Congress Removes Provisions to Limit Wall Street Bonuses "Behind Closed Doors"

The Democrats talk a good game, but their record of reform and renewal after winning the Congressional elections and then the Presidency is pathetic.

Nancy Pelosi is useless as House Speaker. Barney Frank is all talk and little action. The Democratic leadership should be replaced along with about half the remaining Republican congressmen.

Ok, Obama how about some transparency on this one. And better yet, can we see a single reform that improves the system, other than firedrills to shore up the status quo?

AP
Congress kills plan to recover Wall Street bonuses
By Matthew Daly
Thursday February 12, 2009, 5:19 pm EST

Congress kills plan, approved in Senate stimulus bill, to recover Wall Street bonuses

WASHINGTON (AP) -- Congressional leaders have killed a plan that would have forced financial institutions to compensate taxpayers if they paid their executives large bonuses after receiving federal bailout money.

The Senate had approved the repayment plan as part of an effort to crack down on Wall Street firms that paid huge bonuses -- some in the millions of dollars -- to their top executives even as they received taxpayer money in the federal bailout last fall.

The provision was removed as House and Senate negotiators hammered out final details of the $789 billion economic stimulus legislation this week.

A spokeswoman for Sen. Ron Wyden, D-Ore., said no one spoke against the amendment when Wyden introduced it on the Senate floor. "Somehow, it got stripped out behind closed doors," said the spokeswoman, Jennifer Hoelzer.

Wyden is looking for an opportunity to offer his amendment again to help taxpayers get their money back, Hoelzer said.

Sen. Olympia Snowe, R-Maine, co-sponsor of the amendment, issued a statement saying the financial bailout Congress approved last fall "left open an escape hatch of golden parachutes for top executives on Wall Street."

Many of the executives who got bonuses were the ones whose mistakes hurt the financial system and forced taxpayers to foot the bill in the first place, Snowe said.

The Wyden-Snowe amendment would have penalized companies that paid bonuses greater than $100,000 to executives after receiving government rescue funds last year. The companies would have had to repay within four months any portion of the bonus above $100,000 or face an excise tax of 35 percent on the portion of the bonus above $100,000.

Lawmakers removed the provision without explanation in closed-door talks this week. Hoelzer said several senators had questioned whether the provision was legal, since Congress had not limited the bonuses in approving the original legislation last October.

But Hoelzer said the measure was appropriate. She cited a letter from the Joint Committee on Taxation saying the measure "presents a strong case for constitutionality since it has only a modest look-back period."

Most of the bonuses in question were paid in the final two months of 2008.

The tax committee estimated that the Wyden-Snowe amendment would have raised as much as $3.2 billion. Financial institutions received more than $274 billion through the bailout program while paying out an estimated $18.4 billion in employee bonuses last year, the committee said.

SP Fututres Hourly at Market Close

The SP futures went down to the forecast support level of 806 and then we went into the last hour of the trading day with a short covering technical rally.

The bulls are not out of the woods yet, and must take that overhead resistance, formerly support, and stick it. It might not be easy to do into a three day holiday weekend.



The Big Picture

Hartford Insurance Loses Access to Government Lending After Ratings Downgrades

This news helped to take the US equity indices down to new lows when it came out.

Reuters
Hartford loses access to U.S. lending facility, shares plunge
Thursday February 12, 2:07 pm ET

NEW YORK (Reuters) - Hartford Financial Services Group Inc lost access to a U.S. commercial paper lending facility after recent debt rating downgrades, it said in a regulatory filing, and shares dropped 11 percent.

In the filing on Thursday with the U.S. Securities and Exchange Commission, Hartford (NYSE:HIG), a large life and property insurer, said it will have to repay the $375 million borrowed under a federal program.

That happened after its commercial paper ratings were downgraded by Moody's Investor Services on February 6, and by Standard & Poor's and Fitch on February 9.

As a result it will have to tap other sources of cash to repay the debt, a potential thorn as its capital had already eroded due to large losses over the past two quarters.

Also Thursday, Hartford said the Connecticut insurance department approved changes to the way it can account for some reserves. The decision effectively boosted its life insurance unit's capital by about $1 billion.

Analysts said the move was not enough to offset bigger capital concerns, and may not protect it from ratings downgrades, which could trigger the need to raise additional capital. Hartford raised $2.5 billion in capital from German insurer Allianz SE last October.

The regulatory relief is "better than nothing, but it doesn't necessarily follow that this will put it (Hartford) in a better position with the rating agencies," said Steven Schwartz, a life insurance analyst at Raymond James.

The Connecticut insurance department's decision to grant Hartford the regulatory relief came after a national group of insurance regulators voted on January 29 not to approve such changes for life insurers nationwide.

U.S. life insurers have lobbied for regulators to ease capital rules after heavy losses on investments, and on sales of variable annuities, a popular retirement product that accounts for much of the sector's business.

Hartford and others have also sought capital injections under the U.S. government's $700 billion financial services rescue plan.

Shares of the Connecticut-based company fell $1.51 to $12.11 in afternoon trade on the New York Stock Exchange. Shares are down more than 80 percent in the last 12 months.