and compensation," wrote the lawmakers. "By including this and other reasonable oversight and accountability provisions that ensure against future market failures, we will pass a bill that will help our troubled economy while still providing a fair deal to American taxpayers."

Editors Note: A full text of the letter included below --

September 22, 2008

Dear Speaker Pelosi & Chairman Frank:

There is no doubt that we are in a grave economic crisis requiring swift and effective action. Families in our districts are struggling. That's why any plan must be one that helps Main Street as well as Wall Street. Our plan must also require responsibility on the part of corporations. We are extremely troubled to hear that the Treasury Department is resisting efforts to impose pay limits on Wall Street executives and bankers whose companies stand to be helped by the government's $700 billion rescue plan. If these executives are going to have their firms bailed out by the American taxpayer, then they must be held to account by placing some limitations on the executives' pay and compensation.

Limiting executive compensation in the bailout package is not meant to be punitive. Rather, it is an issue of accountability and fairness. Taxpayers cannot be expected to simply give away hundreds of billions of their money without receiving so much as a promise to do better on the part of corporations in return. Further, these executives cannot and should not receive something for nothing. The tens of millions that the Treasury Department wants to go to these executives' already ample salaries could be much better spent on ensuring that middle class families across the country are able to stay in their homes and have peace of mind about the security of their retirement accounts.

As Chairman Frank recently noted, part of the reason that we find ourselves in this mess are the "perverse incentives" that encouraged executives to take huge risks in exchange for multi-million dollar payouts. For example, some financial executives have manipulated their companies' books to maximize profits in the short term and push losses into the future. While this practice was successful in ballooning executive bonuses, it misled investors and imperiled the very investments these executives were supposed to be protecting. If executives did cook the books, we should require that they return their bonuses back to their companies to shore up company finances. Any bailout legislation should include, not just immediate action to stop the bleeding, it must also include provisions to prevent this from happening again. We must stop this perverse incentive by imposing limitations on executive pay.

As Treasury Secretary Henry Paulson recently noted, "Pay should be for performance, not for failure." We are gratified that following the government takeover, the former CEOs of Fannie Mae and Freddie Mac will not be paid millions of dollars in severance owed them under their employment contracts. It is because of your leadership and our strong congressional action that these executives will not receive a taxpayer-funded "golden parachute" worth approximately $25 million. This is a step in the right direction and we encourage you to go further by imposing reasonable limits on executive pay and compensation in the bailout package that Congress is soon to consider. By including this and other reasonable oversight and accountability provisions that ensure against future market failures, we will pass a bill that will help our troubled economy while still providing a fair deal to American taxpayers. Thank you so much for your continued strong leadership on this issue.

Sincerely,

Patrick Murphy
MEMBER OF CONGRESS

Brad Ellsworth
MEMBER OF CONGRESS

Heath Shuler
MEMBER OF CONGRESS

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